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Bitcoin tokenization exceeds $1 billion for DeFi

Photo of: Sangeetha Golchha
by Sangeetha Golchha

More than $1 billion worth Bitcoin has been tokenized to access DeFi protocols on the Ethereum network. This is equivalent to the entire TVL in DeFi a few months ago. The idea behind tokenizing Bitcoin is simple. BTC can be locked through some mechanism, tokens can be minted on the other network representing a specific amount of bitcoin. The peg between the two should be kept with the process being reversible. So, you can destroy these tokens, thereby leading to the original bitcoins getting unlocked again on the Bitcoin blockchain. 

DeFi pulse rolls out that close to 98,300 BTC worth over a billion has been tokenized using protocols. This equates to more than 12% of the DeFi sector’s market cap standing at $8.57 billion. The new data talks at length about the increasing popularity of the ETH-based protocols for passive income generation among the Bitcoin holders. In the month of June, the total value locked in DeFi was just $1.05 billion of which 4.7% equal to $47.5 million was taken by Bitcoin, pointing towards the trend that the share of Bitcoin in DeFi capitalization has increased by 150% in a little more than three and a half months. Comparing this the lightning network has managed to attract only 1,100 Bitcoin worth $11.5 million since the launch in March 2018.

The trends point out that a good majority of BTC in the DeFi sector was in the form of Wrapped Bitcoin. But with the launch of Ren’s virtual machine and RenBTC, and tokenization protocols such as PieDAO’s BTC++ this year have augmented the Bitcoin’s position and expansion in this growing market of DeFi

Source: DeFi pulse

Bitcoin’s tokenization protocols allow the user to lockup Bitcoin and mint a corresponding ERC-20 token. This allows for the representation of value by Bitcoin holders to interact with smart contracts on the Ethereum network. Wrapped Bitcoin still ranks the top tokenization protocol in terms of total BTC locked after attracting 56,800 Bitcoin worth $605.5 million since November 2018. Ren’s virtual machine has tokenized 21,500 Bitcoin which is worth $230 million since its launch in May this year.

Both have grown but WBTC continues to be dominant and attracts a larger volume of BTC compared to Ren. It has grown roughly from 28,360 BTC to 56,850 BTC, whereas Ren recorded expansion from 10,000 BTC to 21,510 in one month. In the last three months or so, both the projects have recorded humongous growth and have grown by more than 850%. On June 19th, wrapped BTC represented only 5,839 BTC, and Ren has tokenized only 155 BTC.

Source: DeFi Pulse

As from the estimates, Curve Finance is the numero-uno when it comes to yield generating protocol by tokenized BTC, with 27,600 Bitcoin (worth $295 million), followed by Aave with 17,800 BTC (worth $190.5 million) and Balancer with 9,500 BTC (worth $101.6 million). Together these three protocols have been able to pull more than half of all the tokenized Bitcoin.