Wrapped Bitcoin (WBTC) has gone live on Hedera, marking another key milestone for both ecosystems. For Hedera, it’s the entrance of one of the most trusted digital assets in the world.
For Bitcoin holders, it has opened up a way for them to ultimately interact with complex financial applications without having to give up the safety and value of BTC.
Many in the industry view it as a significant step toward expanding Bitcoin’s presence in decentralized finance (DeFi).
The largest cryptocurrency, Bitcoin, has been excluded from most of these systems due to limitations on its main blockchain related to smart contracts. Bringing WBTC onto Hedera flips that script and gives a new use case to Bitcoin.
WBTC is, in fact, the most popular and largest 1:1 BTC tokenized representation on all regulated custodian storage. Any WBTC can also be redeemed at any time for regular Bitcoin. This can be somewhat comforting to those concerned with maintaining trust, as they know their wrapped asset isn’t a synthetic or algorithmic form of their native asset – it’s backed and fully redeemable at any time against real BTC reserves held by a regulated custodian.
By enabling WBTC to utilize Hedera, BTC holders can now leverage smart contract capabilities without having to sell the asset or transfer it to more risky protocols. They can lend it, stake it, trade with it, and provide liquidity in a decentralized protocol, all while being exposed to Bitcoin’s underlying value.
Hedera is also seeking to add liquidity to its expanding DeFi ecosystem. More liquidity means more activity, more developers, and more options for users. It is an extremely strong vote of confidence from the largest participants in the digital-asset markets that Hedera is going to be one of the leading places for decentralized finance.
Hedera enhances DeFi capabilities with wrapped Bitcoin
BitGo, the primary custodian underpinning WBTC and a member of the Hedera Council, supported the launch. BiT Global and LayerZero also participated, offering additional support for cross-chain interconnections.
Hedera advertises itself as a quick, cost-effective network with predictable fees. Its consensus mechanism is also designed to prevent frontrunning and miner-extractable value (MEV), two issues that can harm users on other blockchains.
With WBTC going live on Hedera, Bitcoin holders can wrap their BTC and utilize it across the smart-contracting platforms of Hedera. This facilitates lending and borrowing, trading, liquidity provision, and many other DeFi tricks.
Hedera has been gaining traction in DeFi over the past year. Its total value locked (TVL) has increased, and the network has attracted more developers, as well as institutional partners.
It is still perceived as one of the larger digital currencies by market cap, even based on the market value of its native token, HBAR.
DeFi Bitcoin gains foothold around the world
The addition of WBTC on Hedera is also indicative of a broader trend in the space. Bitcoin is no longer viewed solely as a long-term store of value; it’s also increasingly being considered an asset that can support its own financial ecosystem.
Supporters of the industry builders argue that they are foolish to sit on all that money. Rather, they envision a system in which BTC can be deployed as a productive asset to lend against, stake with, and trade through – without sacrificing its bedrock identity.
At several industry events, it was emphasized that Bitcoin DeFi aims to establish a trustless and permissionless financial layer beyond the scope of Bitcoin. This vision views BTC as collateral and capital, the foundation of a global open finance system.
Major exchanges have even flagged “BTCFi” as a trend to watch heading into the medium- and long-term, asserting that this could boost Bitcoin adoption.
The listing of WBTC on Hedera could boost the network’s DeFi activity by introducing new users and increasing liquidity. It may incentivize the creation of more tools and financial products that focus on Bitcoin on Hedera as well.
If you're reading this, you’re already ahead. Stay there with our newsletter.
