In the course of the recent hype of the decentralized financial projects (DeFi), the tokenization of Bitcoins on Tron and Ethereum is progressing inexorably.
Bitcoin is rapidly establishing itself in the DeFi sector. In the last two months alone, Bitcoin (BTC) worth more than 900 million US dollars have been brought onto the Ethereum blockchain by the tokenization protocol Wrapped Bitcoin (WBTC). Overall, Bitcoin bound on the Ethereum network has increased by 900 percent in the past two months.
Using WBTC, users can swap BTC for Wrapped Bitcoin, an ERC-20 token that is linked to Bitcoin. Similar to how Tether (USDT) is pegged to the US dollar, the WBTC token shows the current Bitcoin rate.
This gives Bitcoin Hodlers access to the diverse DeFi ecosystem. In addition, tokenization enables the Bitcoin network to scale, as Bitcoin on Ethereum can take advantage of all the advantages of an ERC-20 token.
In addition, WBTC is currently the fifth-largest DeFi protocol and makes up almost ten percent of the capital stored on the Ethereum blockchain.
In the first half of 2020, the number of Bitcoin bound on the Ethereum network grew from $ 4 million to $ 36 million. The DeFi hype in the third quarter demonstrates the extreme increase in demand in the DeFi area.
In addition, the hype surrounding tokenized Bitcoin has benefited tokenization protocols such as Ren (REN). The virtual machine (VM) by Ren, the end of May, launched today, includes more than 300 million US dollars, bound Bitcoin. The REN rate has increased by around 180 percent over the same period.
Tron CEO Justin Sun has made repeated attempts lately to attract investors to Tron’s DeFi sector. On September 16, Tron released the fully community-controlled DeFi protocol Sun (SUN).
SUN serves as a governance token for the creation of new mining pools and represents the center of the DeFi ecosystem of the Tron blockchain.
Similar to Uniswap’s UNI-Token, SUN can be mined by providing liquidity. For a few days it has been possible to mine SUN tokens with the help of tokenized Bitcoin.
According to a medium post For the Tron Foundation, the SUN token will also serve as a “transit center” for cross-blockchain transactions in the future.
Since Tron released its TRC-20 bitcoin on September 30th, total committed capital has already exceeded $ 20 million.
The trend towards tokenization of Bitcoin is advancing at a rapid pace. Until a few years ago, few people had suspected that this would partially solve the scaling problem of Bitcoin via a second-layer network.
Still, there are some risks involved in tokenizing Bitcoin on another blockchain.
On the one hand, you lose the security of the Bitcoin network and on the other hand, you trust a central party that has to ensure that the Bitcoin token is really covered one to one.