Bitcoin Investors Swap for Ethereum Wrapped BTC to Yield Farm and Chill

August 18, 2020   Ethereum

Demand for Wrapped Bitcoin has surged as Bitcoin investors seek a private method to gain exposure to DeFi and lend farming. Demand for Wrapped Bitcoin (WBTC) has been growing tremendously in the last few weeks, with more than 23,100 WBTC ($274 million) currently in circulation.

According to data from FlipsideCrypto, a digital asset data provider, more than half of the WBTC was minted in the past month as the decentralized finance sector saw record growth.

Launched in 2019, WBTC is an ERC-20 token that is pegged to the price of Bitcoin (BTC). It allows users to seemingly transfer Bitcoin to the Ethereum network and interact with smart contracts.

To get WBTC, users must go to an authorized merchant who will hold the user’s BTC and exchange it for WBTC tokens. Merchants can mint and burn WBTC tokens as needed.

The growing demand for WBTC shows that Bitcoin users are looking for high-yield options to hold Bitcoin. According to a recent report by Genesis, a digital currency prime broker, institutional clients are also showing similar interest.

While there is growing interest in WBTC, its growth is also inflated by the yield farming phenomenon, as more than half of all WBTC in circulation is currently locked in DeFi lending protocol Compound.

Yield farmers value privacy


WBTC is by far the most popular Bitcoin-backed token used on the Ethereum network, but it is also a centralized option that requires users to go through a Know Your Customer procedure and to use a third-party custodian service. For some potential users, this raises privacy and censorship concerns.

While institutional interest around DeFi has been growing and even central banks are beginning to get involved, many users are individuals who may want to stay anonymous while using WBTC.

As such, the demand for renBTC, a decentralized and anonymous alternative to Wrapped Bitcoin, has been surging as well.

RenBTC is similar to wBTC but it features trustless storage for the Bitcoin being locked. This allows users to fully own their asset and remain anonymous in the process.

While not all DeFi protocols accept renBTC, this token can also be exchanged for WBTC and used to access DeFi protocols like Compound that only accept the latter.

According to Flipside Crypto, 19% of all new addresses using WBTC in August bought it through renBTC. This shows that privacy can indeed be a driving factor for more growth in the DeFi sector.

DeFi’s potential seems limitless, but can Ethereum support the growth?


As DeFi continues to grow, new security issues are arising. Not only have several DeFi protocols been subject to hacks and malfunctions, but the growth of yield farming itself could have consequences to the tokens involved with each platform.

For example, currently, more than 50% of all DAI is locked in Compound, which can disrupt its peg with the dollar. In the case of WBTC, more than half of its supply is locked in Compound as well. The continuance of this trend could easily bring liquidity issues for the tokens at hand.

Even more concerning is the fact that the Ethereum network is becoming increasingly bogged down by network congestion and high fees. While it seems that the future for DeFi and all its related parts is limitless, the nascent sector requires a strong foundation to stand on.

At the moment, the cornerstone is the Ethereum network, but the question is: Can it sustain the growing number of smart contracts and demands being placed upon it?

Source

Share
Pin
Send
Share
Share

Related Crypto News and Promotions




Top upcoming ICOs

ICOs Rating Days left
1 DogData 5 35
2 2local 5 66
3 SerenitySource 5 95
4 Geco.one 5 95
5 Tycoon 5 96
6 Pawtocol 4.9 67
7 Curate 4.9 88
8 Ledder 4.9 96
9 IdeaFex 4.9 629
10 BitWings 4.8 4

ICOs rating

Top Cryptocurrencies

Сryptocurrency CVIX Price Change, 24h
Bitcoin 37 $10 717.95 0.13%
Ethereum 49 $352.61 1.70%
Tether 1 $1.00 0.04%
XRP 43 $0.244652 5.40%
Bitcoin Cash 56 $216.71 0.50%
Chainlink 72 $10.79 10.22%
Polkadot 46 $4.41 1.32%
Binance Coin 65 $24.66 -0.10%
Crypto.com Chain 53 $0.154425 0.29%
Litecoin 59 $46.06 3.15%

Cryptocurrencies rating

Top Crypto Brokers

Broker Status
1 FIBO Group information
2 XM information
3 OctaFX information
4 101investing information
5 T1Markets information
6 easyMarkets information
7 Orbex information
8 LH Crypto information
9 USGFX information
10 FOREX.com information

Brokers rating

Top Crypto Exchanges

Exchange Volume change, 24h
1 Binance 36.37%
2 ZG.com 2.65%
3 HBTC 13.25%
4 CITEX 11.02%
5 TAGZ Exchange 11.50%
6 Bidesk 14.76%
7 IDCM -11.63%
8 Bitribe 17.13%
9 Binance.KR 33.14%
10 Chiliz 16.90%

Exchanges rating