As we all know, DeFi has recently created a great wind in the cryptocurrency world. In fact, people are talking about DeFi tokens frequently now. Perhaps we can even say that this situation has overshadowed the popularity of Bitcoin for a short time.
Nowadays, with DeFi getting more popular, crypto investors who want to use their BTC in DeFi are now looking for projects that tokenize Bitcoin. There are incredible increases in the number of BTC tokenized day by day and different projects are emerging. As we informed you yesterday, a different token has emerged that will allow Bitcoin to enter the DeFi market. We also used the term “bridge between Bitcoin and Ethereum” for the token.
In the midst of DeFi controversy and development, what is seen as a new trend is Tokinize Bitcoin. Tokenized Bitcoin is essentially a digital certificate of a Bitcoin share (BTC) and can be used to digitally represent Bitcoin held by an individual. This new asset can be used as collateral, traded and sold like any other cryptocurrency.
“Bitcoin is already a digital asset. Why is there such a thing as tokenized Bitcoin?” You can direct the question. As is known, many DeFi applications (dApps) continued to be built on ETH and as a result Bitcoin remained outside of this ecosystem. To make up for this, the developers came up with “wrapped” Bitcoin (wBTC), then renBTC, and eventually tokenized Bitcoin (tBTC).
Could Grow Growth for Both Bitcoin and DeFi
As we reported yesterday, tBTC, developed by Keep Network, will allow investors to convert their BTC into tokenized form to use DeFi markets built on Ethereum. Since BTC contributes about 60% of all crypto market capitalization, this access to DeFi markets can deliver the growth it needs. TBTC.network leader Matt Luongo is a true believer in the DeFi ecosystem. Luongo advocates for tBTC to flourish in DeFi markets with the hope of a better future for all.
As prices dropped, some speculation surrounding the DeFi market now began to emerge. During this transition, tBTC received criticism from Bitcoin maximalists. Despite the criticism, tBTC has been welcomed by many as it is thought to be fully regulated, protected by Nexus Mutual and open source. This combination enables users to exchange their BTC for tBTC securely and at a ratio of 1: 1.
Let’s look at other formats together:
What is Wrapped Bitcoin (wBTC)?
Wrapped Bitcoin (wBTC) is an Ethereu-based token that is fixed to Bitcoin at a ratio of 1: 1. This token gives BTC holders the chance to use applications built on ETH as they wish.
What is renBTC (RENBTC)?
RenBTC is a product of Ren, an open protocol designed to facilitate cross-chain liquidity transfers between blockchains such as Ethereum, Bitcoin, Bitcoin Cash and more. Unlike wBTC, renBTC and other Ren-based assets are created or destroyed using smart contracts.
Is It Useful For Bitcoin and Ethereum?
So how could this be good for Bitcoin? It probably increases the utility of Bitcoin. While many will argue that Bitcoin doesn’t need any more functionality, maybe it only uses some of these functions. As we discussed earlier, the benefits can be increased transaction speeds, exchangeability, privacy, and lower transaction costs. With the launch of ETH 2.0, we can expect transactions on Ethereum to be faster and cheaper. This can also help with the case of Bitcoin tokenized on Ethereum.
How could it be good for Ethereum? If Ethereum captures the value of Bitcoin too much, it could increase the utility of Ethereum as a global network for value transfer. According to research by Etherscan, a significant portion of the previously mentioned 15,000 BTC is locked in the Ethereum DeFi ecosystem.
Tokenized Bitcoin can greatly increase DeFi’s utility in Ethereum. How? Decentralized financial services based on tokenized Bitcoin may emerge. BTC-based DEXs, lending markets, liquidity pools, and everything else in DeFi can be expressed in BTC. The success of tokenized Bitcoin may encourage other types of assets to switch to the Ethereum network as well.