WBTC, BTCB and other tokenized Bitcoin implementations could contribute to an imminent shortage of BTC
In a blog post published on Friday, Binance announced the reintroduction of BTCB, a form of tokenized Bitcoin designed to bring liquidity from the world’s largest cryptocurrency to the Binance Smart Chain DeFi ecosystem.
However, perhaps HODLers are celebrating renewed interest in BTCB for another reason: any Bitcoin stuck on BSC could contribute to an imminent supply crisis in BTC.
First announced in 2019, Binance initially viewed tokenized Bitcoin as a vehicle through which traders could gain exposure to cross-chain assets without leaving Binance Chain. Since then, however, the usefulness of this type of asset has grown out of all proportion due to the early maturation of the DeFi ecosystem.
For example, WBTC (a form of Bitcoin tokenized on Ethereum) has seen tremendous success since its launch in January 2019: it currently ranks 14th in the market cap cryptocurrency ranking, and has found significant adoption in protocols such as Aave and Uniswap. The smart contracts of both platforms are among the 10 largest WBTC owners.
In the published article, Binance pointed out that similar adoption may be possible for BTCB. The asset could be used to issue stablecoins with native BSC protocols such as QIAN and Venus, collateral for loan protocols such as CREAM, or in yield farming and liquidity mining protocols such as Beefy, Bakery and Pancake.
According to Binance’s „Proof of Assets“ page, there are currently more than 9,000 Bitcoins on Crypto Nation Pro Scam, worth over $181 million. However, the blog post specifies that only 2,000 are in circulation.
Other blockchains with smart contract functionality seem set to contribute to the growing shortage of BTC. Solana’s cross-chain Wormhole project will transform ERC-20 tokens into SPL tokens, including WBTC. In addition, Interlay is using funding support from the Web3 Foundation to build a trustless bridge with the goal of bringing tokenized Bitcoins to Polkadot. The launch of Interlay is scheduled for early 2021.
If the success of Bitcoin tokenized and cross-chain projects continues to increase, institutions determined to absorb BTC’s offering may face an increasingly serious shortage. Aaron Wright, co-founder of OpenLaw, pointed out in a Tweet a possible future of this kind:
„At the moment, 0.6%+ of Bitcoin is tokenized and put to work on Ethereum. What will happen when it reaches 10%?“
0.6%+ of Bitcoin is now wrapped and being put to work on Ethereum (and growing).
What happens when it hits 10%? pic.twitter.com/4dGT0yXHBP
– Aaron Wright (@awrigh01) November 17, 2020