Wrapped Bitcoin WBTC explained (Bitcoin on Ethereum)

Hello and welcome to the Exodus channel, 
your home for the best crypto videos. Hit those like and subscribe buttons 
and we’ll keep the videos coming. A common question for crypto newbies is – why 
are there so many different types of Bitcoin? Scrolling down the crypto rankings will show you 
a host of assets that have ‘BTC’ in their name,   like RenBTC, Bitcoin BEP2, and Wrapped Bitcoin. All of these variations of Bitcoin can be quite 
confusing, but the explanation is quite simple! None of these tokens are the real bitcoin, but 
they do have bitcoin as an underlying asset. Bitcoin tokenization is a 
way to lock up or transfer   the value of Bitcoin to other blockchains. The idea was first conceived by 
the Wrapped Tokens Project, which   is a joint effort between Ren, Kyber Network 
and the institutional asset custodian, BitGo. The process of locking up the Bitcoin and turning 
it into an ERC20 token is known as “wrapping.” Once the BTC is turned into an ERC20 token,   it can be used in Ethereum’s 
rapidly expanding DeFi ecosystem. This means that instead of 
just buying BTC and holding it,   investors can now buy WBTC and use it to 
earn passive income in a number of ways.

WBTC holders can take out loans on decentralized 
lending platforms like MakerDAO or Aave, and   effectively borrow against the assets they wish to 
hold, which can be very useful in a bull market! WBTC can also be used to provide 
liquidity on platforms such as Uniswap,   giving you a small percentage of the fees from 
the trades that happen in that specific pool.   Similarly, it means that you can stake 
your Bitcoin on platforms like Compound,   which pay you interest on your assets 
in order to facilitate lending. Using WBTC also opens Bitcoin traders 
to more trading pairs on decentralized,   Ethereum-based exchanges, 
like Uniswap and Kyber Swap. These use cases seem to be 
popular, because as of today,   over 8 billion dollars’ worth of WBTC has been 
minted and sent into the Ethereum network. But before WBTC can be minted onto the 
Ethereum blockchain, every WBTC token   has to be backed by exactly 1 Bitcoin. 
This guarantees the value of the asset,   whereas the security of the 
WBTC is backed by Ethereum.

But BTC is a much more secure asset than 
WBTC, and the increased utility is a   trade-off for weakened security. Another 
trade-off when using WBTC is that BitGo,   the entity that holds WBTC and the keys 
needed to mint them, is a centralized company. Despite BitGo’s positive 
security record up until now,   they, or any third party that 
gains access to their accounts,   have the power to freeze operations, divert WBTC 
or prevent people from redeeming their Bitcoin. 
 With the rising popularity 
of RenBTC and SynthetixBTC,   plus the emergence of Polkadot cross-chain DeFi,   the Ethereum version of Wrapped Bitcoin could 
face some strong decentralized competition   in the future.

For now though, it still 
commands 72% of the tokenized Bitcoin market. And for the crypto space in general, any 
way to import Bitcoin’s huge liquidity   into the DeFi space could be 
a win-win for all involved. What are your Bitcoin price predictions for 2021?   Let us know in the comments below. And if this 
video helped you to understand Wrapped Bitcoin,   give it a thumbs up and don’t forget to 
subscribe for more crypto videos from Exodus..

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