Wrapped Bitcoin (WBTC) is an ERC20 token that is backed 1:1 with Bitcoin. This means that for every WBTC token in circulation, there is an equivalent amount of Bitcoin held in reserve.
WBTC was created to bring the liquidity of Bitcoin to Ethereum and to make it possible to use Bitcoin in Ethereum decentralized applications (dApps).
WBTC has the same properties as Bitcoin, including fungibility, scarce supply, and censorship resistance. However, because WBTC is an ERC20 token, it can be stored in any Ethereum wallet and used in any Ethereum dApp.
This makes it much easier to use Bitcoin in Ethereum applications than if Bitcoin were used directly.
The main difference between WBTC and Bitcoin is that WBTC is issued by a centralized custodian, while Bitcoin is decentralized. This custodian holds the Bitcoin reserves that back the WBTC tokens and is responsible for issuing new tokens when they are bought and burning them when they are sold.
The custodian also sets the exchange rate between WBTC and BTC.
Because WBTC is issued by a centralized entity, it is not as decentralized as Bitcoin. However, the custodian has agreed to follow the rules set forth by the WBTC community, which includes transparently auditing the reserve fund and following a decentralized governance model.
Overall, WBTC is a good way to bring the liquidity of Bitcoin to Ethereum. It is also an easy way to use Bitcoin in Ethereum applications.
However, because it is issued by a centralized custodian, it is not as decentralized as Bitcoin.