In order to do this, just open your Zengo app, tap on “Actions,” then tap the ‘’Buy’’ button, and select either Bitcoin (BTC) or Wrapped Bitcoin (wBTC). Apart from Bitcoin, you can also buy other cryptocurrencies such as Ethereum, Dogecoin, Tezos, and Polygon. Available payment methods include Visa, MasterCard, Apple Pay, and Bank Wire Transfers.
Trade your Bitcoin for Wrapped Bitcoin so that you can interact on the Ethereum blockchain with the state-of-the-art Zengo wallet app today. The IRS has not offered specific guidance on how wrapping coins, such as Bitcoin, should be taxed. But if you want to take a conservative approach, you might consider moving Bitcoin to wrapped Bitcoin as trading one virtual currency for another, which would be a taxable event. In essence, the merchant transfers real BTC to a custodian address of the Bitcoin blockchain where it is locked. Once it receives the real BTC, the custodian address mints the equivalent amount in wBTC on Ethereum. Uniswap is an exchange that is fully decentralized – meaning it is not owned and operated by a single entity – and uses a relatively new trading model called the Automated Liquidity Protocol.
When you ‘’unwrap’’ your Wrapped Bitcoin, they become usable with the Bitcoin network again. It is possible to accomplish both of these actions using Zengo’s swapping feature. Typically, you’ll have to pay a small fee to an exchange to undergo the process of wrapping or unwrapping your BTC. Wrapped Bitcoin (wBTC) is a token that mirrors the value of Bitcoin (BTC) and is interoperable with decentralized applications built on the Ethereum network. Released in 2019, wrapped Bitcoin tracks the value of real Bitcoin, which means each wBTC token’s value has a one-to-one relationship with Bitcoin.
Once your account is created, you can fund it using a bank account via ACH, a wire transfer or a debit card. However, this dominance is starting to shift slightly as other blockchains attempt to break into the DeFi sector. Consequently, you are sure to see wBTC start to appear on other blockchains in the near future.
What is WBTC?
Yes, why wouldn’t you store your Bitcoin and/or Wrapped Bitcoin in the safest and most secure cryptocurrency wallets on the market? Zengo is by far the safest and most reliable non-custodial wallet that provides you access to Web3, decentralized finance, and NFT marketplaces whilst safeguarding your cryptocurrency holdings. Additionally, Zengo makes sure only you can access the private keys to your digital assets via its built-in biometric facial recognition 3FA system. The second and more advanced way to wrap Bitcoin is via a decentralized system. The Keep Network offers users wrapped BTC services in the form of tBTC. In this scenario, the centralized custodial responsibilities are transferred over to smart contracts.
- Although Bitcoin and Wrapped Bitcoin both have the same value, Bitcoin (BTC) can only transact on the Bitcoin native and lightning networks.
- Once you are all signed up, you can simply click the “Wrap” button from inside your BTC wallet.
- You can buy wrapped Bitcoin directly on a cryptocurrency exchange.
- Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry with over 9,000,000 users, and over $207 billion in quarterly trading volume.
It uses biometrical 3-factor authentication to make sure only you can access your cryptocurrency holdings. With Zengo, you can forget about complicated seed phrases or print out old-fashioned QR codes on pieces of paper. Wrapped Bitcoin is redeemable on a one-to-one basis with BTC, which means users can wrap or unwrap Bitcoin whenever they choose. Generally, exchanges will charge a small fee for these transactions, so check the fee to wrap or unwrap a cryptocurrency before making a transaction. There are two types of wrapped tokens, cash-settled and redeemable. Cash-settled tokens cannot be redeemed for the underlying asset.
Once you have funded your account, enter an order to purchase wBTC in your desired amount and complete your purchase. If you’re planning to hold on to your wBTC for a while, you may want to consider moving the funds to a crypto wallet separate from the exchange where you bought it. This move can protect your assets in case the exchange you’re working with files for bankruptcy — as was the case with FTX and BlockFi — or gets hacked. But a wallet still won’t shield you from the volatility of crypto. You can buy wrapped Bitcoin directly on a cryptocurrency exchange. First, you’ll need to make sure the exchange you’re using supports wrapped Bitcoin, and then you’ll need to create an account.
How was Wrapped Bitcoin developed?
