For anyone who’s been keeping an eye on the growing trend of Bitcoin making it’s way to DeFi, you’ve surely seen the recent surge in wBTC driving the creation of new Dai.
?????????? $WBTC in @MakerDAO just exploded pic.twitter.com/nuCGyGrSi1
— DeFi Pulse ?? (@defipulse) May 20, 2020
For those who missed it, Maker recently added support for wBTC as collateral, marking the fourth asset support outside of ETH, BAT and USDC which can be used to mint new Dai. While many were skeptical this would amount to much, what they didn’t see coming was the rapid increase in new wBTC being minted in the past few weeks – the vast majority of which was immediately sent and locked in Maker Vaults through Oasis Borrow.
The ~1550 WBTC mint from today was just used to generate 5 million DAI that went to @NexoFinance's wallet.
~9.5 million DAI is now being backed by 2625 WBTC (68% of the total supply of WBTC) ?? https://t.co/R9RRmHBV9v
— Anthony Sassano | sassal.eth (@sassal0x) May 22, 2020
Underpinning this rapid shift is a US-leading exchange and token issuer – CoinList. While this may come as a surprise to some, it turns out CoinList is quickly becoming the leading provider for large Bitcoin holders to use when it comes to posting their Bitcoin as collateral to take advantage of the extensive DeFi landscape.
When asked for comment, Matthieu Jobbe Duval – CoinList’s head of financial products responsible for their WBTC operation stated:
“CoinList launched a BTC<>WBTC liquidity pool in February, allowing our users to convert BTC for WBTC (or vice versa) instantly. This supercharged the WBTC liquidity pretty much overnight. Since the launch of the pool, we have minted 3 out of 4 WBTC in existence and are involved in 20% of the global WBTC ADV.”
Interestingly enough, CoinList’s competitive advantage is said to come from the nascent nature of front-end tooling regarding the creation of WBTC. As it stands today, there is no easy portal to press a button and wrap Bitcoin. As such, large investors are turning to trusted institutions like CoinList to handle this process for them, especially with such large sums of capital at play.
Dai’s Road to Recovery
As anyone who has been keeping an eye on Maker since Black Thursday knows, Dai suffered a pretty strong setback after breaking it’s ATH in supply just a few months prior. Now, with the recent surge in WBTC volume, Dai is back on track to break its ATH despite a 0% Dai Savings Rate.
Dai outstanding is getting close to all-time high again??Currently 116 Million. Mostly as ERC20 as opposed to DSR which was most Dai at the previous peak.
WBTC in @MakerDAO went 10x this week from $1M to $10M ?? Digital gold-backed USD, anyone? ??https://t.co/bs0usu1gXo pic.twitter.com/xuld45Tc0D
— Dune Analytics (@DuneAnalytics) May 22, 2020
This news comes are a very promising surprise as many Maker community members were skeptical that WBTC would drive the leading lending protocols growth as much as we’ve seen in recent days. In fact, the amount of WBTC locked in Maker just passed USDC, making it the second-largest pool of capital (behind ETH) locked in the protocol at the time of writing.
And just like that.. $WBTC is now the second most popular @MakerDAO collateral type https://t.co/m8QrSdEtaY
— DeFi Pulse ?? (@defipulse) May 22, 2020
Bitcoin on Ethereum
Now, while it’s still got a ways to go before passing ETH locked in Maker (~100M DAI compared to ~10M DAI) this is an incredibly bullish sign that Bitcoin on Ethereum is coming quicker than we may have thought. Seeing as WBTC currently has a debt ceiling of $10M, it’s highly likely that we’ll see a poll to raise this amount in the coming days. What’s interesting to note is that while this success is great, there’s definitely still room for improvement when it comes to bringing Bitcoin to Ethereum in a trustless fashion.
I'm worried about the trust models of some of these tokens. It would be sad if there ends up being $5b of BTC on ethereum and the keys are held by a single institution.
— vitalik.eth (@VitalikButerin) May 21, 2020
With solutions like tBTC and RenBTC on the horizon, there’s no doubt that the number of ways in which Bitcoin can be represented on Ethereum will be rampant by the end of 2020. Taking this a step further, the fact that vast majority of newly minted wBTC is being locked within Maker is a great signal that DeFi lending opportunities are starting to reach the ears of Bitcoin whales.
While it’s been noted that a lot of the newly minted Dai is being loaned on Nexo, we can envision a future in which this Dai flows more fluently into the vibrant DeFi landscape, further empowering the composable nature of Ethereum’s most promising sector.
To keep up with all things WBTC, follow them on Twitter!
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Cooper is the Editor of DeFi Rate. He is an ambassador of Set Protocol and an active contributor to MetaCartel where he seeks to find emerging consumer-facing applications that propel the Ethereum ecosystem. He often works with projects as the Director of Fitzner Blockchain Consulting where he coauthors the weekly publication Token Tuesdays.
Like my writing? Drop me some gwei @ coopahtroopa.eth ??
