WBTC takes the lead with 8,165 representative Bitcoin tokens issued on the Ethereum network. The amount in U.S. dollars of the Bitcoin-pegged tokens on Ethereum exceeds USD 100 billion.
On June 27th, the number of Ethereum network tokens pegged to the price of Bitcoin reached more than 11,000 units. Users can trade those tokens like Bitcoin or other cryptocurrencies. However, the former does not have their blockchain, but they are created on the Ethereum blockchain.
The amount in U.S. dollars of Ethereum’s 11,146 (ERC-20) tokens pegged to the price of Bitcoin is 101 billion, according to data from BTConEthereum. The WBTC token already has 8,165 units issued, which represents 73% of the total tokens pegged to Bitcoin on Ethereum.
WBTC takes the lead among Bitcoin-pegged tokens, which could relate to its addition to the MakerDAO platform. The community decided to add WBTC as a collateral asset to provide “greater liquidity to the protocol”.
Second, renBTC has a total of 1,094 tokens issued, which represents USD 9.9 billion. In third place, HBTC has 710 units, with a value of USD 6.4 billion.
Even though users see these tokens as a way to add Bitcoin to Ethereum, the reality is a little different. The addition of WBTC to MakerDAO relates to an advertising strategy that offers the opportunity to obtain Bitcoin through the token. However, this is the integration of a token that only serves as a price marker.
Ethereum Tokens Pegged to Price of Bitcoin
The intention to bring more liquidity to the market can translate, indirectly, as the intention to sell the final product, which in this case is the stablecoin DAI. Besides, the assertion that Bitcoin is coming to Ethereum through an ERC-20 token to buy DAI is a little misleading.
In general, these ERC-20 tokens belong to an entity that acts as their custodian to ensure that the price of the cryptocurrency is the same as that of Bitcoin. In other words, if the entity holds 1 on-chain BTC, it will issue 1 token on Ethereum. It is from this moment on that the users who acquire the token run some risk.
Due to the nature of these tokens, the entity must ensure that its asset is worth 1 BTC. If an event occurs in which the entity no longer has enough liquidity to support the value of its token, or loses its funds, the value of the cryptocurrency would be nil. This implies that users must give custodians their trust to safeguard their money.
Last May, itBTC, a new ERC-20 token pegged to the price of Bitcoin, was disabled for two days after its launch. The deactivation of the token led to the suspension of deposits on the platform for 10 days. Users who had money on the platform had to withdraw it so that their funds were secure.
Despite the popularity of ERC-20 tokens, some people, such as Ethereum’s Vitalik Buterin, are concerned about them. Buterin noted in May that the amount of BTC on Ethereum grew to be two and a half times larger than on Blockstream. He believes that their popularity could inspire similar projects that would be badly designed.
By Alexander Salazar