Abbreviation: WBTC
This is a derivative of the cryptocurrency Bitcoin.
A wrapped version of a coin or token is simply version of that asset on another blockchain. With Wrapped Bitcoin, it is that coin located on a blockchain like Ethereum. This allows users to engage with that coin on the other chain. This is important for things such as liquidity pools.
A wrapping is nothing more than a bridging from one chain to another. This requires the original Bitcoin to be sent to an address while the smart contract on the other chain releases a mirrored amount to the associated wallet.
Coins or tokens on different chains helps in a couple different ways:
- price discovery is enhanced with expanded arbitrage opportunities
- liquidity is increased as the pools grow and are filled
Wrapped Bitcoin is also important when it comes to decentralized exchanges (DEX) because they engage with the EVMs.