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Edited by Kahn332 at 22-12-2023 05:02 AM
Benefits for other public chains
Bitcoin's high market value, high liquidity, and low volatility make it a valuable asset for any public chain. As a result, Bitcoin-pegged assets are widely used in lending protocols on Ethereum. Its introduction is even more important for other public chains that lack assets.
The addition of asset types also makes DeFi's building blocks more secure. Prior to March 12 last year, the assets on Ethereum were relatively single, and a large amount of assets were liquidated when the market fluctuated significantly. In MakerDAO, many users needed DAI to repay their loans, causing DAI to trade at a premium of over 20%. If you can borrow DAI by collateralizing more types of assets, it can increase the anti-fragility of lending protocols. With the application of cross-chain Bitcoins like WBTC, this issue has been addressed.
Benefits for HODLers
For Bitcoin HODLers, using Bitcoin on other chains through cross-chain mechanisms can effectively reduce costs and increase use cases. Using Bitcoin-pegged assets has several advantages:
Lower transaction costs: In non-congested network conditions, the general transaction cost on the Bitcoin network is about $5. In Ethereum, when the Gas Price is 10 GWEI, the transaction cost for ERC20 tokens is about $1. The transaction costs on other chains like Solana, Polygon, Harmony are negligible.
Faster transaction confirmation: Bitcoin has a block time of about ten minutes, while Ethereum has a block time of about thirteen seconds. New public chains can confirm transactions within a few seconds.
It can be used as a valuable asset in protocols for collateralized lending, trading, derivatives, bonds, etc. For example, you can borrow stablecoins by collateralizing Bitcoin-pegged assets.
It can help HODLers generate income, which is not possible within the Bitcoin network. |
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Post time 5-11-2023 20:42:34
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