Want to jump straight to the answer? You can buy WBTC on Coinbase.

Wrapped Bitcoin allows investors to interact with Ethereum’s blockchain while being exposed to Bitcoin. Each wrapped bitcoin is equivalent to the price of 1 bitcoin, and you can exchange one for the other on a cryptocurrency trading platform. You must be wondering, why not just buy Bitcoin?

Using Wrapped Bitcoin has several advantages over using Bitcoin on Bitcoin’s blockchain. WBTC is an ERC-20 token, which means it’s an Ethereum-based token. And since WBTC is an ERC-20 token, you can interact with DeFi protocols to receive loans, earn interest and much more. 

What is Wrapped Bitcoin?

Wrapped Bitcoin (WBTC) is a tokenized version of Bitcoin on Ethereum’s blockchain. For the organization to mint WBTC, Bitcoin has to be deposited as a reserve. Each wrapped bitcoin is backed by a normal bitcoin, so the price of WBTC can be pegged to the price of Bitcoin.

Choosing to buy Wrapped Bitcoin instead of Bitcoin allows you to interact with any program that Ethereum tokens can interact with. For example, you can use decentralized exchanges with WBTC but not BTC. Decentralized exchanges offer a way to trade crypto without a centralized exchange or identity verification.

Another way WBTC is superior to BTC is that WBTC can interact with decentralized lending protocols on Ethereum. If you own WBTC, you’re able to stake it on Ethereum protocols like Uniswap or Kyber Network to earn interest on your bitcoin while still being exposed to Bitcoin’s volatility. 

Using WBTC also gives you the option to take out cryptocurrency loans without needing a credit score. To do so, you’ll need to use a lending protocol on Ethereum’s blockchain, such as Compound. To get a loan using this program, you need to put up your WBTC as collateral. This is because there are no credit scores, so there needs to be collateral in case of a default.

Investors sometimes get loans using decentralized finance to leverage their positions. These investors benefit from both their bitcoin collateral and cryptocurrency loan appreciating, so long as they don’t default on their loan.

Brief History of Wrapped Bitcoin

Wrapped Bitcoin was created in January 2019 and was the first ERC-20 token to be pegged to Bitcoin’s price with a 1:1 ratio. WBTC was initiated as a joint venture between Bitgo, Kyber and Ren. WBTC is now controlled by a decentralized autonomous organization (DAO) to govern the protocol. 

The DAO currently has 16 members, mostly consisting of DeFi based companies that develop on Ethereum’s blockchain. By using a DAO, these members, such as Kyber Network, Compound, MakerDAO and Bitgo, can vote on proposals to upgrade the WBTC network.

Step 1: Open an online account.

To buy Wrapped Bitcoin, you need to open an online account with a cryptocurrency exchange that supports Wrapped Bitcoin. If you already own Ethereum tokens, you could send them to a decentralized exchange like Uniswap and swap them for WBTC. 

If you don’t already own crypto, you’ll need to make a crypto brokerage account. Some well known cryptocurrency brokerages that support WBTC are eToro and Coinbase Pro. To open an online account with either of these brokerages, you’ll need to provide them with personal information for regulation purposes, similarly to stock brokerages. To fund your account, you can connect a bank account or debit card. 

Step 2: Buy a wallet (optional). 

To keep your WBTC and other cryptocurrency investments safe, you should transfer them off of the exchange you purchase them on. You can either transfer them to a hardware wallet or a software wallet. Both are secure options, but hardware wallets are the most secure because they store your cryptocurrency offline on a physical device.