What is Wrapped Bitcoin (WBTC) and How It Works
Wrapped bitcoin (WBTC) is a tokenized version of bitcoin that lives on the Ethereum blockchain. Think of WBTC as putting bitcoin inside a digital "wrapper" so it can be used on networks like Ethereum for trading, lending, and decentralized finance (DeFi) apps. Just like swapping physical cash for a gift card you can spend online, WBTC lets you use bitcoin in new places while maintaining 1:1 value. In this guide, you'll learn what wrapped bitcoin is, how it differs from regular BTC, how it's kept secure, and how to get started with WBTC and DeFi. You'll also discover the main benefits, risks, and how OKX supports WBTC for both beginners and advanced users.
What Is Wrapped Bitcoin (WBTC)?
What is wrapped bitcoin? In simple terms, wrapped bitcoin (WBTC) is an ERC-20 token that represents bitcoin 1:1 on the Ethereum blockchain. The "wrapped" part means that actual BTC is locked up by a trusted custodian, and a matching amount of WBTC is issued on Ethereum. This lets users access DeFi apps, fast trades, and smart contracts using bitcoin value without leaving Ethereum.
Why does WBTC exist? Bitcoin is powerful but wasn’t designed to work with Ethereum’s smart contracts or DeFi protocols. By "wrapping" BTC and issuing WBTC as an Ethereum-compatible token, bitcoin holders can tap into the whole world of DeFi—borrow, lend, trade, or earn yields with their BTC.
WBTC is always backed 1:1 by real bitcoin held by custodians. This makes sure every WBTC can be swapped back into the equivalent BTC at any time.
💡 Pro Tip: WBTC is the most widely used wrapped bitcoin token, with deep liquidity and strong community support.
How Does Wrapped Bitcoin Work?
Here's how wrapped bitcoin moves from BTC to WBTC and back:
- Step 1: Request – A user or merchant requests to wrap BTC into WBTC.
- Step 2: Deposit – Bitcoin is sent to the custodian’s secure vault.
- Step 3: Minting – After confirmation, an equal amount of WBTC is "minted" (created) on Ethereum.
- Step 4: Use – The user now holds WBTC, which can be used in Ethereum DeFi apps and wallets.
- Step 5: Burn/Unwrap – When you want to convert WBTC back to BTC, the WBTC is destroyed (burned) and the equivalent BTC is released from custody and sent to your bitcoin wallet.
This process works much like taking dollars to a bank, locking them away, and getting a digital receipt to spend online—swap it back any time!
For more basics, check out OKX’s beginner guides.
Proof-of-Reserves, Security & Governance
Trust is crucial for wrapped bitcoin security. Every WBTC in circulation is always matched by an equal amount of real BTC, and the entire process is governed and monitored by a decentralized autonomous organization (DAO). Proof-of-reserves is provided through transparent audits and public blockchain records, allowing anyone to verify that BTC backing is always complete.
Who Issues and Holds WBTC?
WBTC uses a network of custodians and merchants. Companies like BitGo (as the leading custodian) physically hold the BTC in secure wallets. Merchants—approved entities on the WBTC DAO—process requests to mint (create) and burn (destroy) WBTC. The DAO, made up of DeFi leaders and community members, sets rules, votes on upgrades, and manages governance. Some exchanges, including OKX, support WBTC by offering easy access and trading, but the underlying model remains open and global.
How Is WBTC Secured?
Multisignature (multisig) wallets protect the BTC reserves, meaning multiple trusted parties must approve every transaction. Regular audits and transparency reports are published for public review—anyone can see the total WBTC in circulation and the matching BTC in custody on-chain. This open model, along with multisig and established entities like BitGo, helps ensure robust protection for WBTC holders.
💡 Pro Tip: Always check for updated audit and proof-of-reserves links before holding large WBTC amounts.
OKX, as a leading exchange, supports proof-of-reserves audits and may offer extra insurance—learn more on the OKX platform.
Wrapped Bitcoin vs. Bitcoin: Key Differences
While both wrapped bitcoin and native bitcoin give you access to bitcoin’s value, there are key differences:
- Network & Standard: Bitcoin lives on its own blockchain, while WBTC is an ERC-20 token on Ethereum.
- Smart Contract Support: WBTC can interact with Ethereum dApps, DeFi, and smart contracts; BTC cannot.
- Speed & Fees: WBTC transactions on Ethereum are generally faster and can have lower fees during low congestion.
- Use Cases: BTC is for holding, spending, and storing value; WBTC opens doors to lending, yield farming, and decentralized exchanges.
Here's a quick comparison:
| Feature | Native Bitcoin | Wrapped Bitcoin (WBTC) |
|---|---|---|
| Blockchain | Bitcoin | Ethereum (ERC-20) |
| Token Standard | Native BTC | ERC-20 |
| Smart Contracts | No | Yes |
| DeFi Access | Limited/No | Full (lending, DEX, etc.) |
| Transaction Fee | Typically higher | Lower (on Ethereum) |
| Wrapping Needed | No | Yes |
| Conversion | Direct BTC transfers | Swap WBTC ↔ BTC (custodial) |
OKX offers trading, swapping, and wallet support for both assets, making it simple to manage both BTC and WBTC in one platform.
How to Get and Use Wrapped Bitcoin
Ready to buy or use wrapped bitcoin? It’s straightforward—just follow these steps:
- Buy directly: You can purchase WBTC on leading exchanges like OKX, often using USDT, ETH, or BTC.
