A Shake-Up in DeFi Sees Wrapped Bitcoin (WBTC) Growing Faster Than Lightning Network

Ethereum network has minted 1,000 Wrapped Bitcoin (WBTC) on May 12th via a single transaction, dwarfing the entire amount of Bitcoin locked in the Lightning Network (LN).

This recent transaction brought the total number of Bitcoin locked in WBTC to 2,300, which is significantly higher than the 923 Bitcoin currently locked in the Lightning network.

Lightning-Network-defi
Source: DeFiPulse – Lightning Network

The latest data from DefiPulse suggests that the value of locked WBTC in the decentralized finance (defi) ecosystem is around $21.5 million.

WrappedBTC-wBTC
Source: DeFiPulse – WBTC

WBTC is an ERC-20 token that helps in migrating Bitcoin’s value to the Ethereum blockchain which can be utilized as collateral in the defi ecosystem to withdraw loans against it.

The migration of Bitcoin’s value to the Ethereum blockchain is facilitated by Bitgo, which acts as a custodian, allowing users to convert it into WBTC via eight merchants which act as a middleman including:

  • Dharma
  • Ren
  • Set Protocol
  • Gopax
  • Kyber
  • Prycto
  • DiversiFi
  • AirSwap

The WBTC protocol is handled by a consortium of 16 projects which include the eight merchants, the custodian, and the defi platforms Compound, and MakerDAO. A user can always redeem their BTC by first returning the drawn loan along with the interest rate and then by burning the WBTC token.

The Soaring Popularity of Defi Makes Way for ETH-based Synthetic BTC

The popularity of the deFi ecosystem has grown exponentially over the past couple of years which is evident from the fact that the value of collateralized assets in the defi ecosystem crossed the 1 billion mark.

This popularity has also increased the demand for assets that can be collateralized apart from ETH, especially Bitcoin. This has led to the expansion of projects offering BTC tokenization or ETH-based synthetic Bitcoin.

One such example is the recent launch of PieDAO BTC++ fund which comprises of 25% Wrapped BTC, 25% Provable BTC, 25% imBTC and 25% Synthetix BTC. The fund ensures that the user can access the Defi ecosystem through synthetic bitcoin protocol while also hedging against the failure or targetting of one synthetic bitcoin project.

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Author: James W

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