In a Friday blog post, Binance reintroduced BTCB to the world – a wrapped Bitcoin asset meant to bring liquidity from the world’s largest cryptocurrency, BTC, to Binance Smart Chain’s DeFi (decentralized finance) ecosystem. .
However, hodlers may applaud the renewed interest in BTCB for a different reason: every Bitcoin locked in BSC may contribute to an impending BTC supply crisis.
First announced last year, Binance initially viewed Bitcoin only as a way for traders to gain cross-chain asset exposure without leaving BSC. Since then, however, the utility of shrouded Bitcoin has exploded due to the early maturation of the DeFi ecosystem.
For example, WBTC – a Bitcoin token wrapped on Ethereum – has seen huge success since its launch in January 2019: it currently ranks 14th in cryptocurrency by marketcap, and has found significant adoption in protocols such as Aave and Uniswap, both of which have closed contracts. among the top 10 holders of WBTC.
In their blog, Binance noted that a similar adoption might be possible for BTCB. Wrapped Bitcoin could be used to strike stablecoins with native BSC protocols such as QIAN and Venus; as collateral for loan protocols such as CREAM; and in yield farming and liquidity extraction protocols such as Beefy, Bakery and Pancake.
According to what Binance calls a “Proof of Assets” page, there are currently over 9,600 Bitcoins on BSC – over $ 181 million. However, the blog post states that only 2,000 are circulating.
Other chains based on smart contracts intend to compound the growing scarcity. Solana’s Cross Wormhole Project will turn ERC-20 tokens into SPL tokens, including WBTC, and similarly, Interlay is using support from a Web3 Foundation grant to build a trustless bridge bringing Wrapped Bitcoin to Polkadot. Interlay will be launched in early 2021.
In particular, if the success of encapsulated and cross-chain Bitcoin assets continues to grow, institutions looking to suck up the supply of BTC may well face a growing shortage. Aaron Wright, the co-founder of OpenLaw, pointed out such a possible future in a Tweet:
0.6% + of Bitcoin is now packed and put to work on Ethereum (and growing).
What happens when it reaches 10%? pic.twitter.com/4dGT0yXHBP
– Aaron Wright (@ awrigh01) November 17, 2020