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Tuesday, December 7, 2021

BITCOIN on ETHEREUM!? How? Why!?

Hey yo, what is going on, with the Chico Army & any newbie aka a viewer of YouTube? If you don’t know by now, my name is Tyler, the host of the crypto channel, that knows TikTok, is for creeps & for China to invade America, through our youth, and Vine was so much better per example, will Sasso…you know how we lemonade. It’s time for Chico Crypto! So, I’m sure you could tell what this video is about, something highly interesting that is going on in the cryptocurrency space.

Ethereum, becoming the gravity well that will suck bitcoin assets into its protocol. And the data is already there which proves just this wrapped bitcoin, since May has exploded from about 1k bitcoin in May, to today over 6k. A 6x increase in just 2 months. That’s basically 60 million dollars, brought over from Bitcoin, which is now on Ethereum. And the asset, wrapped bitcoin?

It has been actually trading a bit higher than BTC over the past 7 days, as there is money to be made, with interest, borrowing and lending WBTC. Just look at the charts, and you layer over WBTC, slightly higher almost every day.

But that is just one of the bitcoin on Ethereum assets. There are many protocols, pushing out their own versions. renBTC, which since its recent launch just keeps exploding. There are now over 7.4 million dollars, locked in Bitcoin, which is nearly 800 BTC according to Etherscan. Then you have Tokenlon’s in BTC, which has been out for a bit more time than REN, but not as explosive from Etherescan, we can see there are just over 560 imBTC which means 560, bitcoin have been locked worth over 5.2 million dollars.

And finally, the slower growth of the collateralized bitcoin on Ethereum protocols, tokens BTC, which has only managed to capture about 30 BTC, worth just over 230 thousand dollars. But if you added all of this up, that’s over 7500 BTC, and combined it into 1 wallet, it would make it a top 250 BTC wallet already. Let’s just say, in another 6 months it doubles to 15000 BTC, which in my opinion, is on the low end of the estimates that would put DeFi bitcoin, into the top 50 Bitcoin Wallets, which are mostly centralized exchanges up in that range.

Starting to shake yet?? Getting scurry Binance and the like? So, I’m sure some of you are like Tyler, what is the best bitcoin on Ethereum right now? Well, they all have their pro’s & cons, & I’m going to try and bring out the best and worst in each of them right now. So let’s begin, with the largest one, WBTC. Now, this is the centralized version of bitcoin on Ethereum. It can be considered a trusted version, where you bitcoin leave your hands, and a custodian watches over them, while you use your WBTC.

Which the proof of assets, are fully verifiable on the WBTC website, for you to make sure the assets are there. Wonder why Bakkt, can’t do something like this? Now, the custodian for WBTC is BitGo, one of the leaders in the space for digital asset custody, and has regulations overlooked and certified, by the SEC! But, the management of the wallet and the protocol is done through the WBTC DAO, which we can confirm by going to Github for it, which shows the multi-wallet, merchants in the system, and all DAO members. So WBTC, if you want to Mint it, through one of the Merchants you have to do a KYC/AML process, so a lot of the diehard decentralised heads did not like that feature.

And a founding partner of WBTC, who created RENBTC, put out something which makes getting wBTC so much easier. The WBTC Cafe, which connects directly to a ledger or web wallet, and you do not have to go through KYC, to get WBTC and this is powered by of course REN but also curve finance. 2 solid DeFi lego pieces.

So WBTC is the most liquid pro. Custody by Bitgo-can is seen as a pro & a con which we will get into with the other protocols.DAO for asset management-Pro. KYC con, but solutions are being built. So, this WBTC, I would recommend it for someone looking to put large amounts of Bitcoin on Ethereum, as it has the guarantee against loss due to hacks, loss by employees, and more, but your moves are known due to KYC.

Now, the next Bitcoin on Ethereum comes from REN again, but this time their version is fully powered by the RENVM. We talked about it, RENBTC & The reason, I like this version, is because of how collateralization works.

As we can see from the stats, we have over 7.5 million locked in the RENVM, which is mostly bitcoin, yet there is also something called bonding, of which over 57 million REN are contained, worth over 9 million. So why is REN “bonded” and what is that? Well for Bitcoin to be created with the RENVM, a user sends Bitcoin to a dedicated bitcoin address, verified by the VM.

