Wrapped Bitcoin (wBTC): What It Is and How to Use It

Wrapped Bitcoin (wBTC) is a token that mirrors the value of Bitcoin (BTC) and is interoperable with decentralized applications built on the Ethereum network. Released in 2019, wrapped Bitcoin tracks the value of real Bitcoin, which means each wBTC token’s value has a one-to-one relationship with Bitcoin.

Bitcoin and Ethereum have different protocols, so the blockchains on which they run are unable to communicate with each other. Wrapped Bitcoin is one of many wrapped cryptocurrencies created as a solution to this issue: It lets BTC holders “wrap” their Bitcoin and create a token compatible with Ethereum’s protocol so it can communicate and transact with a different blockchain.

How does it work?

Wrapped Bitcoin allows applications and smart contracts on the Ethereum blockchain to interact with cryptocurrency that is backed by real Bitcoin reserves. When users exchange BTC for wBTC, the original Bitcoin is stored in a digital vault, and newly minted wBTC is then released to the…

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This article was written by Connor Emmert and originally published on www.nerdwallet.com