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Introduction to mainstream synthetic bitcoin assets

Messari

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Despite Bitcoin's success as "digital gold," in its current state, its use cases are largely limited to "hold."

"' Escape 'the Bitcoin Network: Unlocking the Defi Potential of BTC"

Original source: Tim Cole, Messari

South Wind, Unitimes

Bitcoin is, without a doubt, the king of cryptocurrencies. Yet despite Bitcoin's success as "digital gold", in its current state, its use cases are largely limited to "holding".

Fortunately, there are more and more things that users can do with Bitcoin, such as making it available for use in the DEFI protocol on other blockchains. These DEFI protocols give cryptocurrency users a way to use BTC to lend, provide liquidity, and more.

Ethereum has been the primary blockchain network used by BTC in DEFI due to its relatively high transaction speed, smart contract capabilities, and large developer community. For example, DEFI users can lock their BTC into an Ethereum smart contract and get an equivalent token of Bitcoin (such as WBTC) and then use these tokens to participate in various Etherium-based DEFI protocols to earn revenue. Without these "synthetic bitcoins" running on different blockchains, bitcoin would not be able to generate the passive income for its holders that it does today.

1. Bitcoin in CEFI & NBSP;

Centralised finance such as BlockFi. (CEFI) Companies allow users to deposit BTC as collateral for borrowing or as a simple savings vehicle. Due to customer service requirements and general familiarity, most new users tend to use established, centralized institutions for financial services rather than decentralized protocols.

Today, however, more and more people are abandoning these centralized options in favor of unregulated, permitless, and more transparent alternatives. DeFi agreement. Such as Compound And Aave Lend agreements, such as those that allow users to use "synthetic bitcoin" as collateral for loans or to lend as deposits; Dex protocols such as Uniswap allow users to pair their "synthetic bitcoin" with other assets, providing liquidity for decentralized exchanges.

Until less than a year ago, BTC was not available in most DEFI protocols due to lack of interoperability with other blockchains. However, with the clear need to use BTC in DEFI, a solution has emerged, and there are now many ways to use BTC on other blockchains.

Above: The growth trend of the total BTC value of the lockup in DEFI. Photo source: Messari

2. Wrapped Bitcoin (WBTC)

Wrapped Bitcoin (WBTC) is a centralized "wrapped" solution that allows users to use BTC on the Ethereum blockchain. WBTC is by far the most used Bitcoin interoperability solution, controlling 78% of the market for BTC usage in DEFI. The current market supply in circulation is about 189,000 WBTC, or $7.63 billion.

WBTC is an ERC-20 token whose issue is backed by BitGo's managed BTC on a 1:1 basis. WBTC operates through a process of "casting" and "destroying". In the casting process, the user provides an Ethereum address to a smart contract, and then the user sends the BTC to the host, who casts it. WBTC and send it to the smart contract. Eventually the contract would send the WBTC to users, who would then be free to use their bitcoin on the Ethereum blockchain. The redemption process is also simple, first the user submits a withdrawal request, then the user sends the WBTC to the smart contract, which will send the WBTC&NBSP; Destroyed. Upon confirmation of this destruction, the host sends the BTC back to the user.

One problem with WBTC is its centralized custodian. This centralization makes WBTC more vulnerable to attack, which in turn drives the development of various other solutions that bring BTC into Ethereum. Traditionally, cryptocurrency users also dislike centralised products because they lack trust in these centralised entities: there is always the fear that a centralised organisation might censor or steal a user's assets. WBTC tries to curb this sentiment with full transparency of hosted addresses, which allows users to compare hosted addresses to the number of WBTC cast to ensure a 1:1 support ratio.

3. renBTC

On Ethereum, RenbTC is a direct competitor to WBTC, and there is currently supply in circulation. 9,993 Renbtc, about $403 million. Like WBTC, RENBTC is backed 1:1 by BTC and is also an ERC-20 token, with a very similar process of "casting" and "destroying".

RenbTC is a product of RENVM, an open protocol designed to act as a "bridge" between assets and the Ethereum blockchain back and forth. The key difference is that RenVM aims to host its users' Bitcoins in a more decentralized way. RENVM aims to be powered by a network of 10,000 virtual machines, known as dark nodes, which are rewarded by providing computing power and storage space to the network. Dark nodes allow users to convert their BTC value to RenbTC, thus allowing their BTC to be hosted in a decentralized manner. These dark nodes must stake at least 100,000 REN to participate in and protect the network, which helps prevent them from doing evil or stealing the stored BTC.

Ren The company plans to release its mainnet in three phases, which will make the protocol increasingly decentralized. Ren is currently in the second phase of the project. Mainnet Subzero, the network is now largely centralized: Greycore is the sole set of nodes responsible for the network's execution and consensus mechanisms (run by the Ren team). As the Subzero mainnet progresses and the team becomes more confident in its implementation, new node members will be added. They are making progress in these phases so that they can quickly fix potential bugs that may appear in the early stages.

4. tBTC

TBTC is another direct competitor of RENBTC and WBTC. The TBTC token was designed by Keep Network. ECR-20 token, which aims to maintain Bitcoin's "hard currency" status. Like RENBTC and WBTC, TBTC can always be exchanged for the same amount of BTC.

TBTC's "casting" and "destroying" processes are decentralized, as is its custodian process. If a user wants to cast a TBTC, they need to first send a request to a smart contract to get a wallet address to deposit their BTC. The KEEP network works by randomly selecting a group of signers (Signers) to ensure decentralization of BTC hosting: This group of signers will be randomly selected to create and manage the BTC wallet address. Currently, the value of the ETH that these signers (nodes) need to pledge must be twice the value of the BTC that the user has deposited, to ensure that they don't run away with the money or act malign in any other way. These signers are compensated for their work through a small fee paid by depositors. A randomly selected group of signers provide proof that the BTC has deposited them. TBTC can then be cast. An update to the protocol, called TBTC V2, is coming soon, which will allow nodes to pledge only KEEP tokens instead of using ETH as collateral, in order to reduce economic constraints and drive network development.