That BTC is then held in custody, through a trustless manner, by the network of REN Darknodes. That RENBTC is then minted and sent to the USERs Ethereum address to be used in DeFi. And here is where bonding comes in, with the Darknodes.

And from REN documentation, on the Darknodes. The decentralized network of Darknodes is permissionless, but to prevent the forging of a large number of identities a good behaviour bond of 100,000 REN tokens is required in order to register and run a Darknode.

This prevents malicious adversaries from running an unbounded number of Darknodes and overwhelming the network with misbehaving Darknodes. Yes, the Bond, is to prevent malicious activity from their dark nodes, like collusion to steal BITCOIN, or the other assets, you can mint-like ZCash and bitcoin cash.

So, the value for REN token holders starts to explode, the more RENBTC that is minted! And, with the tools REN is putting out, like the WBTC cafe, that means WBTC use is going to be accelerated & which means more renBTC will be minted. What? How? Remember I said, the WBTC cafe uses, the RENVM.

  1. A user sends BTC to a Bitcoin address generated on WBTC.Cafe. The RenVM then locks BTC on the Bitcoin network and converts it to run BTC.
  2. That renBTC is automatically received by the curve finance liquidity pool where it’s automatically swapped for WBTC through the protocol’s low-slippage pool and
  3. The user then receives the WBTC on Ethereum & are now free to do as they choose with it.

So, we have covered projects and BTC’s on ETH, which I have talked about before, let’s dive into these other ones, which are more unknown. Let’s begin with Tokenlon’s IMBTC, as it has much more value locked up.

And Tokenlon is more like WBTC in that it involves a trusted third party custodian, which is TokenLon themselves, I think, I couldn’t find much on the custodian, which makes me weary. From a medium post on the topic “However, we admit that the current in BTC is still not perfect, as is the case with most blockchain financial products. Due to the limitations of blockchain technology, it is impossible to achieve both the ideal decentralization and ease of use.

Therefore, we choose to adhere to the principle of security and transparency, and temporarily use centralized hosting to make imBTC easy to use, so as to better popularize usage. At the same time, Token is also planning on how to transform centralized hosting into a DAO (decentralized autonomous organization) hosting solution that remains decentralized, yet easy to use.

So, custodianship is scary, but the proof of reserves is verifiable if that really means anything. But looking at the custodian page, they have something there, an APR yes, for holding you earn interest, from the Tokenlon Dex platform they, distribute the transaction fee from purchasing imBTC on Tokenlon’s DEX to users who hold BTC but then, you had this happen within BTC in April, several projects related to imBTC, including one I covered pieDAO, were hacked and ya millions lost & what it came down to?

Was re-entrancy attacks, due to their ERC token design.

They chose erc777, instead of the tried and true erc20, which allowed this attack to happen, to the dapps. RISKY! Now the final one is PBTC, which only has about 30 Bitcoin minted, worth around 270k but if we go to their website, the value is over 320k, and as we can see from the graph, that is because they are minting on EOS too.

Interesting, they have some cross-chain stuff going on and they have a great infographic on their benefits over other, bitcoin assets, and they explain they use a network of validators, secured by TEE to mint WBTC, noice I like that…

But there is a section on its market-making and liquidity appeal, which they say is high due to their peg in and peg out nature. Well if we go to Coingecko, that isn’t there for some reason, only just over 6k in volume, and then spread on it, is massive, WBTC is worth over 10k, but you couldn’t get rid of a full one if you tried. So, my friends, it’s the wild west of Bitcoin’s on Ethereum, each version has its pros and cons.

Custodian models, if they have a trusted entity, might be safer for now, because of the vulnerabilities in smart contracts. But as we saw with Tokenlon, they were centralized, and there was a vulnerability found, not with them, but the dapps using their token standard.

So as the decentralized protocols grow, get tested, and the attack vectors closed, we will definitely see the growth of RENBTC and possibly WBTC. So should you put your bitcoin on Ethereum? I’m definitely thinking about putting 2. Make your own choice and do your own research.

Read More: Top 10 Cryptocurrencies to invest in 2021

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