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What is Wrapped Bitcoin (WBTC) and How Can DeFi Investors Use It?

Even though DeFi is taking off, a little extra liquidity could prove to be the wind beneath its wings. Powered by 46 partners—and counting—Wrapped Bitcoin (WBTC) is blowing in from all corners of the globe.

The post What is Wrapped Bitcoin (WBTC) and How Can DeFi Investors Use It? appeared first on Bitcoin Market Journal.

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Even though DeFi is taking off, a little extra liquidity could prove to be the wind beneath its wings. Powered by 46 partners—and counting—Wrapped Bitcoin (WBTC) is blowing in from all corners of the globe.

Wrapped Bitcoin (WBTC) is an ERC-20 token, pegged to bitcoin 1:1, that was launched on the Ethereum network on January 31, 2020. As a result, bitcoin can be used in the largely Ethereum-powered DeFi market.

How Does Wrapped Bitcoin Work?

There are three key players in the process of a bitcoin holder getting WBTC: the user, the merchant, and the custodian.

To exchange bitcoin for Wrapped Bitcoin, a user puts in a request to a WBTC merchant. Merchants distribute WBTC in exchange for bitcoin—or the other way around. They have also incorporated a KYC step in the process. The merchants serve as a middleman between the user and the custodians, who are the liquidity pool of the network.

When the merchant presents the transaction request to the custodian, the custodian chooses to either grant or deny the request to either mint or burn WBTC. The minting and burning processes happen via an atomic swap, directly between the merchant and the custodian.

The process is launched when a merchant enters a minting request via an Ethereum smart contract while sending bitcoin to the custodian. At that point, the custodian waits for confirmation on the Bitcoin blockchain, approves the request on the Ethereum network, and the merchant then gets the WBTC.

For the user to get their tokens, they have to enter into a trusted exchange or atomic swap with the merchant. Once the user gets their WBTC, what they have is basically bitcoin “wrapped” in an Ethereum blanket. Hence, the name “Wrapped Bitcoin.”

How Wrapped Bitcoin Benefits the DeFi Space

Liquidity is the foundation of all finance. Without money to lend, financiers have no value. Further, limited liquidity could kill a burgeoning financial movement. If investors were to rush to DeFi and run into one platform after another that didn’t have enough to liquidity, DeFi would quickly get slapped with crippling labels like “insoluble,” “unsustainable,” and others that DeFi-doubters are eager to whip out.

Because bitcoin and the Ethereum blockchain don’t play nice, and DeFi is largely powered by Ethereum, there’s been a thick brick wall between DeFi and bitcoin investors. This wouldn’t be a problem if it weren’t for the fact that BTC clutches on to the vast majority of the digital asset market cap.

Wrapped Bitcoin is a sledgehammer trying to bust down that Berlin-esque wall. If investors continue stepping through the gaps, a flood of liquidity could flow into the DeFi space.

If only 5% of the bitcoin market cap were to move into the DeFi liquidity pool, DeFi’s market cap would hop up 35%.

How to Add WBTC to Your Portfolio

Investors can go through the “wrapping” process using a merchant, or they can purchase WBTC on one of several exchanges.

If you hodl WBTC, its price will rise and fall with that of BTC. Alternatively, you could use it to invest in DeFi protocols.

Fees Associated with WBTC Wrapping

As with most financial services, wrapping with WBTC comes with a cost. There are fees you have to pay to the following entities:

  • Custodian fees. These are collected by the custodian when the merchant chooses to mint or burn wrapped tokens.
  • Merchant fees. The merchant takes a fee from the user as payment for helping them turn their BTC into WBTC.
  • Sidechain transaction fees. To help prevent spam on the sidechain, there is a fee that is shared by all entities that are running a sidechain node.

How DeFi Investors Can Use WBTC to Earn Interest on Bitcoin

DEFI.

There are a few ways you can use WBTC to generate interest on your BTC. You can use one or a combination of multiple platforms.

Lending on Compound

An increasingly common door into the DeFi building is Compound, which now accepts WBTC. Compound works by using an algorithm to calculate interest rates based on common market factors like supply and demand.

If you have a loan, the value of your collateral has to remain above a certain threshold in order to prevent the liquidation of your assets. On the other side of the table, you can lend WBTC to Compound users and earn interest. At the time of writing, the net rate on Compound for WBTC was 2.30%, with a supply APY of 1.44% and a distribution APY of 0.86%.

Yield Farming on Maker

The first step in earning interest on your BTC with Maker is to wrap it into WBTC. You can then use your WBTC to generate DAI. At the time of writing, you had to maintain a liquidation ratio of 150%, and if you end up getting liquidated, you would have to pay a 13% penalty. However, if you lock up your WBTC to generate DAI, the liquidation risks could be worth it.

Once you have generated DAI, you can convert it back into BTC using an exchange, reinvest it, or allow it to continue producing DAI.

