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Binance lists Wrapped Bitcoin – What is it?

Photo of: Joseph Stone
by Joseph Stone

While DeFi continues to soar, the centralized exchanges are starting to adapt to the new realities of the market. Binance, the largest crypto exchange has started to list Wrapped Bitcoin.

What is Wrapped Bitcoin?

The easiest way to explain Wrapped Bitcoin (or WBTC) is to say it’s a token that represents Bitcoin. One Wrapped Bitcoin is equal to one Bitcoin and can be exchanged or converted into exactly one Bitcoin, just as one Bitcoin can be converted into one Wrapped Bitcoin.

To get into the details, Wrapped Bitcoin is a token based on the Ethereum platform which is designed to bring liquidity to DeFi projects. When holders of Bitcoin convert their money into Wrapped Bitcoin, they can then lend them to DeFi projects and earn money doing so.

To the general public, the name recognition of Bitcoin has no equal in the world of cryptocurrency. From adolescents to boomers, everyone knows in the simplest terms what a Bitcoin is and bringing that name recognition to DeFi projects is valuable in terms of general adoption potential.

Bitcoin’s architecture however, as many readers certainly know, is not exactly state of the art. While the rest of blockchain projects have been evolving, cutting monetary and temporal costs and offering much better potential to users, Bitcoin is still relatively slow and expensive.

What Wrapped Bitcoin does is bring the huge amounts of money in Bitcoin to the world of DeFi.

Binance and Wrapped Bitcoin

The token is pegged to the price of Bitcoin and now, users of the largest crypto exchange Binance will be able to trade the token for Bitcoin or Ethereum on Binance and vice-versa.

Using this system, users will be able to convert their Bitcoin and, for example, use them to lend or borrow money on Compound, one of the foremost DeFi apps. Compound allows lenders and borrowers to connect together on the Ethereum network using smart contracts and completely circumvent the financial system as a whole.

Being listed on Binance is a big step for Wrapped Bitcoin as the project (and DeFi in general) certainly raised some suspicion in the crypto community as a whole during its inception. DeFi is now a $9 billion market and Uniswap, its foremost decentralized exchange has surpassed Coinbase in daily volume of trading.

This is not especially surprising from Binance which seems to have embraced many DeFi projects in the past few months after announcing key partnerships with important DeFi projects such as Compound and Kava Labs.

Many DeFi apps require collateral to ensure the validity of their smart contracts (for example, to borrow a certain sum for a lender). Wrapped Bitcoin exists especially for that. This is not only good for DeFi but also a very interesting use of Bitcoin which might draw attention and traffic to the king of cryptocurrency as well and answer the classic criticism from the general public: “Yeah, but what can I really do with my Bitcoins?”.