How to Bet (Wrapped) Bitcoin: A Beginner’s Guide
The Bitcoin (BTC) network uses a proof-of-work (PoW) consensus protocol to secure the network, which means that network participants can earn mining rewards (if they choose to extract the digital currency), but they cannot earn wager rewards native.
Fortunately, for BTC holders who want to earn bet rewards on their bitcoin investment, you can tokenize your coins to Wrapped Bitcoin to earn bet rewards in the Ethereum (ETH) -based DeFi ecosystem.
Read on to learn how to bet bitcoin (in tokenized form) and start earning bet rewards on your “digital gold”.
What is Wrapped BTC and how does it work?
Wrapped Bitcoin (WBTC) is a tokenized version of BTC on the Ethereum network. WBTC is integrated BTC into Ethereum’s decentralized financial ecosystem by complying with the ERC-20 standard.
WBTC was launched in 2019 by BitGo, Cyberand Pure and is currently the largest wrapped token by total market value.
WBTC allows Ethereum applications to integrate an ERC-20 token backed by genuine BTC reserves. Simply put, you can wrap up your BTC and lend the WBTC through DeFi lending protocols, use it as collateral for a crypto loan, or deposit it into an automated marketer (AMM) to earn liquidity recovery rewards.
WBTC is secured 1: 1 with BTC through a transparent verifiable “proof of reserve” system. In other words, WBTC is linked to the value of BTC in the ratio 1: 1 and therefore reflects BTC’s price movements.
Wrapped Bitcoin is managed by a decentralized autonomous organization (DAO) consisting of several members who have a multisig contract to add or remove WBTC merchants and managers.
To deposit BTC and Mint WBTC you must go through a process involving sellers and managers. After receiving a request from a user, the seller initiates a transaction by sending your BTC to a custodian to debit a corresponding amount of WBTC. WBTC is sent to the user, and the caretaker locks BTC in a digital vault.
If you want to redeem your WBTC for BTC, the seller initiates a fire transaction and authorizes the custodians who release a corresponding amount of BTC to the seller’s address. WBTC is destroyed by the custodian and you will receive BTC from the seller.
Now let’s take a look at two WBTC betting options that allow you to earn bet rewards using (tokenized) bitcoin.
How to bet (wrapped) BTC to earn bet rewards
There are essentially two ways you can earn rewards by betting your tokenized bitcoin holdings. You can either bet your WBTC on a centralized exchange or in a decentralized protocol.
Strictly speaking, the two examples are not our efforts in proof-of-stake (PoS) sense. Instead, they both involve depositing Wrapped Bitcoin to earn returns, thus acting as a de facto form of effort.
Efforts on a centralized stock exchange
You can bet your WBTC on a centralized exchange (CEX) to earn bet rewards.
For example, you can access Binance Earn and provide liquidity in Binance liquidity pools. Binance liquidity pools allow you to earn transaction fees and interest on your WBTC.
To get started, log in to your Binance account and click “Earn”. Scroll down and click on “Liquidity Farming”.
Go to the Liquidity Farming page and search WBTC.
Add liquidity by clicking on the “Add” option in the operating column.
In this case, WBTC / ETH is a double liquidity pool. Continue to bet the WBTC amount and calculate the total return. When you are satisfied, submit your order by clicking on “Add liquidity”.
If you are an existing Binance user, this is without a doubt the easiest way to earn rewards for betting your WBTC tokens. However, you must keep in mind that Binance is a centralized exchange and that you trust a third party with your money.
Effort wrapped BTC in a DeFi protocol
Alternatively, you can bet your WBTC in a DeFi protocol like Curve.
Curve.fi allows users and other decentralized protocols to exchange ERC-20 tokens via liquidity pools. Curve.fi offers relatively low fees and low slippage and provides rewards to liquidity providers.
You can insert WBTC in a curve contract. In return, you will receive corresponding liquidity provider (LP) tokens. You can then bet your LP tokens to earn a return on your tokenized BTC holdings.
To learn more about earning crypto revenue on Curve.fi, check out our guide: DeFi Unlocked: How to Earn Crypto Investment Revenue on Curve Finance.
While native BTC efforts on the Bitcoin network are not working, any Bitcoiner can convert their coins to WBTC and bet on various centralized and decentralized platforms to earn returns on their digital gold.
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