More than $1B in Bitcoin has been tokenized for DeFi

More than $1 billion worth of Bitcoin (BTC) has now been tokenized to access decentralized finance protocols on the Ethereum network. That’s equivalent to the entire total value locked, or TVL, in DeFi less than four months ago.

According to DeFi Pulse, roughly 98,300 BTC (worth $1.05 billion) has been tokenized using protocols other than Blockstream’s Lightning Network — equating to more than 12% of the DeFi’s sector’s $8.57 billion combined capitalization.

The milestone illustrates the increasing popularity of ETH-based protocols for generating passive returns among Bitcoin holders, with the entire DeFi sector having been valued at just $1.05 billion TVL as of the start of June — of which $47.5 million or 4.7% was Bitcoin, indicating that the share of DeFi’s capitalization represented by BTC has increased by 150% over three and a half months. 

By contrast, the Lightning Network has only attracted 1,100 Bitcoin worth $11.5 million since launching in March 2018.

In June, the vast majority of BTC in the DeFi sector took the form of Wrapped Bitcoin (WBTC), However, the launch of Ren’s more decentralized Virtual Machine and RenBTC in addition to grassroots tokenization protocols such as PieDAO’s BTC++ this year have boosted Bitcoin’s expansion into DeFi.

Bitcoin tokenization protocols let users lock up their Bitcoin and mint a corresponding ERC-20 token, allowing the value represented by a user’s Bitcoin holding to interact with smart contracts on the Ethereum network.

While WBTC is still the top-ranked tokenization protocol by total BTC locked after attracting 56,800 Bitcoin worth nearly $605.5 million since late November 2018, Ren’s Virtual Machine has tokenized 21,500 Bitcoin worth $230 million since launching in May of this year.

While both protocols have more than doubled in the number of locked Bitcoin over 30 days, WBTC continues to attract a larger volume of BTC than Ren, growing from roughly 28,360 BTC to 56,850 BTC, while RenBTC expanded from 10,000 BTC to 21,510 over one month.

Over the past 90 days, both projects have grown by more than 850%. On June 19, WBTC represented only 5,839 BTC and Ren had tokenized just 155 BTC.

Curve Finance is the top-ranked yield generating protocol by tokenized BTC, with 27,600 Bitcoin (worth $295 million), followed by Aave with 17,800 BTC (worth $190.5 million) and Balancer with 9,500 BTC (worth $101.6 million). Collectively, the three protocols have attracted more than half of all tokenized Bitcoin.

However, with only 0.47% of Bitcoin’s supply tokenized, there is still significant value that will likely migrate from Bitcoin into DeFi over the coming months and years.