The flexibility of an ERC20 token and the power of Bitcoin is facilitated in the WBTC token. WBTC is the first ERC20 token to be backed by Bitcoin at a ratio of 1:1. WBTC is completely transparent, community led, and 100% verifiable.
The proof of reserve is On-chain and therefore improves trust. Transparency is a very important consideration in this process. When the redemption of the WBTC tokens for BTC happens, the tokens are burned. The minting and burning of the tokens get tracked and are therefore verifiable on the blockchain.
The Ethereum network leverages and enables new applications and use cases for Bitcoin with WBTC. The Bitcoin is standardized for the ERC20 format. Thus, Dapps on Defi are able to leverage Bitcoin for centralized lending, derivatives markets, and margin trading.
As the WBTC ecosystem is expanding, several use cases and compelling applications are identified, explored, and implemented with active innovation.
The liquidity of Bitcoin is bought to Ethereum with EBTC which further makes it possible for the traders to use Bitcoin value in token trades on the decentralized exchanges. Wallet providers and exchanges are able to reduce overheads while supporting multiple currencies with the Ethereum node.
WBTC Conversions and Auditing
AirSwap, Dharma, ETHfinex, GOPAX, Kyber Network, Prycto, Ren, and Set Protocol are a few to name merchants who in the beginning made conversion between WBTC and BTC possible.
WBTC inventory has been procured by different centralized and decentralized exchanges to facilitate liquidity for WBTC. WBTC finds wide usage in financial apps.
Community transparency is ensured from auditing of several credible third party audit firms, thus the details of WBTC minted and burnt can be tracked.
There is a heavy demand for cross-chain crypto assets within DeFi. The openness of the Bitcoin Network, and the highly secure and decentralized nature of the ChainLink Oracle network, along with the transparency facilitated by BitGo has made it possible to have onchain proof of reserve from Chainlink regarding the fully backed collateralization of WBTC.
When the auditing process is automated, there will be increased trust among users. WBTC collateralization will gain trust in markets and DeFi applications. And more of options to protect against unexpected events can be established.
Smart contract developers are leveraging WBTC in new and interesting smart contract designs encouraged by the additional level of trust they received on their WBTC funds.
The idea of wBTC came in to improve Bitcoin’s functionality and usability. However, these tokens evolved to provide for sophisticated financial services to traditional BTC holders. And, thus proved wrapping as beneficial to all.“
Credit: Source link