- Bitcoins worth $1 billion have been tokenized for accessing the DeFi platform protocols
- 98,300 BTC were tokenized which is 12% of the combined capitalization of the DeFi Sector ($8.57 billion)
- At the start of June 2020, only 4.7% or $47.5 million of total DeFi’s capitalization was represented by Bitcoin
Many investors and users in the crypto world are saying that 2020 is the year for Decentralized Finance (DeFi). This is due to the reason that top tier cryptocurrencies like Bitcoin and Ethereum are currently experiencing volatility, DeFi is gaining popularity in contract codes. After all, these codes couldn’t be manipulated or terminated by anyone. Following its growth recently, Bitcoins worth $1 billion have been tokenized for accessing the DeFi platform protocols. To put that into perspective, four months back that amount was DeFi’s total locked value (TLV).
There is an increase in the popularity of Ethereum protocols that can generate passive returns to Bitcoin holders. As per data from DeFi Pulse, 98,300 BTC were tokenized which is 12% of the combined capitalization of the DeFi Sector ($8.57 billion). The tokenized BTCs are worth over a billion-dollar and protocols other than Blockstream’s Lightning Network were used.
How does Tokenization Work?
In simple terms Tokenization of Bitcoin means enabling its use on other blockchain networks. In Tokenization we lock the BTCs on its blockchain and by minting them into another token uses Bitcoin on that particular chain. Tokenized bitcoin represents a specific value on that new network. The complete process is reversible meaning one can anytime destroy the converted tokens making the original number of tokens available on the bitcoin’s blockchain. ERC-20 tokens represent bitcoins on the Ethereum network.
Popularity in WBTC and Ren’s VM
At the start of June 2020, only 4.7% or $47.5 million of total DeFi’s capitalization was represented by Bitcoin. This number rose drastically to 150% in just a period of three and a half months. Since June, Wrapped Bitcoin (WBTC) is the first choice of users for tokenization. Currently, t56,800 Bitcoin tokens have been tokenized since November 2018 valuing a whopping $605.5 million. The growth of WBTC alone in the last 30 days is from 28,360 BTC to 56,850 BTC.
Introduction of Ren’s Virtual Machine (VM), RenBTC and PieDAO’s BTC++ which is a grassroots tokenization protocol has played a significant role in the boost of Bitcoin’s tokenization into DeFi. WBTC can be the first choice for users but other protocols are also growing. In numbers, since launch in May 2020 Ren’s VM has tokenized 21,500 BTCs adding to a worth of $230 million. Out of which more than 50% of the increase (from 10,000 to 21,510) was witnessed in the last month.
Protocols like Curve Finance, Aave and Balancer have also tokenized 27,600 bitcoins worth $295 million, 17,800 bitcoins worth $190.5 million and 9,500 bitcoins worth $101.6 million respectively. Their sum alone accounted for more than half the tokenization of BTC. Popularity in converting BTCs for DeFi use may be increasing at a very high rate but it still represents only 0.47% of the total market supply of Bitcoin. In coming times as the Decentralized sector grows this number could also be seen increasing.