Bitcoin Traders Swap for Ethereum ‘Wrapped BTC’ to Yield Farm and Chill

Demand for Wrapped Bitcoin (WBTC) has been rising tremendously in the previous couple of weeks, with greater than 23,100 WBTC ($274 million) at present in circulation.

Based on information from FlipsideCrypto, a digital asset information supplier, greater than half of the WBTC was minted up to now month because the decentralized finance sector saw record growth.

Net wBTC supply since launch. Source: Flipside Crypto

Internet wBTC provide since launch. Supply: Flipside Crypto

Launched in 2019, WBTC is an ERC-20 token that’s pegged to the worth of Bitcoin (BTC). It permits customers to seemingly switch Bitcoin to the Ethereum community and work together with sensible contracts.

To get WBTC, customers should go to a certified service provider who will maintain the person’s BTC and change it for WBTC tokens. Retailers can mint and burn WBTC tokens as wanted.

The rising demand for WBTC exhibits that Bitcoin customers are searching for high-yield choices to carry Bitcoin. Based on a latest report by Genesis, a digital foreign money prime dealer, institutional purchasers are additionally showing comparable curiosity.

Whereas there’s rising curiosity in WBTC, its progress can be inflated by the yield farming phenomenon, as greater than half of all WBTC in circulation is at present locked in DeFi lending protocol Compound.

Yield farmers worth privateness

WBTC is by far the preferred Bitcoin-backed token used on the Ethereum community, however it’s also a centralized possibility that requires customers to undergo a Know Your Buyer process and to make use of a third-party custodian service. For some potential customers, this raises privateness and censorship considerations.

Whereas institutional curiosity round DeFi has been rising and even central banks are beginning to get involved, many customers are people who could need to keep nameless whereas utilizing WBTC.

As such, the demand for renBTC, a decentralized and nameless different to Wrapped Bitcoin, has been surging as effectively.

wBTC and renBTC net supply since launch. Source: Flipside Crypto

WBTC and renBTC internet provide since launch. Supply: Flipside Crypto

RenBTC is just like wBTC however it options trustless storage for the Bitcoin being locked. This permits customers to completely personal their asset and stay nameless within the course of.

Whereas not all DeFi protocols settle for renBTC, this token will also be exchanged for WBTC and used to entry DeFi protocols like Compound that solely settle for the latter.

Based on Flipside Crypto, 19% of all new addresses utilizing WBTC in August purchased it by way of renBTC. This exhibits that privateness can certainly be a driving issue for extra progress within the DeFi sector.

Purchase amount for first acquisition of BTC on Ethereum. Source: Flipside Crypto

Buy quantity for first acquisition of BTC on Ethereum. Supply: Flipside Crypto

DeFi’s potential appears limitless, however can Ethereum assist the expansion?

As DeFi continues to develop, new security issues are arising. Not solely have a number of DeFi protocols been subject to hacks and malfunctions, however the progress of yield farming itself may have penalties to the tokens concerned with every platform.

For instance, at present, more than 50% of all DAI is locked in Compound, which may disrupt its peg with the greenback. Within the case of WBTC, greater than half of its provide is locked in Compound as effectively. The continuance of this development may simply deliver liquidity points for the tokens at hand.

Much more regarding is the truth that the Ethereum community is turning into more and more slowed down by network congestion and high fees.

Whereas evidently the longer term for DeFi and all its associated components is limitless, the nascent sector requires a powerful basis to face on.

In the meanwhile, the cornerstone is the Ethereum community, however the query is: Can it maintain the rising variety of sensible contracts and calls for being positioned upon it?

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