BITCOIN & DEFI
DeFi for Bitcoin returns to growth after a December lull
Dependent on suboptimal wrapping solutions and few trusted lending/borrowing protocols, other solutions are emerging
When it comes to the booming DeFi market, Ethereum holds a unique position of benefiting from the emerging segment of the crypto industry. And that is why we are seeing some divergent price action from the top two crypto-assets recently. While Bitcoin has been in somewhat of a retreat, Ethereum has continued to march forward. Even the pullbacks in the latter have been met with strong demand.
The second-largest crypto is primarily used as a collateral asset for borrowing & lending in the decentralized finance (DeFi) market, apart from being the primary home base for smart contracts & decentralized applications (dApps). It is this unique set of use cases that drives the interest of investors and traders in ETH. While Bitcoin has been mostly kept out of this action since there isn’t any easier way to port BTC to ETH trustlessly.
Having said that there are some suboptimal wrapping solutions and few trusted lending/borrowing protocols that are currently enabling Bitcoin to be a part of the massive growth in Defi. The most prominent solution in this regard is Wrapped Bitcoin (WBTC) — which standardizes Bitcoin to the ERC20 format, creating smart contracts for Bitcoin. So in essence, it combines the power of Bitcoin to the flexibility of an ERC20 token (Ethereum standard).
WBTC is by far the biggest contributor of BTC to DeFi, as you can see in the chart above. Although other solutions like renBTC, HBTC, SBTC & imBTC provide the same functionality their share of the total volume in this segment is dwarfed by WBTC. You can see that after a brief pause in the growth of BTC in DeFi last December, it has picked up again recently.
Nevertheless, there is a lot more room for expansion of Bitcoin’s share in BTC but it needs more innovative solutions to integrate this functionality. Badger DAO is one such product — formed in 2020 it created a “one-stop, one-click” App to get Bitcoin to work in DeFi. The community-driven DAO is focused on enabling Bitcoin holders to earn high APYs (annual percentage yields) on other blockchains, rather than relying on centralized platforms which expose them to counterparty risk.
Badger DAO’s first product, launched in December 2020, is a yield aggregator focused on Bitcoin that is similar to Yearn. According to Messari Research, Badger’s vaults have accumulated significant TVL, reaching as high as $2.3 billion at its peak, and currently at just over $1 billion. In a few short months, Badger has been able to capture $600 million in Curve LP tokens and is becoming one of the select few market leaders in farmed BTC. Badger has two native tokens, DIGG — a rebase token that stakers in certain vaults can earn, and BADGER, a governance token.
Looking ahead to the interoperability of blockchains — making Cryptoverse a much more integrated, coherent & scalable space.