What is the Difference Between Bitcoin and Wrapped Bitcoin (WBTC)?

Bitcoin (BTC) and Wrapped Bitcoin (WBTC) are both cryptocurrencies, but they function differently within the blockchain ecosystem. This article outlines the key distinctions between BTC and WBTC.

Overview

WBTC is a tokenized version of BTC that operates on the Ethereum blockchain. While both BTC and WBTC maintain a 1:1 value ratio, WBTC enables users to participate in Decentralized Finance (DeFi) applications on the Ethereum network. In contrast, BTC is the original cryptocurrency, operating on its native blockchain.

Bitcoin (BTC)

• Blockchain: BTC operates on its own distinct blockchain.
• Function: Primarily used as a decentralized store of value and for peer-to-peer transactions.
• Utility: Can be stored and transferred, but it does not have direct access to Ethereum's DeFi ecosystem.

Wrapped Bitcoin (WBTC)

• Blockchain: WBTC is an ERC-20 token that resides on the Ethereum blockchain.
• Function: Represents BTC on the Ethereum network, allowing users to utilize BTC in DeFi applications.
• Utility: Enables users to leverage the value of BTC within the Ethereum ecosystem for various activities, including lending, borrowing, yield farming, and more.
• Backing: Each WBTC is backed by 1 BTC, ensuring a 1:1 price equivalence.

Summary

BTC is the original cryptocurrency with its own blockchain, primarily used for value storage and transactions. WBTC, on the other hand, is a tokenized version of BTC on the Ethereum blockchain, designed to enable BTC holders to participate in Ethereum's DeFi ecosystem while maintaining price parity with Bitcoin.