Since Satoshi Nakamoto released the white paper, whether Bitcoin is used as a digital currency or a payment system, its decentralized financial approach has shown many possibilities. The virtual currency native community put forward the concept of decentralized finance (DeFi), which is essentially for users to perform transactions and other operations on their own without resorting to traditional intermediaries when performing financial services based on blockchain technology.
However, since the concept was put forward, DeFi has gradually appeared in various forms of services such as infrastructure, payment and loan, derivatives and insurance, and is regarded as a financial market with great potential. As the foundation of DeFi, the new financial ecosystem, Ethereum has attracted more and more Bitcoins. The first Bitcoin to use the Ethereum token standard (ERC20 standard)-WBTC (Wrapped BTC) has a total lock-up value of close to 1.5 billion U.S. dollars. This is a huge flow of BTC from the Bitcoin network to the Ethereum ecosystem.
So, as the ERC-20 version of Bitcoin, WBTC has become one of the important solutions of DeFi. It has a dominant advantage in the field of tokenized encrypted assets. What is the secret behind it? Today, let us uncover the mystery of WBTC.
What is WBTC? what is it used for?
WBTC stands for Wrapped Bitcoin, which literally means “wrapped Bitcoin”. It is an ERC-20 token based on Ethereum and linked to Bitcoin. It was jointly launched by blockchain projects such as BitGo, Kyber Network, and Ren, and was officially launched in January 2019. The token is issued on Ethereum and achieves 1:1 anchoring with Bitcoin. It is the ERC-20 version of Bitcoin and the first ERC-20 version of BTC. The purpose is to make BTC liquidity enter the Ethereum ecosystem. .
In the past two years, head transactions have begun to deploy DeFi, making it once a “potential stock” ecosystem in the blockchain. Ethereum is the “main battlefield” of DeFi, and Bitcoin, as the most important digital asset, is also being introduced to participate in DeFi on the Ethereum chain through different solutions, and WBTC is one of the solutions.
On the one hand, the emergence of WBTC neither affects the storage value of Bitcoin, but also participates in services on Ethereum. By migrating Bitcoin to Ethereum, investors can take advantage of the money-making opportunities that DeFi is constantly looking for.
On the other hand, for the weak liquidity of the decentralized trading platform, WBTC provides a solution, and the decentralized exchange provides WBTC holders with income in return. The financial incentives provided by encrypted liquidity have also attracted Bitcoin holders.
The data shows that as the first Bitcoin to use the Ethereum token standard (ERC20 standard), the market value of WBTC is close to 1.5 billion U.S. dollars. This is a huge flow of BTC from the Bitcoin network to the Ethereum ecosystem. This demonstrates the strong growth of the Decentralized Finance (DeFi) market in 2020 and the dominant position of WBTC relative to other tokenized crypto assets.
Bitcoin is its own DeFi, why join in the excitement of Ethereum DeFi?
Bitcoin itself is a form of DeFi, and developers are constantly building new DeFi applications on the Bitcoin network.
But Bitcoin itself cannot easily move across chains on Ethereum. Most applications are still in the theoretical stage. Compared with Ethereum’s DeFi, there are some defects in security and stability. So there was a tokenized version of Bitcoin on Ethereum.
The DeFi built on Ethereum does not require cumbersome cross-chain operations. The security and convenience of asset exchange in a single chain also makes up for the shortcomings of slow transaction speed, which is also an important basic equipment for the development of DeFi. Since most of DeFi’s products and projects are running on Ethereum at this stage, it has also brought popularity to Ethereum, and the number of Bitcoins on the Ethereum network has surged. On the other hand, if DeFi continues to maintain this growth momentum, it can lay a more solid foundation for the Ethereum network as the prototype of the financial landscape.
If you want to combine the best of Bitcoin, Ethereum, and DeFi, then WBTC is one of the new breakthroughs. Currently, WBTC has been integrated into many DeFi platforms, such as Kyber Network, Airswap, etc. In addition, some other versions of tokenized Bitcoin are also emerging, such as renBTC, sBTC and so on.
summary
In fact, when WBTC first appeared in 2019, it did not show obvious advantages, but MakerDAO accepted WBTC as collateral for DAI loans, which became a breakthrough for Bitcoin in Ethereum, and then Qingyun went straight up. But the permissionless nature of DeFi makes the use of Bitcoin on Ethereum may be risky.
