Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin that is built on the Ethereum blockchain. The purpose of WBTC is to bring the liquidity and widespread adoption of Bitcoin to the Ethereum ecosystem, allowing Bitcoin holders to participate in the growing decentralized finance (DeFi) market.
WBTC is created by depositing Bitcoin into a custodial wallet, where it is held in reserve. An equivalent amount of WBTC is then minted on the Ethereum blockchain and can be traded or used in DeFi applications just like any other ERC-20 token. When WBTC is redeemed, the equivalent amount of Bitcoin is released from the reserve.
By creating WBTC, Bitcoin can be used in a variety of decentralized applications such as lending, borrowing, trading, and yield farming, among others, providing additional use cases for the original cryptocurrency. WBTC has gained popularity in recent years and is now supported by a variety of decentralized exchanges and other DeFi platforms.