Take a Bitcoin, leave it in custody, ‘wrap’ to represent it as an Ethereum-based token, and retain a peg to Bitcoin’s price – et voila, you have created Wrapped Bitcoin! In brief, WBTC is an Ethereum ERC-20 token tied to BTC’s value, similar to the Tether token tied to USD’s value.
The main reason to do so, is to ‘shift’ liquidity from Bitcoin’s networks to the Ethereum blockchain, and participate in DeFi services that may not otherwise be natively available to Bitcoin holders. DeFi services for WBTC include features like trading, staking, margin trading, lending and borrowing, games, DApps and smart contracts.
There is no maximum limit to WBTC, and transactions complete 40 times faster than usually seen with BTC. Among its backers, BitGo and Kyber Network claim to maintain a 1:1 ratio of WBTC tokens to BTC reserves, and would remain the centralised custodian of BTC.