Staking on Synthetix

Yield farming on Synthetix with WBTC is fairly straightforward.

  • You first provide your WBTC to the curve liquidity pool, which gives you Curve LP tokens as a reward for your contribution.
  • You then stake your Curve LP tokens in Mintr. Both the staking process and claiming your rewards happen in the LP Rewards tab on Mintr.
  • When you want to cash out, you select “Claim and Unstake” and your tokens are liquidated into SNX and REN, which can be traded for BTC on exchanges like Binance, OKEx, and Bilaxy.

Curve Finance sUSD LP Token Rewards.

WBTC: Good for DeFi, Good for Investors

Wrapped Bitcoin may be exactly what DeFi needs. Because it’s pegged to BTC and users can obtain it via a fairly simple process, its rise may continue. If bitcoin players, big or small, increasingly turn to WBTC, the liquidity boost could help DeFi soar to new heights.

And for investors, WBTC provides a new avenue to earn interest on bitcoin holdings by depositing the token in yield-generating DeFi protocols.

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Source: https://www.bitcoinmarketjournal.com/what-is-wrapped-bitcoin/

Blockchain

Mark Cuban Slams Peter Schiff: Gold is Dead, Bitcoin and Ethereum Are Today

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Mark Cuban hasn’t always been the biggest fan of Bitcoin, Ethereum, and other cryptocurrencies, but he’s recently come around as other Shark Tank investors have.

Surprisingly, though, Cuban has come to the defense of the emerging technology, telling gold bug and vehement digital asset naysayer Peter Schiff that his precious metal is now dying as a store of value at the hands of the cryptocurrencies like Bitcoin and Ethereum.

Billionaire Shark Tank Investor Schools Peter Schiff On Crypto

It isn’t at all uncommon to find long-time gold bug Peter Schiff trashing cryptocurrencies ever chance he gets from his Twitter account soapbox. He’s even slammed his own son for buying Bitcoin in the past – an investment that proved dear old Dad very wrong.

Related Reading | “Wonderful” Shark Tank Investor Shifts Portion of Portfolio To Bitcoin and Ethereum

He took a recent opportunity to bash the asset class, surprised that “smart investors” on Wall Street were “dumb enough” to buy into Bitcoin and other digital assets, but was met with a sharp-tongued response from billionaire investor and entrepreneur Mark Cuban.

Cuban blasted back at Schiff offering his “help” in explaining the charm behind the emerging technology. According to Cuban, gold is dying as a store of value, because it cannot adapt and change to address the current or future needs of society. Bitcoin and Ethereum, however, can.

bitcoin ethereum Shark Tank mark cuban

Bitcoin and Ethereum have recently turned Mark Cuban and other sharks into believers | Source: BTCUSD on TradingView.com

“Gold Is Dead,” And How Mark Cuban Came Around To Bitcoin And Ethereum

Mark Cuban, who knows a lot about tech revolutions starting from the ground up, says that the current use cases for crypto are just “proof-of-concept” and advances will change the asset class in the years to come. Meanwhile, gold will always stay exactly the same.

The fact that these technologies have evolved over the past several years are what have won over the Shark Tank investor and peers among his panel on the popular ABC primetime show.

Related Reading | Overheard On CNBC: If It Wasn’t For Bitcoin, Gold Would Be $3K

Cuban has recently become enamored with NFTs, Robert Herjavec is a “big believer” in the long-term future of the technology, and even Mr. Wonderful Kevin O’Leary has moved a portion of his portfolio into Bitcoin and Ethereum.

As more high wealth investors become convinced in the cryptocurrency’s staying power, the more that are moving capital into the asset class. Gold, on the other hand, is still the same asset it always has been and is always going to be, and doesn’t need any further convincing.

Rather than Peter Schiff attempting to convince investors why they shouldn’t buy crypto, perhaps he should be more focused on why they shouldn’t sell their dying store of value – gold – instead.

Featured image from Deposit Photos, Charts from TradingView.com

Source: https://www.newsbtc.com/news/bitcoin/mark-cuban-gold-bitcoin-ethereum/

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BitMEX’s Arthur Hayes and Ben Delo negotiate surrender to U.S. authorities

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The former CEO of crypto derivatives exchange BitMEX, Arthur Hayes, is in negotiations to surrender to U.S. authorities next month concerning charges that authorities levied against four of the exchange’s executives and co-owners in October.

Transcripts of a court teleconference dated Feb. 16 indicate Hayes will surrender to the U.S. in Hawaii on April 6. Hayes and his fellow executives are accused of violating the Bank Secrecy Act by the U.S. Department of Justice and  the Commodity Futures Trading Commission.

The transcript details the assistant U.S. attorney Jessica Greenwood’s comments to the judge presiding over the case, with Greenwood indicating she has been in talks with Hayes regarding the anticipated voluntary surrender. Hayes is currently located in Singapore, with the attorney noting Hayes hopes to continue residing abroad but will appear within the United States for proceedings should the trial go to court.

