Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover early farming strategies for FBTC, a new omnichain Bitcoin asset pegged 1:1 to BTC, which aims to become the leading tokenized BTC for yield-generating strategies.
As DeFi grows and the landscape matures, the demand for deeper liquidity increases across various L1s and L2s where DeFi thrives. The most liquid cryptoasset remains BTC but as of today, 99% of its liquidity lives on the Bitcoin network, isolated from the world of DeFi that lives on Ethereum, Solana, Cosmos, and other non-Bitcoin networks.
The most successful Bitcoin tokenization project to date, WBTC, which offers an ERC20 token backed 1:1 with BTC, currently represents less than 1% of the BTC market cap at just $10B in WBTC, and remains mostly on Ethereum Mainnet while DeFi is rapidly growing on new L2s such as Arbitrum and Mantle.
Another interesting metric to give perspective is the Total Value Locked (TVL) in BTC-related ecosystems still makes up only 4% of the BTC token market cap, which is considerably lower compared to the 75% TVL in ETH ecosystems vs the market cap of ETH, meaning there’s enormous potential for growth of BTC-powered DeFi with a more widely adopted, tokenized version of BTC.
FBTC is an initiative to bridge the liquidity divide between the Bitcoin blockchain and non-Bitcoin networks, such as Ethereum and its respective L2s. Part of the challenge is achieving frictionless transfers across these networks by issuing tokens on both EVM-compatible networks and select non-EVM networks, thereby enhancing the asset’s liquidity and utility.
Launched on July 12, 2024, FBTC has been deployed in a manner whereby multiple institutions will oversee the reserves, issuance processes, and a multi-stakeholder governance structure, using a proof of reserves system. This system verifies that the underlying Bitcoin assets backing FBTC are publicly disclosed and verifiably held on the Bitcoin network.
FBTC will deliver a high-speed, seamless, interoperable vehicle for unlocking the use of BTC liquidity. It aims to address the fragmentation of new L1s, L2s, and modular chains. Here’s a few of the key benefits to its design:
- 1:1 Peg to BTC: A familiar tokenized version of BTC, able to be used for collateral, trading, liquidity provisions and more in DeFi.
- Deep Liquidity to Bootstrap: Thanks to partners such as Antalpha Prime and Mantle, the bootstrapping of FBTC’s liquidity looks optimistic.
- Omnichain Interoperability: FBTC is minted on Ethereum by default and comes with seamless interoperability to enable a wide range of use cases across L1s and L2s.
- Composable With Blue-Chip DeFi Protocols: FBTC has struck an array of partnerships with top DeFi protocols and infrastructure partners.
- Secure Custody: FBTC works with reputable and trusted MPC custody providers to guarantee the security of the underlying BTC.
- Decentralized Operations: FBTC employs a Threshold Signature Scheme network to allow for minting and redemption. As users, we can only swap to acquire FBTC while there are approved custodians for minting and redeeming.
Since launch, a few notable DeFi protocols have enabled support for FBTC liquidity, while many others are still in testing including Solv Protocol, DODO, and Merchant Moe. All dApps…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
