A tokenized version of Bitcoin that exists on the Ethereum blockchain. Each WBTC is backed 1:1 by actual Bitcoin held in reserve, meaning its value mirrors the price of Bitcoin while allowing it to function within the Ethereum ecosystem.
The creation of WBTC bridges two of the largest cryptocurrency networks: Bitcoin and Ethereum. While Bitcoin was designed primarily as a decentralized digital currency, Ethereum provides a programmable platform for building decentralized applications. WBTC enables the use of Bitcoin’s value in Ethereum-based applications, unlocking additional utility without requiring the sale of BTC.
How WBTC Works
When a user wants to obtain WBTC, a custodian locks the equivalent amount of Bitcoin in reserve and issues an equal number of WBTC tokens on Ethereum. The reverse process—burning WBTC to redeem BTC—is also possible. This custodial structure ensures that an equal amount of Bitcoin backs every WBTC in circulation, verified through transparent audits. Benefits include:
- Accessibility: Holders of Bitcoin can participate in Ethereum-based financial ecosystems without needing to convert their Bitcoin to Ether or other assets.
- Liquidity: WBTC helps bring the significant liquidity of Bitcoin into environments where it would otherwise be difficult to use directly.
- Interoperability: It acts as a bridge between two major blockchain communities, expanding use cases for Bitcoin beyond simple holding or transactions.
- Transparency: Custodians publish proof of reserves, so users can confirm that circulating WBTC is fully backed.
Someone holding Bitcoin may want to access decentralized financial services, such as lending platforms or trading tools built on Ethereum. Instead of selling Bitcoin for Ether, they can wrap their Bitcoin into WBTC and then deploy it directly in those ecosystems while retaining exposure to Bitcoin’s price.
Related Martech Zone Content