“We have discussed with counsel how to arrange for a voluntary surrender, and he has proposed appearing within the United States in Hawaii and having his initial appearance there and then,” she said, adding:

“The idea would be that he would appear initially in Hawaii, then appear before your Honor remotely, and then he would continue to reside abroad with travel to the United States for appearances as needed and, of course, if there is a trial, that he would appear within the United States for that trial in New York.”

Greenwood also revealed that BitMEX co-owner Ben Delo intends to surrender in New York by the end of the month. However, she noted they are currently working with the FBI and Border Patrol to obtain immigration authorization allowing him to travel to the United States, despite Delo currently being subject to a U.K. travel ban.

The attorney also stated that while fellow co-owner Greg Dwyer has declined to surrender, extradition proceedings have been initiated to bring him back from Bermuda.

“With respect to the remaining three defendants, […] we’ve been in contact with counsel discussing the possibility of appearing. They’ve all made representations about for when and how they’ll appear,” Greenwood said. However, she added:

“We have no guarantees at this point that any of those things will happen.”

BitMEX CTO, Samuel Reed, was arrested in Massachusetts as the charges were being levied against BitMEX in October. Reed was released from custody after a $5 million bond was paid that same month, with Reed agreeing to comply with sentencing proceedings.

In response to the hearing, the judge determined it wasn’t “reasonably possible” for a motion and trial schedule to be established. The judge scheduled a follow-up conference for May.

Last month, Hayes broke months of silence to post an article to BitMEX’s official blog calling for a boycott of legacy finance in response to trading platforms shutting down trade amid the GameStop pump engineered by subreddit, r/WallStreetBets.

Source: https://cointelegraph.com/news/bitmex-s-arthur-hayes-and-ben-delo-negotiate-surrender-to-u-s-authorities

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‘I can’t believe you morons actually buy this shit’: Banksy art burned and tokenized

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An original artwork by anonymous British street artist Banksy has been burned and turned into a nonfungible token. The NFT will be auctioned next week on the blockchain-based Rarible platform, where users can create and purchase rare tokenized artworks.

The original Banksy in question is a satirical piece entitled “Morons,” which depicts buyers at an art auction bidding on a piece emblazoned with the words “I can’t believe you morons actually buy this shit.” The piece received certification from Pest Control — the only body authorized to authenticate original Banksy artworks.

“Morons” was sold at Christie’s auction house in London in late 2019, where it fetched $32,500 from an anonymous, independent buyer.

The burning of the piece took place at an unknown location in Brooklyn, New York, and was livestreamed via the recently created Twitter account BurntBanksy. The burning was reportedly carried out by a group of cryptocurrency enthusiasts in association with executives from the blockchain project Injective Labs.

The tokenization of the authenticated piece took place without input from the pseudonymous Banksy. However, other prominent artists have seen fit to dip their toes into the crypto world of late, as witnessed recently when famed British artist Damien Hirst announced he would accept bids for his work in Bitcoin (BTC) and Ether (ETH).

The NFT market became an industry unto itself toward the end of 2020, as almost $9 million in token sales was recorded in December 2020 alone. But that was just a sign of things to come, as NFT sales exploded moving into 2021, helped by the validation of several high-profile celebrities such as YouTuber Logan Paul and entrepreneur Mark Cuban.

On Sunday, acclaimed Canadian musician and artist Grimes launched an NFT collection titled “WarNymph”, which went on to sell for a collective $5.8 million. The NBA recently embarked on a joint venture with CryptoKitties creator Dapper Labs to launch NBA Top Shot — an NBA-themed digital token marketplace that has reportedly generated $230 million in sales since launch.

The “Morons” piece is not the first Banksy to be destroyed on purpose. In 2018, Banksy’s “Girl With Balloon” automatically self-destructed shortly after selling for $1.4 million at Sotheby’s. The artist later revealed that he had installed an automatic shredder in the painting’s frame in case it ever went to auction. In an ironic twist of fate, the destroyed Banksy is now thought to be more valuable than the original piece ever was.

The “Morons” NFT will be auctioned on Rarible on Tuesday next week. All proceeds from the auction will be donated to charity. The successful bidder will be entitled to receive the certificate of authentication from Pest Control; however, this too will be burned if it is not claimed within two weeks of the sale.

In an art industry fraught with fakes and forgeries, “Morons” may now be the most authentic, most secure Banksy piece in the world. Once logged on the blockchain, the possibility of it being forged, altered or manipulated in any way is close to zero.

Given Banksy’s rejection of the bloated, materialistic art world, what would he think of the current mania surrounding NFTs? Keep an eye on your local graffiti spots. The answer may be forthcoming.

Source: https://cointelegraph.com/news/i-can-t-believe-you-morons-actually-buy-this-shit-banksy-art-burned-and-tokenized

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