Key Takeaways
- Over 15,000 WBTC was minted since Sept. 17 prompted by UNI token yield farming incentives on Uniswap.
- The comparative returns for Bitcoin-based pools are higher than Ethereum and Chainlink on DeFi platforms like yEarn Finance.
- Curve added a new HBTC pool alongside the existing BTC-based pool backed by RenBTC, wBTC and sBTC.
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WBTC (Wrapped Bitcoin) added 15,000 tokens 24 hours after UNI token launch, taking the amount Bitcoin locked in DeFi to $1.2 billion. High returns on Bitcoin-specific pools is another impetus for the mass move.
The Uniswap Effect
Wrapped Bitcoin is tokenized BTC issued on Ethereum. Launched in January 2019, WBTC had a relatively slow growth until the explosion of DeFi’s yield farming. WBTC has surpassed $800 million in locked value, adding Bitcoins worth $500 million since August.
Uniswap is the leading decentralized exchange (DEX), which is leaving centralized exchanges like Coinbase behind.
The WBTC-ETH pool on Uniswap has become a significant source of attraction as it is one of four pools on Uniswap with added UNI token incentives.
Currently, the WBTC-ETH pool is the largest pool on Uniswap in total liquidity at $391 million. This amounts to a staggering 900% increase since Sept. 17. The relative volume of other WBTC pools on Uniswap paints a clear picture of the source of the demand.
While the WBTC-ETH pool 24-hour volume is close to $40 million, it is zero for the other WBTC pools.
New UNI-incentivized pools will not be added for the next 30 days within the governance grace period. This indicates that the expansion of the pool is likely to continue.
The other pools which qualified for yield farming UNI include DAI-ETH, USDT-ETH, USDC-ETH. These pools expanded by 880%, 136%, and 142%, respectively, since the announcement.
Bitcoin on Ethereum
The total value of BTC locked in smart contracts is $1.25 billion, at the time of writing.
Bitcoin pools and vaults are gaining more traction due to their high returns, causing an increase in the amount of minted WBTC, renBTC, and sBTC on Ethereum.
Tokenized Bitcoin is an ERC-20 token whose value is backed by actual BTC locked in the specific smart contracts. Tokenized BTC is compatible with DeFi platforms built on Ethereum.
RenBTC on Curve accounts for 18% of the total deposited value, just short of $1 billion. The yEarn Finance vaults’ annual returns for Curves’ sBTC LP comprising RenBTC, WBTC, and sBTC is around 30%. Whereas, the other two cryptocurrency-based vaults on Ether and Link project a yearly growth of 1.73% and 2.24% only.
Recently, Curve also added a new HBTC pool to its decentralized exchange platform. But the pool has only added $1,300 worth of HBTC in the one week of launch.
The liquidity mining returns on DeFi platforms increases the incentives for holding Bitcoin. However, these carry additional smart contract risks that come with the potential loss of actual Bitcoins backing the token.
Forced liquidation, loss of tokens, technical glitches, and theft are some of the few risks that come with Bitcoin minted on Ethereum.
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