与大多数「合成比特币」相比，tBTC 需要更多的技术熟练度，出错可能会让用户损失金钱。tBTC 只能根据网络指定的批量大小进行铸造--目前只能接受 0.002、0.01、0.1、0.2、0.5 和 1.0 BTC 的批量大小。KEEP 白皮书中显示了一个让存款人损失大量资金的超额支付错误实例：

Example above: A user who provides a certificate of funds of 1.6 BTC for a deposit of 1 BTC batch size will only cast 1.0 BTC. Any user who destroys 1.0BTC can claim the 1.6BTC deposit and redeem the amount contained in it. (for the output of the spent transaction), earning a profit of about 0.6BTC. Source: Keep White Paper

5. BTCB

BTCB is a BTC-linked asset on the BSC chain that allows its holder to use BTC in the DEFI protocol on the BSC chain. BTCB is a type of BEP2 (the token standard of the Binance chain) or BEP20 (token standard of BTC smart chain) tokens can be converted with BTC at low cost. BTCB is similar to WBTC on Ethereum in that Binance's hosting and trust requirements for users' BTC have a centralized nature. Binance is providing transparency about its BTC holdings to let users know that the synthetic assets it issues are backed by 1:1 BTC. There are currently about 73,119 BTCBs in circulation, or about $2.9 billion.

上图：币安智能链的 BTCB 铸造过程。来源: Binance

BTCB users can use their BTC value in the DEFI protocol on the BSC chain without missing out on potential BTC price appreciation. The BSC chain offers many of the same permitless Defi services as Ethereum, but with much lower transaction fees, which are a growing problem for Ethereum users.

While Binance has a centralized nature like WBTC, it does mean that users can benefit from Binance's security measures: All funds locked up (in custody) on Binance are funded by its User Secure Asset Fund (SAFU); Protection. Safu funds are used as an emergency reserve to repay users in the event of a black swan event such as a hacking attack.

Image above: Defi app on Binance smart chain. Source: Binance

6. xBTC

XBTC was released by Haven Protocol on May 4. The release of XBTC marks the protocol's first synthetic cryptographic asset. Chainlink Is used to maintain the XBTC and BTC anchored seer. XBTC is not currently available on the open market, so its true anchoring has yet to be determined, but with the imminent integration of the protocol with Thorchain, this will change soon. Currently, users can exchange between XUSD and XBTC in the protocol's Haven Vault, with no counterparties and sliders, unlimited liquidity, low fees, and Monero-level privacy. For example, in early May, a user exchanged 1.2 million USD for 20.3 XBTC with complete privacy, for a fee of only 3600 USD. See below:

用户不需要持有任何 BTC 就可以铸造 xBTC，这意味着不需要有实体来托管用户的 BTC 来让他们从 xBTC 的用途中获益。相反，xBTC 由 XHV 币作为抵押品来支撑。这是 xBTC 和其他合成比特币的关键区别。其他合成比特币是以 1:1 由 BTC 支撑的，这意味着上述其他合成比特币坚持了 BTC 的硬通货政策，不会在流通中创造出更多的比特币。相比之下，xBTC 确实创造了更多流通中的比特币，并添加了隐私性组件，这使其成为比特币的竞争对手。

隐私性曾是中本聪的原始比特币比白皮书的核心内容，但在我们今天非常透明的区块链中，隐私性似乎已经丢失了。xBTC 允许其持有者在完全隐私的情况下捕获 BTC 的价格走势，且不久在与 THORChain 整合之后，xBTC 将可以在整个加密世界交易其他加密资产。

7. sBTC

SBTC is a synthetic Bitcoin on Synthetix, the Defi derivatives trading platform. Like XBTC, the issue of SBTC does not require the user to hold the underlying asset BTC. SBTC is only one way through SnX&NBSP; (Synthetix platform local token) Derivatives issued as collateral. The current supply of SBTC is about 1,700 SBTC, or about $69.5 million.

Synthetix allows its users to cast synthetic assets such as SBTC through pools of debt. Users pledge SNX tokens and can then mint the synthetic assets they want. Currently, the Synthetix system as a whole is highly over-mortgaged to make the system more secure against sharp falls in the price of the local token SNX. SBTC receives a feed from ChainLink and can trade with other local synthetic assets on Synthetix without any slippage. Other synthetic assets on Synthetix include synthetic assets that anchor fiat currencies, other cryptocurrencies, and commodities.

In creating more circulation. SBTC is similar to XBTC in that it runs counter to Bitcoin's hard-currency nature. The difference is that SBTC only allows its holders to capture BTC's price fluctuations and trade only within its own network, while XBTC plans to be able to trade with all cryptocurrencies through its integration with Thorchain.

Summary & have spent

There are many forms of "synthetic bitcoin," each with its own unique use case, minting or hosting process. Most synthetic bitcoins focus on introducing native bitcoins into other blockchains to unlock the value of bitcoins and use it for the DEFI protocol, while some other synthetic bitcoins provide additional components or price exposure. Which synthetic bitcoins are used to transfer the value of BTC depends on the individual or institution, and the intended use of each varies. Fortunately, there are more and more ways to transfer and unlock the value of Bitcoin across different blockchains, and since the value of BTC increases along with the value that the DEFI protocol brings to cryptocurrencies, this trend is also inevitable.