mido-finance.com

Approximately 80,000 Bitcoin have now been transferred to the ETH blockchain, as DeFi protocols attract value back to their liquidity pools following an early September crypto market correction. Even as prices for Bitcoin and Ethereum dropped, Bitcoin transferred onto the Ethereum blockchain has already increased nearly 37% so far this month, according to data from Dune Analytics.

The increase in Wrapped Bitcoin (WBTC) and other cross-chain Bitcoin lockups has pushed their aggregate value to more than $800 million from less than $600 million at the start of September. The total value is now equivalent to more than 2% of the entire ETH market cap.

The trend is a signal that, despite price volatility in digital assets, the appetite for DeFi returns remains strong even among BTC owners.

Cross-chain transfer protocols like WBTC and renBTC use trusted third-party custodians or smart contract-controlled wallets to hold one digital asset, while making a replica token on another blockchain, like Ethereum. The replicated assets, which sometimes referred to as wrapped tokens, are pegged to the value of the original token.

The most popular wrapped token is Wrapped Bitcoin, which is responsible for about 66% of all cross-chain BTC, with nearly 53,000 Bitcoin locked in that system so far. RenBTC, the second-most-popular transfer protocol, has grown steadily, having the same share of the Bitcoin transfer market at approximately 22%.

One large gainer has been Huobi’s HBTC, increasing to become the third-most-popular BTC transfer solution with more than 6% of the overall market. The total number of HBTC has risen more than 570% since the beginning of last month, when it stood at under 1,000 HBTC; it’s at 4,800 today.

As the amount of BTC transferred to ETH has surged, so too have concerns regarding centralization and the role third parties play for the three top transfer solutions, WBTC, RenBTC, and HBTC.

HBTC, which launched on the Ethereum blockchain in 2020, is the product of Huobi, a centralized cryptocurrency exchange based in Singapore. Wrapped Bitcoin, a collaboration between several DeFi protocols, including crypto lending services Maker and Aave, has always used a system of trusted third-party custodians to hold native Bitcoins which back WBTC.

And Ren Protocol’s renBTC was recently caught in controversy after it was publicized that the ostensibly decentralized protocol was controlled by members of the Ren development group.

Despite the risks, transfers of Bitcoin to the ETH chain are only accelerating. The allure of DeFi returns will justify the risk of trusted third parties. But there’s a lot of BTC at stake.