What’s the benefit of WBTC (wrapped Bitcoin)? What does the “wrapping” do?


#1

What is wrapped Bitcoin (WBTC)?

It’s a Bitcoin derivative (1:1 exchange rate) that you can use for dApps because making apps on top of the Bitcoin protocol is much harder than making apps on top of smart contract platforms like EOS or Cosmos.

One of the problems with smart contract platforms is the native token doesn’t have the economic value and liquidity that Bitcoin has. WBTC makes a derivative token out of collateralized Bitcoin on another smart-contract platform. You have the benefits of economic value produced by Bitcoin and the programmability of smart contract platforms like Ethereum.

Benefits of WBTC?

  • Definitely: Easier to builds apps while still using BTC
  • Maybe: Could increase adoption for dAPPs with increased liquidity and KYC/AML

Cons of WBTC?

  • Counter-party risk: funds could be lost, compromised by an intermediary
    • the Bitcoin is held in custody by a 3rd party such as Bitgo
    • There are other versions like LBTC or 0X BTC that are decentralized and “trustless”.

Questions:

  • Any other benefits/cons I’m missing?
  • How secure is WBTC compared to BTC? Does the reduced security outweigh the benefit of adoption-ready dApps?

#2

I haven’t done much research on WBTC, but from the sound of it, it’s essentially a way to bootstrap a smart contract platform using Bitcoin.

Perhaps a downside is that if you bootstrap the platform with WBTC, then does the native token every accrue value and liquidity?