Today, the cryptocurrency world is celebrating a new record for Bitcoin. We did it, guys! We’re back at $ 20,000 after three tiring years.
For this reason, it will be a newsletter on Bitcoin. How does Bitcoin relate to DeFi, you ask? Well, first of all, the total value of the locked DeFi delta is about 0.2 times the bitcoin price. This means that for every 1%, BTC price increases or decreases, DeFi TVL changes 0.2%.
According to Defipulse, coiled BTC and BTC are locked in DeFi.
Much of this relationship stems from a specific accounting option that deals with Wrapped BTC BitGo as a proprietary asset in DeFi, and also takes into account all cases where WBTC is used in the DeFi protocols. With a “normal” value of $ 535 million, Bitcoin’s contribution to total booked value jumps to $ 2.9 billion – a very big contrast, isn’t it?
But in addition to Bitcoin being used in Ethereum, there is also the Bitcoin DeFi phenomenon. The point is, none of it is truly “Bitcoin” DeFi, because Bitcoin simply does not allow you to create the complex smart contracts required to implement true DeFi. The only project of this type that I know of is a nuclear loan. You originally offer Bitcoin, but all smart contracts are based on Ethereum, and your loan is repaid there.
Bitcoin DeFi is found in RSK and Liquid, which are Bitcoin “side chains” – separate chains that use Bitcoin as their currency. RSK also uses merger mining to validate its own chain, which results in a much closer connection to the main chain.
The problem, of course, is that since Bitcoin does not have smart contracts, the BTC pathway to these DeFi side chains is centralized and stored. But we recently saw RSK pushing a solution that makes the bridge nearly unreliable, so I started to warm up to see two sides of the Bitcoin itself.
RSK has definitely been active on the DeFi front. Sovereign launched the DeFi package on RSK this week. It is a combination of several building blocks, including the Automated Market Maker Lending and Exchange Protocol, or AMM. Like Fulcrum bZX, the compact package makes it easy to enter delivered Bitcoin centers without the manual steps you would have to take as a compound.
Among the most interesting RSK protocols is TEX, which is a kind of combination of AMM and request exchange. The mechanism is complex, but in essence it counts requests every few minutes based on the average of all restriction orders placed. The exchange was launched by Dollar on Chain, which is a counterpart to RSK Maker with some additional features.
On the Liquid side – a side chain developed by Blockstream – there is less variability, although there is another interesting development in decentralized exchanges called TDEX. Atomic switches are used to execute trades and allow full control over the settlement price, unlike AMM, where you don’t really know the trade price until the order is executed.
Bitcoin Token on Ethereum
As I mentioned, the most popular type of Bitcoin in Ethereum is encapsulated Bitcoin. Simply put, BitGo (and likely other partners) acquire Bitcoin linked to Ethereum and then mint tokens for the corresponding WBTC. Like Tether or other center stacked coins, it feels like an excuse.
In order to update Bitcoin Premium, we need to address this pesky issue as managers can link it to new chains.
The TBTC project is a reliable bridge mechanism for Bitcoin. The project really embodies the principle of “making lemonade” to the fullest. To avoid the limitations of Bitcoin smart contracts, it allows anyone to become a “bridging agent” whose job is to make the transfer between Bitcoin and Ethereum. In the event of an error, users are entitled to claim an excessively insured Ethereum proxy bond with respect to the associated amount.
As you’d expect, tBTC’s bond and coins mechanism is quite complex and likely to roll back, so tBTC this week partnered with CoinList exchanges to provide a simpler way to recover the token. This can also be interpreted as a sharing process, but the primary advantage is that the system remains open to everyone and is not controlled by an exclusive and well-defined group of auditors.
Finally, it’s RenBTC. While the team uses fancy words like “Shamirs Secret Sharing” and “Multi Party Computing” to justify themselves as an unreliable, unresolved bridge protocol, Wanchain’s research appears to show that all of the BTC in their bridge is stored in the same wallet. He is allegedly controlled by the team. Wanchain is a contender, so take what you want – I have no experience to confirm this quickly.