You've probably heard of Bitcoin, right? The most popular and highest-valued
cryptocurrency out there. Thanks to its vital role in the digital finance world, many other cryptocurrencies either jumped on or were evolved from it. And that is exactly what Wrapped Bitcoin is all about. Make no mistake, even though it's named that, the Wrapped Bitcoin serves as a separate kind of cryptocurrency altogether. It may rely heavily on Bitcoin, but it has grown into its own over the years. So much so that it's now a force to be reckoned with in both cryptocurrency and the financial world.
What is a Wrapped Bitcoin?
Just as its name says, Wrapped Bitcoin is a type of
Bitcoin but with a few changes. Firstly, instead of working on a standard blockchain, Wrapped Bitcoins are processed on
Ethereum-based platforms. This is so that one can work with Bitcoins (or at least, in this case, a version of it) within decentralized finance (DeFi) applications. This, in turn, helps provide liquidity among DeFi protocols. Working on a 1:1 basis, Wrapped Bitcoin is essentially the bridge that connects Bitcoin and Ethereum together. And while the other two can work well without Wrapped Bitcoin, the latter need them to work.
How to Buy Wrapped Bitcoins
Buying Wrapped Bitcoins is similar to purchasing Bitcoins because the two are, in some ways, the same. So it makes sense that acquiring them follows the same procedure as well. Firstly, you need to set up an account with a cryptocurrency platform, or as some might refer to as 'merchants,' complete with personal and banking details. Some of the best ones include
Coinbase,
Coinbase Pro, and
eToro, among many others. Now, in most cases, your account will serve as your cryptocurrency wallet but some platforms make it an additional step to buy wallets instead. Whichever the case, you'll need your wallet to buy both Bitcoins and Wrapped Bitcoins so make sure you get one.
Converting Bitcoins into Wrapped Bitcoins
Now, many might be thinking: '
can Bitcoins be converted to Wrapped Bitcoins?' The answer is yes, they can! And the process is surprisingly easy and simple. You can simply convert your existing Bitcoins to Wrapped Bitcoins on your cryptocurrency platforms. Similar to how you can exchange your money to another country's currency through the bank and foreign exchange services, these platforms help your 'wrap' Bitcoins into wBTC. Other platforms, mostly known as 'bridges,' even allow you to move your Bitcoins to the Ethereum network where it will automatically convert to Wrapped Bitcoins. It's as easy as that!
The Benefits of Wrapped Bitcoins
Just like with Bitcoins, getting Wrapped Bitcoins comes with many benefits. One is that, considering the nature of Wrapped Bitcoins, getting gives you more freedom to explore other blockchains. Since Wrapped Bitcoins are all about working on DeFi applications, owners also enjoy the same openness as compared to the stricter protocols of Bitcoins. Moreover, Wrapped Bitcoins can also be used as collateral, especially when it comes to cryptocurrency loans. The process allows for a certain number of Wrapped Bitcoins to be stored until the loan can be fully paid.
With the cryptocurrency market already as complex and complicated, here comes Wrapped Bitcoin to merge two of the highest-valued cryptocurrencies together in one huge system. Because of this, Wrapped Bitcoin is definitely one to watch in the financial world.
