We all witnessed the recent boom in the Defi market which gave us the opportunity to lend and borrow digital assets without third-party participation. Though it is important to notice that when you lock for example your BAT tokens in the Compound or MakerDAO protocol in order to get a load in USDC, due to high volatility and small market capitalization your position may be liquidated if the price of the locked token drops significantly. Your warranty assets value will be lower than the requirement to maintain your loan. So imagine if one day there will be a significant amount of low cap altcoins locked in smart contracts and dump happens of these altcoins how many liquidations will take place. Instead, if you lock ETH there are smaller chances for manipulations because ETH has a huge market cap and is not a coin that you can pump/dump easily. Due to the fact that Defi is based on the Ethereum blockchain, only ERC-20 tokens can be used as collateral in lending services. At the same time, we see that Bitcoin is compared with gold and frequently called a reserve asset. How much growth would the Defi market see if an asset like Bitcoin would participate? Although Bitcoin and Ethereum are different blockchains and you cannot send BTC on the Ethereum network and the solution for this was the tokenization of Bitcoin. There are various versions of tokenized Bitcoin, for example, Wrapped Bitcoin WBTC, which is a product of the BITGO exchange. The important point here is that Bitcoin is a decentralized network and cryptocurrency while WBTC, an ERC-20 token is an absolutely centralized asset, as its emittent is the BitGo exchange. At the moment these are the versions of tokenized Bitcoin: HuobiBTC - tokenized version of Bitcoin on the Ethereum blockchain developed by Huobi exchange, imBTC - ERC-20 token bound to the price of Bitcoin issued by Tokenion company, pBTC - ERC-20 version of Bitcoin which is part of the pTokens project by company Provable also give the possibility to move tokens between different blockchains, renBTC - another Bitcoin project on the Ethereum blockchain, sBTC - synthetic equivalent of Bitcoin by DeFi platform Synthetics, WBTC that I mentioned earlier and tBTC - ERC-20 token bound to Bitcoin by KEEP Network. The difference between all these versions of Bitcoin is that tokens like WBTC and HuobiBTC are fully centralized assets while tokens like sBTC and tBTC are decentralized and are the closest ones to original Bitcoin as they maintain the idea of a decentralized asset.
