Exotic DeFi Goes Hybrid: MKR Holders Accept Wrapped BTC as Collateral in the Maker Protocol

TL;DR: Decentralized finance (DeFi) is a dizzying array of combinations and permutations on a variety of themes. By the time anyone figures it out, it’s usually too late. Nevertheless, the Maker decentralized autonomous organization’s (DAO) Executive Vote determined wrapped BTC (WBTC) is to be “a new collateral asset in the Maker Protocol.”

Exotic DeFi Goes Hybrid: MKR Holders Accept Wrapped BTC

Insisting WBTC will “bring greater liquidity to the Ethereum and decentralized finance (DeFi) ecosystems, and to decentralized exchanges (DEXs),” it’s the fourth asset okayed via MakerDAO Governance, the group announced. “WBTC can now be used in addition to ETH, BAT, and USDC to open Maker Vaults in order to generate Dai.”

If you’re confused, join the club. Wrapped Bitcoin made its debut back in late 2018 as a representation of BTC on the Ethereum blockchain, acting as a 1:1 asset, backed by BTC in a kind of stablecoin variation. As the world’s most popular cryptocurrency, the hope was to provide greater liquidity to then-burgeoning decentralized exchanges, who were mostly based upon decentralized applications (dApps), through including BTC somehow. DeFi exchanges were struggling because the vast majority of trading was between ETH-to-token pairs.


Maker is the Ethereum platform undergirding popular stablecoin Dai by way of its own token, MKR. They’re minted and burned to keep a USD peg, and provide a kind of stake for community voting within the MakerDAO. Adding WBTC to the collateral asset lineup “means that Bitcoin holders can now turn their BTC into WBTC (bring Bitcoin to the Ethereum blockchain), and then use it to generate Dai,” the announcement explained.

It all amounts to collateralized debt, and DeFi has taken on a buzz and excitement not previously known in the cryptocurrency ecosystem since Wall Street discovered the word “blockchain.” But the exoticism and increasing complexity come with an increasingly worrisome price often realized when it’s too late. DeFi platforms have been hacked for millions, including recently for $25 million, and are routinely gamed with participants unsure if actors are nefarious or simply finding inevitable holes in the craze’s mysticism.

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