Maker (MKR) governance token holders have decided (through community voting) to approve a proposal which recommends adding Wrapped Bitcoin (WBTC), an Ethereum-based token backed 1-to-1 by Bitcoin (BTC), as the decentralized finance (DeFi) protocol’s (MakerDAO) newest collateral type.
WBTC is an ERC-20 compliant token that has been developed to be fully collateralized with BTC, the flagship cryptocurrency.
As mentioned in a blog post published on May 3, 2020, WBTC is now the fourth collateral type that may be used by the MakerDAO ecosystem. Other tokens accepted as collateral include Ether (ETH), Circle and Coinbase’s USDC stablecoin, and the Basic Attention Token (BAT). These tokens are deposited in exchange for newly minted stablecoin Dai (DAI).
USDC was recently added in March 2020.
The blog post noted:
“The addition of WBTC means that Bitcoin holders can now turn their BTC into WBTC (bring Bitcoin to the Ethereum blockchain), and then use it to generate Dai.”
DaiStats data shows that almost $32,000 in DAI has been created, so far, with WBTC being used as collateral.
WBTC was launched in January 2019. Its market cap currently stands at around $10 million.
WBTC and other Bitcoin-based or tied ERC-20 tokens aim to increase BTC’s liquidity to Ethereum. These tokens also try to act as a bridge between the Bitcoin and Ethereum network, which are the world’s largest blockchain-based networks.
As mentioned on its website:
“WBTC brings greater liquidity to the Ethereum ecosystem including decentralized exchanges (DEXs) and financial applications. Today, the majority of trading volume takes place on centralized exchanges with Bitcoin. WBTC changes that, bringing Bitcoin’s liquidity to DEXs (or non-custodial exchanges) and making it possible to use Bitcoin for token trades.”
WBTC standardizes Bitcoin to the ERC-20 format. It also creates smart contracts for Bitcoin, which helps with integrating BTC transfers.
It can be challenging to manage many different crypto network nodes and handling several different transaction types to support multiple currencies can be difficult or sometimes impractical. With WBTC, cryptocurrency exchanges, wallets, and payment apps only have to manage an Ethereum node while being able to use Bitcoin.
