LeoGlossary: Wrapped Bitcoin
This is a derivative of the cryptocurrency Bitcoin.
A wrapped version of a coin or token is simply version of that asset on another blockchain. With Wrapped Bitcoin, it is that coin located on a blockchain like Ethereum. This allows users to engage with that coin on the other chain. This is important for things such as liquidity pools.
A wrapping is nothing more than a bridging from one chain to another. This requires the original Bitcoin to be sent to an address while the smart contract on the other chain releases a mirrored amount to the associated wallet.
Coins or tokens on different chains helps in a couple different ways:
- price discovery is enhanced with expanded arbitrage opportunities
- liquidity is increased as the pools grow and are filled
Wrapped Bitcoin is also important when it comes to decentralized exchanges (DEX) because they engage with the EVMs.
Posted Using LeoFinance Beta