### What is Wrapped Bitcoin?

Wrapped Bitcoin (WBTC) is a cryptocurrency token that operates on the Ethereum blockchain as an ERC-20 token. It is designed to represent one-to-one ownership of Bitcoin, enabling Bitcoin holders to participate in Ethereum-based decentralized finance (DeFi) applications without needing to sell their Bitcoin.

### How does Wrapped Bitcoin work?

Wrapped Bitcoin functions by having Bitcoin holders exchange their Bitcoin for WBTC through a custodian. The custodian holds the Bitcoin reserves and issues an equivalent amount of WBTC on the Ethereum blockchain. This process involves smart contracts that ensure each WBTC token is fully backed by an equal amount of Bitcoin. When a user wants to convert WBTC back into Bitcoin, the process is reversed.

### What are the potential use cases for Wrapped Bitcoin?

Wrapped Bitcoin has several use cases, primarily within the DeFi ecosystem:
1. **Lending and Borrowing**: Platforms like Aave and Compound allow users to lend or borrow Bitcoin in the form of WBTC.
2. **Yield Farming**: Users can earn rewards by providing liquidity through protocols like Curve Finance.
3. **Trading**: WBTC can be traded on Ethereum-based decentralized exchanges (DEXs).
4. **Staking**: Users can stake WBTC to earn rewards.
5. **Cross-Chain Interoperability**: WBTC enables Bitcoin to be used in smart contracts on Ethereum.

### What is the history of Wrapped Bitcoin?

Wrapped Bitcoin was launched in January 2019 as a collaborative effort among multiple DeFi projects, including BitGo, Kyber Network, and Ren. The aim was to bring more liquidity to the Ethereum network by leveraging Bitcoin holdings. Since its launch, WBTC has become a crucial tool for enabling Bitcoin holders to access DeFi applications on Ethereum. No forks of WBTC have occurred, maintaining its role as a bridge between Bitcoin and the Ethereum blockchain.

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