Every day we should strive to learn something new and different. I research two ways: new articles and reading books. I like to read my crypto news on the CoinGecko News platform. They always have a mix of education and current events.
Anyways, I was reading some articles, and I kept seeing references to wBTC. I know that the symbol for Bitcoin is BTC, so what was wBTC? Being the lifelong learner that I am, I looked up wBTC.
It turns out that wBTC stands for wrapped Bitcoin. Interestingly, I didn’t know we could wrap up a digital coin. Wrapped Bitcoin and all other wrapped cryptocurrencies serve an important role—they allow the coins to operate cross-platform.
Above, I attached an image of all the smart chains (or blockchains, networks, platforms, ecosystems—whatever you want to call them). Each smart chain is its own platform and rarely do they interact with one another.
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The biggest and most used ecosystem is Ethereum. The Ethereum network houses most of the decentralized finance apps (Dapps). Bitcoin has its own blockchain but isn’t as user-friendly as newer protocol smart chains.
Each smart chain has its Native token where end-users and application developers can pay to access the blockchain. For example, Ehtereum uses Ether (ETH) and Cardano uses (ADA). These Native tokens can trade on centralized exchanges and decentralized exchanges for everyone to purchase and trade.
However, you can’t use them on other platforms for Dapps. For example, I can’t natively use BTC to power various forms of DeFi passive income on the Ethereum network. That’s where wrapping comes into play.
Wrapping is the process of depositing crypto into a holding area and minting a wrapped coin that you can use on a compatible network. For example, I may not be able to use BTC on a Dapp on the Ethereum network, but I might be able to use wBTC.
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I found two great articles that go into more technical details of wrapping coins. One is on Gemini.com, and the other is on Coinmarketcap.com. Read those articles for the nitty-gritty on wrapping and minting coins.
I want to give you an example that may help you better understand the reasoning and process behind the wrapping. Let’s say that Cardano is the Playstation Network, and Ethereum is the XBOX Network.
We know that XBOX has the popular Dapp named Halo. We also know that it is exclusive to the XBOX platform. I can wrap Playstation discs (PLAY) and interact with Halo on my XBOX platform using a wrapping technique.
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While I am playing Halo with wPLAY, my original PLAY coin sits in a holding cell. When I finish playing, I can convert my wPLAY to standard PLAY.
Hopefully, this example sheds some light on the importance of wrapping. In time, interoperability between platforms will be more ambiguous. Unless you are a hardcore DeFi person, you probably will not need wrapped coins.
However, the more we know, the more we grow. I love learning (and sharing) new things. I know I learned a lot by researching wrapped coins. Now, when I see the wBTC or wETH, I can understand what they entail.
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We have come a long way on our cryptocurrency journey, and we still have much more to discuss. Stay tuned, and check out my latest book about cryptocurrencies called “The Magic of Cryptocurrencies (article).” Enjoy and Happy Investing.
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