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Why do investors buy Wrapped Bitcoin? Wrapped BTC, often abbreviated as wBTC, is a fascinating concept that combines the advantages of both worlds: (BTC) and (ETH).
You’ve probably heard of Bitcoin (BTC) – the pioneer cryptocurrency that started it all. It’s decentralised, has a level of protection, and widely recognised as digital gold. However, Bitcoin primarily operates on its own blockchain, which limits its compatibility with other platforms.
Ethereum (ETH), on the other hand, is a versatile blockchain that supports smart contracts, decentralised applications (dApps), DeFi applications, and various tokens. It’s like a bustling city where developers can build all sorts of innovative projects.
Now, imagine if we could bring Bitcoin’s value and liquidity to the Ethereum ecosystem. That’s where comes in!
Wrapped Bitcoin is essentially tokenised Bitcoin created on the Ethereum blockchain using the ERC-20 standard. Here’s how it works:
When someone wants to convert their BTC into wBTC, they deposit their Bitcoin with a custodian (a trusted entity). The custodian then mints an equivalent amount of wBTC tokens on Ethereum. Each wBTC token represents a specific amount of Bitcoin (usually 1:1).
The beauty of wBTC lies in its backing. For every wBTC token in circulation, there’s an actual BTC held in reserve. So, if you hold 1 wBTC, it’s backed by 1 BTC locked away somewhere.
CoinJar removes the standard complexities in the process by allowing you to buy wBTC directly without going through the complex “wrapping” process.
While CoinJar doesn’t provide an “unwrapping” service, you can always convert your wBTC back to regular BTC using the CoinJar app when needed.
You can check the live Wrapped Bitcoin price at the top of this page.
wBTC enables Bitcoin holders to participate in DeFi protocols. You can lend, borrow, or trade wBTC just like any other Ethereum token.
wBTC adds liquidity to decentralised exchanges (DEXs) like . Traders can swap wBTC for other tokens seamlessly.
Some lending platforms accept wBTC as collateral for borrowing stablecoins or other assets.
wBTC acts as a bridge between Bitcoin and Ethereum. You can move your BTC to Ethereum, use it in DeFi, and then convert it back to BTC when needed.
If you’re a Bitcoin holder who wants to explore DeFi opportunities, wBTC allows you to do so without selling your BTC. You can earn interest, trade, and participate in yield farming.
Diversification: By holding wBTC, you diversify your crypto portfolio.
Instead of being limited to Bitcoin’s ecosystem, you gain exposure to Ethereum’s vibrant DeFi space.
Providing liquidity to DEXs by staking wBTC can earn you trading fees and rewards.
Wrapped Bitcoin bridges the gap between Bitcoin and Ethereum, unlocking new possibilities for both communities. It’s like having a portal that connects two worlds – the solidity of Bitcoin and the dynamism of Ethereum.
Remember, each wBTC token represents real Bitcoin, making it a powerful tool for cross-chain interactions. Keep an eye on its price, as it fluctuates based on market demand and adoption.
Cryptoassets traded on CoinJar UK Limited are largely unregulated in the UK, and you are unable to access the Financial Service Compensation Scheme or the Financial Ombudsman Service. We use third party banking, safekeeping and payment providers, and the failure of any of these providers could also lead to a loss of your assets. We recommend you obtain financial advice before making a decision to use your credit card to purchase cryptoassets or to invest in cryptoassets. Capital Gains Tax may be payable on profits. CoinJar’s digital currency exchange services are operated in the UK by CoinJar UK Limited (company number 8905988), registered by the Financial Conduct Authority as a Cryptoasset Exchange Provider and Custodian Wallet Provider in the United Kingdom under the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017, as amended (Firm Reference No. 928767).
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