Let’s say you’re a long-lived Bitcoiner with some BTC lying around that you’d be willing to experiment with.
‘If that sounds like you, then you may have also heard about Ethereum’s emerging decentralized finance ecosystem and how you can put your BTC to work at DeFi in many ways, though you don’t know where to start.
If you fit this bill then look no further. Here’s a brief summary of Ethereum’s most popular BTC ticket to date, the WBTC project supported by BitGo, and a range of ways you can use this token for productive use around DeFi.
BTC ERC-20 Boost Has Started
As the leading smart contract platform, Ethereum is great for leveraging almost anything. That said, Ethereum’s ERC-20 symbolic standard can be easily used to represent and make commercially available on top of Ethereum assets that otherwise external to Ethereum, like bitcoin.
As such, we have seen a symbolization boom around BTC during 2020 as Bitcoin and Ethereum shine in the midst of the cryptoeconomy definitely turning bullish for the first time in years.
For example, according to the tracking site btconethereum.com there is currently +145,000 BTC docked on Ethereum, the vast majority of which – currently over 117,000 – is docked through the WBTC project .
To put the rapid growth of this year’s WBTC into perspective, take a look at the graph below and note how WBTC exceeded its 20,000th unit milestone in August alone. That means the number of WBTCs mined has increased by about 500% in just a few weeks!
And these myriad of activities are circulating very much around one thing, right now: Ethereum DeFi.
DeFi: the New Frontier
The DeFi ecosystem offers new ways to get involved in finance, all in a decentralized fashion. These realities have set Defi on fire within the broad cryptoeconomy this year.
In fact, back in January DeFi projects had less than $ 1 billion worth of assets under management. Today and not even a full year later, the space is a bit shy of $ 15 billion AUM.
This DeFi boom has resulted from promising projects maturing, new projects arriving, and a number of different sectors blossoming, eg decentralized lending, decentralized lending, decentralized derivatives, and beyond.
In this environment, WBTC has grown in popularity as people discover new ways to put their bitcoin to work. Accordingly, let’s dive in and explore some of these best use cases and see if anyone piques your interest!
Idea # 1 – Borrowing Against Your WBTC
One of the most practical things you can do with your WBTC right now is to borrow against it unauthorized in lending protocols like Maker and Compound, with no paperwork or bricks and mortar appointments required!
To illustrate why this utility is powerful, I have previously used a hypothetical scenario around Laszlo Hanyecz, the hero of Bitcoin Pizza Day, who would be famous for millions by buying two pizzaas for 10,000 BTC in 2010. Pe blame Maker or Compound around then, Hanyecz ‘could have borrowed fixedcoins against its WBTC to spend the stables (and gradually repay the debt) on pizza instead of spending any WBTC, which could be much appreciated in value going forward unlike USD-pegged tokens.
Simply put, therefore, if you want immediate liquidity and purchasing power without having to sacrifice your potentially lucrative BTC holdings, borrowing against WBTC at DeFi is certainly an interesting path to consider. You can even use your loans to go long by buying more WBTC!
Idea # 2 – Borrow Your WBTC
On the flip side of DeFi’s lending equation is borrowing.
That means you can lend your WBTC to other DeFi users, though admittedly the forms are not that great at the moment. Keep that in mind!
But if you are only interested in ways you can use your WBTC productively, then borrowing is certainly one avenue to consider. Protocols like Aave and Compound are competitors here.
Idea # 3 – Providing Liquidity to Protocols
Another cryptonative path you can earn on your WBTC is through providing liquidity (LPing).
Let’s consider the current top trading protocols, Uniswap and SushiSwap. The WBTC pools of these protocols are currently popular pools, considering how you can serve as an LP and earn significant trading fees through either route.
For example, the largest DeFi farm currently per locked total value (TVL) is the WBTC / ETH SushiSwap pool. Rewards will rise and fall for this farm, but its 20% annual returns right now are pretty sexy. Expect to see equally attractive LP campaigns in the coming years.
Idea # 4 – Stake Your WBTC LP Tickets for Farming Produce
Let’s say you’re down with LPing but you don’t know what to do next. It’s time to look at staking then!
The process is simple: find a product farm you’re down to LP for, and then get involved in the farms you like by keeping your LP tickets at any of the supported farms .
When it comes to finding farms, I recommend CoinGecko’s farming dashboard. This series will help you easily find WBTC farming opportunities, at which point you can jump in as you wish.
Idea # 5 – Support Decentralized WBTC Options
Another option you can consider is to provide WBTC liquidity to Ethereum-based derivatives projects like Hegic.
If you zoom in, Hegic is a decentralized protocol that allows you to easily take DeFi’s insurance policies at whatever whim you like. Since DeFi’s derivatives scene is so young, the idea is that you serve as a WBTC LP and earn accordingly. But there are plenty of risks as the project is so young, so act accordingly.
Idea # 6 – DeFi Index Mint like BTC ++
One of the biggest wins at DeFi this year has been around DeFi indexes, with several of the biggest to note focusing on PieDAO’s recent offerings.
Accordingly, it is quite straightforward for WBTC holders to want to coin their WBTC to offer a broader DeFi index, as such offerings are conservative at present.
Keep in mind that there are certain fees at play that you will have to charge if you want to slot into this conservative farm. If you are down with these fees, then the future of Ethereum could be for you! Farming on, but smartly farming!
Idea # 7 – Shop for NFTs on OpenSea
One of the major NFT markets right now is OpenSea, a universal NFT marketplace that allows WBTC to buy.
As such, if you’re so inclined OpenSea lately, activated WBTC is buying and selling. This means for participating stores you can buy products, both physical and digital plus, and all in the form of NFTs. Make sure they look for the best deals possible! +
Idea # 8 – Cash Out on Coinbase
Let’s say you have a stash of WBTC, and you’re ready to exchange money. Coinbase is your friend here!
What I’m saying is that if you have some WBTC you want to exchange for some fiat, then WBTC to USD is a very easy operation on Coinbase (or Gemini, or any company that can facilitate crypto-to-transactions) fiat).
Accordingly, you can hold onto your WBTC or exchange it as you please. It’s up to you, but there’s always a chance of holding out until BTC may be worth much more!