A decentralized smart-contract-managed bridge would be the best choice in the decentralized world of crypto. No need to trust any third party, only trust the code of immutable time-stamped smart contracts. The need for such a token arose with the growth of DeFi, which is now worth billions of dollars going into lending, options, derivatives, and other types of financial applications.
Already, you see a push to introduce wrapped Bitcoins into more complex DeFi concepts. Once you are all signed up, you can simply click the “Wrap” button from inside your BTC wallet. Next, the network will pull up a prompt asking you to enter the amount of BTC you wish to convert into WBTC. Once you make that decision, you can click the “Confirm Wrap” button to process the transaction. BitGo is a California-based company that focuses on digital asset services including custodial services, and it serves as the sole custodian of the BTC that backs WBTC.
This influences which products we write about and where and how the product appears on a page. NerdWallet, Inc. is an independent publisher and comparison service, not an investment advisor. Its articles, interactive tools and other content are provided to you for free, as self-help tools and for informational purposes only. NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues. Our estimates are based on past market performance, and past performance is not a guarantee of future performance.
Wrapped BTC a New Tech Revolution
If you aren’t able to pay off the debt immediately, cash advances often carry interest payments. So if the cryptocurrency you bought loses value, you could quickly find yourself paying high interest rates — sometimes 20% or more — on an asset that is no longer worth the amount you paid for it. Wrapped Bitcoin allows applications and smart contracts on the Ethereum blockchain to interact with cryptocurrency that is backed by real Bitcoin reserves. When users exchange BTC for wBTC, the original Bitcoin is stored in a digital vault, and newly minted wBTC is then released to the user. Some more recent blockchains, like Polkadot, were created to overcome the interoperability issue. However, it became necessary to find a solution and allow communication between early networks like Bitcoin and Ethereum, which is why wrapped tokens were created.
Though Ether (ETH) is the native coin on Ethereum’s blockchain network, it is not ERC-20-compatible and cannot interact with other ERC-20 tokens on the Ethereum network directly. As a solution, wrapped Ether (wETH) was created to allow ETH holders to transact directly with ERC-20 cryptocurrency tokens on the network. A custodian is still required since traders can’t independently use wrapped tokens for cross-chain transactions. However, technology is evolving rapidly, and we might attain some decentralized options soon. Retail crypto users can obtain WBTC through DEXes like Uniswap or centralized exchanges like Bitstamp. This allows them to gain exposure to Bitcoin on other blockchains without having to directly wrap or unwrap their bitcoin with WBTC’s custodians.
Wrapped BTC provides users with more functionality compared to regular BTC. For example, wBTC can leverage Ethereum’s robust smart contracts. However, they didn’t become such until Ethereum entered the market years after BTC. Consequently, BTC lacks full smart contract capabilities in its true form. Scalability is another major advantage gained from wrapping your Bitcoin.
DeFi BTC
Yes, it is definitely possible to send Bitcoin and Wrapped Bitcoin from your Zengo wallet to other external wallets whenever you want. To do so, open the Zengo app, navigate to the Bitcoin or Wrapped Bitcoin trade screen, enter how many BTC or wBTC tokens you want to send, paste the receiving address, and tap the ‘’send’’ button. If you ever lose access to your device, simply use Zengo’s biometric and keyless recovery feature to regrant your access to your digital asset portfolio. According to Arcane Research, the amount of Bitcoin locked on the Ethereum blockchain has increased to 189,000 BTC in 2021. It is estimated that a record 1% of Bitcoin’s circulating supply of 18.73 million is now used in DeFi through wrapped Bitcoin tokens. The way Bitcoin is held determines the level of security provided.
SNX is the platform’s main governance token for the Synthetix Network. We may receive compensation when you click on links to products we review. Importantly, because WBTC is a crypto-backed, BTC-pegged stablecoin, it does not have its own token economics (or tokenomics). The supply of WBTC varies with how much BTC is held as collateral by BitGo. Since beginning to offer WBTC in 2019, the group has also begun offering both WBTC and WETH through similar means on the Tron blockchain. Once you have set up your Zengo wallet app, follow the steps below to swap your Bitcoin for Wrapped Bitcoin.
In simple words, for every wBTC that exists, for example, there is a Bitcoin that a custodian is holding. Wrapped crypto tokens are cryptocurrencies pegged to the value of another original crypto or assets like gold, stocks, shares, and real estate and put to work on the DeFi platforms. The concept of wBTC is fairly safe in that the technology is sound. However, there are still many risks you should be aware of before you convert your BTC over to wBTC.
