Review on Wrapped Bitcoin by Faruk ELHAKAN
Wrapped BTC?
Hello everyone, our topic is wrapped bitcoin. To buy WBTC, a user requests tokens from a seller. The vendor then performs the required KYC / AML procedures and authenticates the user. Once this is complete, it performs user and merchant exchanges with Bitcoin transferring from user to merchant and WBTC transferred from merchant to user.
Most of the most popular DeFi dapps on Ethereum require specific collateral use. Products like MakerDAO and Compound require users to lock down existing crypto assets in their hands before they can borrow other crypto assets. Since the overall value of Ethereum is significantly smaller than Bitcoin, these protocols don't grow too big. By bringing Bitcoin to the Ethereum network, the liquidity of the protocols increases and thus more sources of collateral can be created for dapps.
The administrative members of the WBTC DAO decide who can take over the roles of other people managing the system, as well as major updates and changes to the protocol.
Users who own BTC and want to convert it to WBTC should interact with merchants. Vendors initiate the process of generating or burning WBTC tokens by implementing verification procedures to authenticate users. The Custodians, the Guardians, protect the real BTC that is wrapped and actually produce and burn the tokens on the Ethereum blockchain. When WBTC is burned, the BTC is returned to the user under the custody of the custodian. When new WBTC is generated, BTC is taken from the user and stored by the guardian organization.
Pros
- DEVELOPED FOR TRADERS, INSTITUTIONS, AND DAPPS
- Decentralized applications can now leverage Bitcoin payments in smart contracts for lending protocols, funds, prediction markets, and token sales.
Cons
- relative risk
