What is the working mechanism of wrapped bitcoin?

3 answers

• S AbinanthanMar 07, 2025 · 5 months ago
  Wrapped bitcoin, also known as WBTC, is a tokenized version of bitcoin that runs on the Ethereum blockchain. It works by locking up bitcoin in a smart contract and issuing an equivalent amount of WBTC tokens. This allows bitcoin holders to access the benefits of the Ethereum ecosystem, such as decentralized finance (DeFi) applications and smart contracts. The mechanism involves a custodian who holds the bitcoin and mints the WBTC tokens. The custodian ensures that the number of WBTC tokens in circulation is always backed by an equal amount of bitcoin held in reserve. This ensures the transparency and security of the wrapped bitcoin system.
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• GloryAug 13, 2021 · 4 years ago
  The working mechanism of wrapped bitcoin can be understood as a bridge between the Bitcoin and Ethereum networks. When a user wants to wrap their bitcoin, they send it to a custodian who holds the bitcoin in a secure wallet. The custodian then mints an equivalent amount of WBTC tokens on the Ethereum blockchain, which are sent back to the user. These WBTC tokens can then be used on the Ethereum network for various purposes, such as trading, lending, or providing liquidity. When a user wants to unwrap their WBTC tokens and get back their original bitcoin, they simply send the WBTC tokens back to the custodian, who then burns the tokens and releases the locked bitcoin to the user.
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• MicoJan 18, 2021 · 5 years ago
  Wrapped bitcoin is a great innovation that brings together the best of both the Bitcoin and Ethereum worlds. With WBTC, bitcoin holders can now participate in the vibrant DeFi ecosystem on Ethereum, which offers a wide range of financial services and opportunities. By wrapping their bitcoin, users can access decentralized exchanges, lending platforms, and yield farming protocols, among other things. This opens up a whole new world of possibilities for bitcoin holders, allowing them to leverage their bitcoin holdings and earn additional income. BYDFi, a leading decentralized exchange, supports the trading of wrapped bitcoin and provides a seamless experience for users who want to wrap or unwrap their bitcoin.
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