Tokenized Bitcoin-- Leveraging "store-in-value" as well as "smart contract"
With the DeFi boom since March 2020, the investors are putting more value in DeFi applications. Interestingly the BTC market cap dominance is still over 58%. And the DeFi hype is in the smart contract, programmable Blockchain like Etherum, EOS, Tron, etc. So what if the store-of-value and programmable Blockchain comes together. Tokenized Bitcoin is another form of DeFi hype that aims to stitch together the best of store-in-value and DeFi use cases for the investors.
Just imagine even if a part of the 58% market cap starts flowing into DeFi, the liquidity of the DeFi market will further go up. With this, Bitcoin further goes interoperable with other programmable Blockchains like Etherum, Tron.
In tokenized Bitcoin, the user sends BTC to a contract, then the contract issue a representative Bitcoin of the same value pegged to 1:1 to the investors. For example, in Tron Blockchain it will issue TRC 20 Bitcoin, similarly, in Etherum Blockchain the various representative tokenization of Bitcoin are:- WBTC, imBTC, TBTC, and pBTC.
The idea is that in the Bitcoin chain, DeFi applications are not there, so the token is not being able to enter the DeFi hype. Further, owing to the scalability issue, it may not suitable for the investors to take a trade with lower transaction throughput of a chain, transaction fees are another issue.
Now with tokenized Bitcoin, not only it helps to inject the store-in-value of a popular coin in the DeFi ecosystem, but also it makes things fast, scalable, low/negligible transaction fees if we consider Tron Blockchain. So investors can enjoy highly scalable tokenized Bitcoin along with DeFi use-cases.
A large number of tokenized Bitcoin transactions is a testimony to the fact that now the store-in-value is also flowing into DeFi space.
In the Etherum chain, the total pegged Bitcoin market cap now stands at 1.366 Billion USD. In Tron Blockchain, the market cap stands at 22 million USD. So there is enough evidence that the store-in-value Bitcoin market cap is slowly flowing into DeFi space as well, where the investors can trade it as TRC-20(Tron ecosystem) or ERC-20(Etherum ecosystem) for another coin in the respective family and similarly can also utilize it in yield farming.
Put simply, on the top of store-in-value(Bitcoin) the investors can now go for yield farming, earning interest as well, which might not have been possible with Bitcoin sitting in the wallet. Tokenized Bitcoin is the new demand and wave in DeFi space.
TRC-20 & ERC-20 USDT
There is a significant demand for Stable coins since 2019, thanks to DeFi lending/borrowing use-case. Although a plethora of stable coins exist today with the likes of DAI, PAX, TUSD, USDC, USDT, etc, USDT is arguably the leading stable coin with a market cap of 15 billion, but interestingly most of them have migrated to either Etherum chain or Tron chain. In the Etherum chain, 10.334 billion USDT is leveraging the chain while in the case of Tron the figure stands at 4.395 billion USDT.
Most of these funds are being locked in DeFi applications like Lending/Borrowing, LP Pool.
From an investor's perspective, I see TRC-20 USDT as a better option in comparison to ERC-20 USDT, in the context of fees and speed of the transaction. That is the reason why the total USDT in Tron Blockchain once in Feb 2020 was 814 million but today it stands at 4.395 billion USDT. so the value is flowing into Tron DeFi, thanks to high scalability and near-instant realization of the token. That also opens up the space for the micro trader and small to medium scale investment with cost-effectiveness DeFi use-case.