While this is a given, DeFi’s yield-generating opportunities rely upon smart contract-supporting altcoin blockchains. It can be argued that the expansion of the DeFi (Decentralized Finance) spawned the birth of wBTC. DeFi applications seek to transform traditional centralized financial services into decentralized version.
Unlike centralized exchanges (CEXs), DEXs do not require a trusted third party, or intermediary, to facilitate the exchange of cryptoassets. There are currently multiple versions of staking protocols in effect. Most require a user to lock their cryptocurrency into a smart contract for an agreed time in exchange for rewards.
Additionally, Zengo supports NFTs and acts as a gateway to Metaverse gaming and the exciting world of decentralized finance via its WalletConnect feature. ERC-20 is a standard by which these digital tokens are created so they can transact with each other. Tokens that meet the ERC-20 standard must meet requirements that dictate how transactions are approved, how tokens are transferred and smart contract usage. Wrapped tokens are increasingly regarded as a good investment in the cryptocurrency world, where decentralized finance will undoubtedly play a significant role.
In a scenario wherein the user requests to unwrap BTC, the custodian has to burn the minted BTC and unlock the collateral. Learn about Bitcoin.com’s official token, ways to earn it, and how to use it in the Bitcoin.com ecosystem and beyond. They offer trading access to over 190 countries including Australia, Canada, Europe, and the USA. Kraken – Founded in 2011, Kraken is one of the most trusted names in the industry with over 9,000,000 users, and over $207 billion in quarterly trading volume. Now, select Bitcoin and Wrapped Bitcoin and fill in the amount of Bitcoin or Wrapped Bitcoin that you want to swap for one another. Launch the Zengo wallet app and tap the ‘’Actions’’ button located in the main menu.
The demand for using BTC in DeFi as an underlying asset was such that it had to be converted into an ERC-20 compatible token to participate in the ecosystem, mainly developed on Ethereum. Learn what makes decentralized finance (DeFi) apps work and how they compare to traditional financial products. KuCoin – This exchange currently offers cryptocurrency trading of over 300 other popular tokens. It is often the first to offer buying opportunities for new tokens.
The Zengo wallet allows you to do this very easily and with minimal room for human error. Apart from wrapping and unwrapping Bitcoin, Zengo also allows you to swap other cryptocurrencies, like MATIC, Voyager, and Decentraland, against low, competitive fees. With the non-custodial and Web3-ready Zengo wallet, you can buy, sell, send, receive, and swap cryptocurrencies like Bitcoin, Ethereum, Polygon, Chainlink, and Dogecoin entirely effortlessly.
Therefore, just like Bitcoin, Ether needs to be wrapped to comply with other ERC-20 token standards. A tokenized version of Ether on the Ethereum platform is thereby created. Blockchains like Bitcoin and Ethereum have different protocols, functionalities, and due to the fundamental difference in their algorithms, they cannot talk to each other. Given the overall usefulness and affordability of wrapping BTC, it’s no surprise to learn that developers are hard at work expanding on this concept.
Although Bitcoin and Wrapped Bitcoin both have the same value, Bitcoin (BTC) can only transact on the Bitcoin native and lightning networks. To interact with Ethereum’s ERC-20 network, Bitcoin needs to be wrapped first. Wrapped Bitcoin can be sent on the Ethereum network just like all other ERC-20 tokens. Whenever you want to unwrap your Bitcoin, you can often do so with just a few taps. In contrast with other assets, wrapped tokens also offer fractionalized ownership that allows owners to buy and hold a tiny fraction of the asset. One of the significant flaws in wrapped BTC tokens is the need to trust the custodian that holds the underlying asset.
Since wrapped tokens exist on Ethereum’s blockchain, rather than Bitcoin’s directly, transactions conducted with wBTC are faster and cost less. As of late, there has been a lot of talk regarding wrapped tokens. Specifically, Wrapped Bitcoin (wBTC) continues to surface as one of the prime examples of why wrapping tokens is beneficial to all. The concept of wBTC emerged in a bid to improve Bitcoin’s functionality and usability. Consequently, these tokens help provide more sophisticated financial services to traditional BTC holders. Although WBTC was the first asset to track bitcoin and make its liquidity tradable on Ethereum, others have followed.
