DeFi is an open and global financial system built for the internet age – an alternative to a system that's opaque, tightly controlled, and held together by decades-old infrastructure and processes. It gives you control and visibility over your money. It gives you exposure to global markets and alternatives to your local currency or banking options. DeFi products open up financial services to anyone with an internet connection and they're largely owned and maintained by their users. So far tens of billions of dollars worth of crypto has flowed through DeFi applications and it's growing every day.
Bitcoin in many ways was the first DeFi application. Bitcoin lets you really own and control value and send it anywhere around the world. It does this by providing a way for a large number of people, who don't trust each other, to agree on a ledger of accounts without the need for a trusted intermediary. Bitcoin is open to anyone and no one has the authority to change its rules. Bitcoin's rules, like its scarcity and its openness, are written into the technology. It's not like traditional finance where governments can print money which devalues your savings and companies can shut down markets.
Ethereum builds on this. Like Bitcoin, the rules can't change on you and everyone has access. But it also makes this digital money programmable, using smart contracts, so you can go beyond storing and sending value.
Wrapped Bitcoin (WBTC) is a wrapped form of Bitcoin developed to give Bitcoin holders the ability to participate in popular decentralized finance (DeFi) protocols that were popularized by on and by the Ethereum network. WBTC is an ERC-20 token and therefore, gives Ethereum the advantage of inviting liquidity from the Bitcoin ecosystem onto the Ethereum network.
In order to create WBTC tokens, BTC holders submit requests to obtain newly issued tokens from a merchant who performs KYC and AML (Know Your Customer and Anti-Money Laundering) checks. The merchant then initiates the required transaction with an official custodian in order to mint the WBTC tokens before sending them into the custody of the merchant.
At this point, the requesting customer is able to swap BTC for WBTC with the merchant via a centralized exchange (CEX), decentralized exchange (DEX), or atomic swap. It is important to note that only merchants are empowered to redeem WBTC for BTC tokens in this protected process.
Due to the purpose of Wrapped Bitcoin and its unique minting process, there is a low circulating supply of WBTC. This is always the same as the total maximum supply, since it grows only as new tokens are minted. Currently, 210,1450 WBTC tokens are in active circulation. Live WBTC price can be viewed on Binance at any time.
What Is Wrapped Bitcoin (WBTC) Used For?
Wrapped Bitcoin is primarily used as an intermediary token for Bitcoin holders to enter the Ethereum network for the main purpose of interacting in DeFi applications in the ERC-20 ecosystem. Since Ethereum was designed several years after Bitcoin with decentralized application (DApp) technology, smart contracts and other protocols that enable further innovations beyond the BTC environment, Wrapped Bitcoin benefits both networks.
DeFi is a collective term for financial products and services that are accessible to anyone who can use Ethereum – anyone with an internet connection. With DeFi, the markets are always open and there are no centralized authorities who can block payments or deny you access to anything. Services that were previously slow and at risk of human error are automatic and safer now that they're handled by code that anyone can inspect and scrutinize.
There's a booming crypto economy out there, where you can lend, borrow, long/short, earn interest, and more. Crypto-savvy Argentinians have used DeFi to escape crippling inflation. Companies have started streaming their employees their wages in real time. Some folks have even taken out and paid off loans worth millions of dollars without the need for any personal identification.
One of the best ways to see the potential of DeFi is to understand the problems that exist today.
You hold your money.
You control where your money goes and how it's spent.
Transfers of funds happen in minutes.
Transaction activity is pseudonymous.
DeFi is open to anyone.
The markets are always open.
It's built on transparency – anyone can look at a product's data and inspect how the system works.
Your money is held by companies.
You have to trust companies not to mismanage your money, like lend to risky borrowers.
Payments can take days due to manual processes.
Financial activity is tightly coupled with your identity.
You must apply to use financial services.
Markets close because employees need breaks.
Financial institutions are closed books: you can't ask to see their
loan history, a record of their managed assets, and so on.
Your money is held by companies.
You have to trust companies not to mismanage your money, like lend to risky borrowers.
Payments can take days due to manual processes.
Financial activity is tightly coupled with your identity.
You must apply to use financial services.
Markets close because employees need breaks.
Financial institutions are closed books: you can't ask to see their
loan history, a record of their managed assets, and so on.
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