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AAX Academy takes you through an article to understand the popular DeFi project WBTC



Wrapped Bitcoin (WBTC) is an ERC20 token created to integrate Bitcoin with DeFi. The token acts as a stablecoin for Bitcoin, meaning that 1 WBTC will always represent the value of 1 BTC. Despite the number of new coins taking the top spot on the crypto charts, Bitcoin is still the biggest coin in terms of market share, so it makes perfect sense to inject the full power of the original currency into DeFi. As an ERC20 token, WBTC transfers faster than regular BTC, but the key advantage lies in the integration with dApps, Ethereum wallets and smart contracts.

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Since its inception, WBTC has generated a lot of interest across DeFi applications, including lending, derivatives, DEXs, and payment protocols.

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Bitcoin Tokenization

Wrapped Bitcoin launched on Ethereum in January 2019 as part of a collaboration between mainstream players in DeFi such as Ren, BitGo, Compound, Kyber, MakerDAO, and Set Protocol. Today, the project is managed by a Decentralized Autonomous Organization (DAO) called WBTC DAO.

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For DeFi, one of the biggest advantages of WBTC is the injection of liquidity brought by tokens. Many of the most popular DeFi dApps require users to put up their own collateral to use the service. For example, when using Compound to borrow and lend crypto assets, users need to lock up a certain amount of collateral. Using only ETH would limit the growth rate of these protocols, but by integrating the service with Bitcoin, this limitation has been removed. There are more and more people investing more money in Bitcoin.

Now, people can spend these funds through WBTC-enabled DeFi protocols while holding Bitcoin.

Operation mode of WBTC

The framework of the WBTC token has 3 main components: receiving, minting and burning.

To get WBTC, you need to receive tokens from a WBTC merchant. The merchant will conduct KYC/AML procedures and verify your identity. Once complete, the transaction is executed, transferring Bitcoin to the merchant and WBTC to you. Minting refers to the process of creating new tokens. Minting in the framework is initiated by merchants and executed by custodians. Destruction refers to the act of converting bitcoins into WBTC tokens, and only merchant addresses can be destroyed. The amount to be "burned" is deducted from the merchant's WBTC balance (on-chain), which then reduces the WBTC supply.

As you can see, WBTC requires trust in people and systems, not pure code. To promote trust and transparency, WBTC conducts regular audits and publishes all on-chain transactions and verifications of the Bitcoin and Ethereum networks. Anyone can check how much BTC has been sent to a WBTC address on the Bitcoin blockchain, match the transaction with the creation of WBTC, and verify the destruction process of WBTC, redeeming BTC on-chain.

If you just want to trade WBTC, it's much simpler. Most DEXs operating in the DeFi space support the token, including Uniswap, Kyber, and SushiSwap, as well as a growing number of centralized exchanges such as AAX. You can then use that WBTC for any other protocol in DeFi like Compound, Aave, or Set. Direct swaps between WBTC and BTC are only possible through official WBTC merchants, including Kyber, Dharma, Set, GOPAX, AirSwap, Prycto, ETHfinex, and Ren.

The future of WBTC

The future of WBTC lies not only in how individual traders use it, but how DeFi developers deploy it strategically. As an ERC20 token, Bitcoin in the form of WBTC is another building block in the modular system design of DeFi protocols. Now, it's up to the most innovative developers to find more interesting ways to play, combining the best of Bitcoin, Ethereum, DeFi, and innovative finance into one platform.

At present, AAX has opened the deposit and withdrawal of WBTC tokens. For details, please refer to the official website of AAX (


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AAX Academy takes you through an article to understand the popular DeFi project WBTC

Wrapped Bitcoin (WBTC) is an ERC20 token created to integrate Bitcoin with DeFi. The token acts as a stablecoin for Bitcoin.

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