The prospect of Bitcoin on Ethereum blockchain has always fascinated the crypto fans. Now, MakerDao has achieved this feat by using a ‘Wrapped Bitcoin.’ The decentralized community, Maker Dao, has full authority over the MakerDao Protocol, and they have decided that a new collateral asset called ‘Wrapped Bitcoin’ (wBTC) is an ideal way to bring Bitcoin on Ethereum blockchain.
Bitcoin holders can now turn their BTC into WBTC (bringing Bitcoin to the Ethereum blockchain), and then use it to generate Dai.https://t.co/STskGXQeff
cc @WrappedBTC
— Maker (@MakerDAO) May 3, 2020
According to the announcement, the MakerDao protocol will now offer transactions between BTC and ETH using a wBTC, which is an ERC20 token. Such a setup will undoubtedly increase the liquidity quotient on the platform.
Adding Bitcoin on Ethereum blockchain has its advantages
Interestingly, Bitcoin is the fourth offering on the MakerDao DeFi platform. There are already three collateral asset categories in the ecosystem, namely USDT, ETH, and BAT. Traders are already transacting using these asset types. With the introduction of Bitcoin on Ethereum blockchain, the wBTC Maker Vaults would now be permitted to ensure appropriate Dai generation.
With the launch of BTC on ETH blockchain, liquidity crunch will be sorted to a great extent. The entry of wBTC is beneficial for the entire DeFi realm, including the decentralized exchanges.
Bringing Bitcoin on Ethereum blockchain a technical milestone
Adding Bitcoin on Ethereum blockchain wasn’t easy – both technically and policy-wise. Now, Bitcoin users will be creating a Dai using their wBTC to create a vault. Oasis Borrow will handle the duties of vault management. The five-step process involves CoinList registration, fulfilling the KYC requirements, wrapping Bitcoin to wBTC, undertaking transaction with wallet, and lastly, creating a wBTC vault to build a new DAI.
With the rise of DeFi, the entry of BTC was only a matter of time. Earlier, there were speculations whether or not BTC would enter the DeFi ecosystem. But with the launch of Bitcoin on Ethereum blockchain, all these doubts have been put to rest.