- Wrap BTC: Convert your bitcoin to WBTC using supported platforms or through the merchant-custodian network.
- Transfer & Store: Store WBTC in any ERC-20 compatible wallet on Ethereum, such as OKX Wallet, MetaMask, or Ledger.
Step-by-Step: Buying WBTC on OKX
- Create an OKX account – Register and verify your identity.
- Deposit funds – Add BTC, ETH, USDT, or other supported tokens.
- Find WBTC – Search for the WBTC trading pair (e.g., WBTC/USDT).
- Place your order – Choose market or limit order and confirm.
- Store or transfer – Move WBTC to your OKX Wallet or another compatible wallet.
OKX offers ultra-low trading fees, 24/7 support, and reliable liquidity to make buying WBTC easy for all users.
Wrapping and Unwrapping BTC
To wrap BTC into WBTC:
- Connect your Ethereum wallet to a wrapper (e.g., a DeFi dApp or OKX if provided).
- Send BTC to the specified custodian address.
- Wait for confirmation (can take 1-2 hours, depending on network load and confirmations).
- WBTC is minted and sent to your Ethereum wallet.
To unwrap, the reverse process applies: return WBTC, burn it, and the custodian sends BTC back to your wallet.
Be aware of small wrapping/unwrapping fees and allow for blockchain confirmation times. For the easiest experience, buy and hold directly on OKX.
Wrapped Bitcoin in DeFi: Use Cases & Opportunities
WBTC vastly expands what you can do with bitcoin in DeFi. By bridging the gap between Bitcoin's value and Ethereum's flexibility, it unlocks new utility.
- Trading on DEXs: Use WBTC for quick, non-custodial swaps on platforms like Uniswap.
- Lending and Borrowing: Deposit WBTC on protocols like Aave or Compound to earn interest, or use it as collateral to borrow stablecoins.
- Liquidity Pools & Yield Farming: Provide WBTC liquidity to earn pool rewards, trading fees, or participate in yield farming strategies.
Popular Platforms for WBTC
- Uniswap: Trade WBTC against ETH or stablecoins; enjoy deep liquidity.
- Aave: Lend or borrow with WBTC as collateral—earn yields or gain leverage.
- Curve Finance: Supply WBTC for stable, low slippage pools; ideal for large swaps or stablecoin trading.
OKX continues to expand DeFi offerings—keep an eye on DeFi on OKX for potential bridge or lending integrations for WBTC.
Risks, Regulation, and Insurance: What to Know
While wrapped bitcoin offers many benefits, it isn’t risk-free. Key risks and safety factors include:
- Centralization Trust: Custodians hold the real BTC, introducing a trust layer versus pure decentralized assets.
- Regulatory Oversight: Custodians and merchants follow KYC/AML guidelines and operate under regulatory scrutiny, which may vary by region.
- Smart Contract & Custodian Risk: Bugs or mismanagement could affect WBTC, though multisig controls and audits help reduce this.
- Insurance: Some exchanges and custodians (including OKX) may provide insurance or SAFU funds for extra user protection—always check coverage details.
Always activate two-factor authentication and keep wallet recovery phrases offline.
Risk Disclaimer: All crypto investments involve risk, including loss of principal. Do your own research before using DeFi products or exchanging tokens.
Other Wrapped and Bitcoin-pegged Tokens
WBTC isn’t the only Bitcoin-backed token available. Alternatives include:
- renBTC: Minted through the Ren protocol, offering more decentralization but sometimes less liquidity.
- HBTC: Issued by Huobi, focusing on exchange-centric use cases.
- tBTC: A decentralized solution with stricter rules for minting and burning.
Compared to these, WBTC stands out for highest liquidity, broader adoption in DeFi, and transparent, reputable custodians.
On OKX, you’ll find support for WBTC and, at times, major alternatives like HBTC—check for current listings before trading.
Frequently Asked Questions
What is wrapped bitcoin?
Wrapped bitcoin is an ERC-20 token on Ethereum that represents bitcoin one-for-one, allowing BTC’s value to be used in Ethereum apps. WBTC is always backed by real BTC.
How to buy wrapped bitcoin?
You can buy wrapped bitcoin by opening an account on an exchange like OKX, depositing funds, searching for WBTC, and trading for it. OKX makes this simple for beginners.
wrapped bitcoin vs bitcoin
Wrapped bitcoin (WBTC) is an ERC-20 token on Ethereum, while regular bitcoin (BTC) exists only on the Bitcoin blockchain.
What is coinbase wrapped bitcoin?
Coinbase wrapped bitcoin is simply WBTC supported on Coinbase as an ERC-20 token; it’s not a unique or exclusive asset.
Is wrapped bitcoin safe?
Wrapped bitcoin uses custodians, multisig wallets, and regular audits to secure funds, but users must trust the custodians and review risk disclosures before investing.
Conclusion
Wrapped bitcoin brings bitcoin’s value to Ethereum and DeFi—a powerful combination for investors and users. The three main takeaways:
- Utility: WBTC lets you use bitcoin across DeFi lending, trading, and yield opportunities.
- Trust: Regular audits, on-chain proof-of-reserves, and multisig wallets build confidence in WBTC security.
- Easy Access: Buying, transferring, and using WBTC on OKX is fast and beginner-friendly.
Wrapped bitcoin opens the door to greater flexibility and financial opportunity. Want to get started? Sign up with OKX and discover the potential of WBTC today.
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