Will DeFi be dominated by Bitcoin after all?
Editor's Note: This article comes fromGolden Finance, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Golden Finance
Golden Finance
, reprinted by Odaily with authorization.
If you have read the Bitcoin white paper, you will understand that Satoshi Nakamoto proposed a decentralized electronic transaction system that includes the blockchain concept and proof of work, but many people may have overlooked the essence of Bitcoin: a de-centralized electronic transaction system. Centralized financial solutions.
We have seen many previously unimaginable use cases emerge along the way, many decentralized finance protocols have driven demand for Bitcoin on Ethereum, and as costs continue to decrease and friction points are gradually eliminated, this This trend will change faster and faster. However, despite the strides made in the cryptocurrency market, bitcoin as a credit-free financial services instrument does not seem to be performing as expected at this stage.BTCSince Bitcoin cannot be easily moved across chains, a tokenized version of Bitcoin is provided on the Ethereum blockchain, and the price of these ERC-20 tokens is anchored 1:1 to the price of an equivalent amount of Bitcoin. The earliest and most recognized Bitcoin ERC-20 token is Wrapped Bitcoin (wBTC), which is led by a Circle organization similar to USDC. Although the use of Wrapped Bitcoin requires a trusted custodian to support the relevant tokens, more and more other trustless alternative solutions are emerging in the market and have achieved rapid development.
The Wrapped Bitcoin token was launched in January last year, and it has been more than a year, but the market value of this ERC-20 token anchored to Bitcoin was less than $5 million at the beginning of this year, mainly because of Wrapped Bitcoin. Lack of integration and functionality, and thus no clear advantage over Bitcoin. However, with the rise of the decentralized finance boom, this unpopular "Bitcoin on Ethereum" model has begun to be integrated with ERC-20 tokenized Bitcoin by many decentralized financial protocols to provide services for users. For example, MakerDAO announced in May this year that it would accept Wrapped Bitcoin as collateral for DAI loans, and then other decentralized financial protocols began to provide financial services based on Wrapped Bitcoin. At the same time, it also increases the liquidity of decentralized financial agreements.
Not only that, but in decentralized finance use cases, Bitcoin can also be used to obtain loans, which further promotes the market demand for Wrapped Bitcoin. In addition, staking this Bitcoin-anchored Ethereum ERC-20 token can earn compound interest, which has also stimulated its parabolic growth in the past few months. It is understood that the tokenized bitcoin on Curve can obtain more than 50% annual compound rate of return, and the Curve protocol has successfully generated a feedback loop: seeking CRV token liquidity mining rewards from users who provide liquidity, thereby Increased lock value in Curve. In this way, the potential value generated by CRV governance tokens will also increase, thereby incentivizing more liquidity to be provided. Second, increased liquidity drives market demand for yield farming assets, so investors chasing those returns are also locking up tokenized bitcoins in these decentralized finance protocols rather than selling those tokens as they have done in the past, So in the end Bitcoin will benefit from that as well.
It is worth mentioning that after the CRV token launch, sBTC/ren
/wBTC The Curve liquidity pool brought a large amount of bitcoins into Ethereum. In just four days, the value of bitcoins injected into Curve rose from $45 million to more than $200 million, more than quadrupling. Thanks to various market incentives, the total value of tokenized bitcoins currently locked on Ethereum has reached $800 million, or about 0.38% of the total circulating supply of bitcoins.
Through the observation of the growth of tokenized Bitcoin, it is not difficult to find that these growths are actually largely driven by giant whales and institutional investors. The basis is as follows: First, if users want to tokenize themselves Holding bitcoins and depositing them into decentralized financial agreements usually requires paying expensive gas fees, and only large players like giant whales can afford such high costs; secondly, those who hold these tokens The total number of addresses has not increased significantly. So far, the number of addresses holding wBTC is only 4600, and the number of addresses holding renBTC is even less, only 750;
Thirdly, through the observation of the accounts of wBTC and renBTC holders, it is found that their average balances reached $95,000 and $217,000 respectively, which is not the amount that retail investors can achieve; finally, only giant whales and early adopters can quickly Know how to use these Bitcoin alternatives to generate additional income for yourself, while the average retail investor usually takes longer to trust and learn.
Speaking of gas fees, with the steady development of Ethereum 2.0, some decentralized financial protocols have begun to integrate "second layer" solutions, which will gradually reduce gas fees, allowing users to better use tokenization bitcoin. Additionally, USDC’s new “meta transaction” feature allows users to transfer ERC-20 tokens without owning ETH tokens. This series of innovations can effectively reduce user friction and simplify the process of introducing Bitcoin into Ethereum.
It can be seen that, in addition to the existing decentralized financial protocols, the innovation and development speed of the encryption industry is astonishing. In the next ten years, there may be some demand projects for tokenized Bitcoin in the encryption market that do not currently exist. Given the permission-free nature of decentralized finance, it will be easier for decentralized financial protocols to provide ERC-20 token financial services that support Bitcoin.
