In brief

  • Wrapped Bitcoin (WBTC) has been added as a collateral asset for the Maker Protocol following a community vote.
  • Adding WBTC unlocks billions in potential loan liquidity for Bitcoin holders.
  • The vote demonstrates how quickly and easily new collateral assets can be added to the protocol.

The Maker Protocol is going long on Bitcoin.

Wrapped Bitcoin, or WBTC, the ERC20 “wrapped” Bitcoin token has been approved as a collateral asset in the Maker Protocol following an Executive Vote on Sunday. WBTC joins ETH, BAT, and USDC as collateral assets that have been approved for use in the protocol via MakerDAO governance.

Maker users can now get loans using Bitcoin as collateral, expanding the decentralized finance (DeFi) ecosystem and opening access to Bitcoin’s more than $163 billion market cap.

The Maker Protocol successfully transitioned to distributed governance between December 2019 and March 2020 by distributing tokens to community members, but not before a somewhat controversial vote to approve Coinbase’s USDC as collateral in response to the March crypto crash.

Critics argued at the time that adding a fiat-backed stablecoin controlled by crypto exchange Coinbase and payments startup Circle increases centralization risk for a platform that is meant to be completely decentralized. 

Sunday’s approval, decided through votes cast by MKR token holders, followed discussion in the Maker Governance Forum and an April 30 Governance and Risk meeting. The stability fee, or the interest rate on a DAI loan backed by WBTC is initially set to 1%. The stability fee for all other collateral assets is currently set to 0%.

WBTC launched in January 2019 in an effort to increase liquidity in the Ethereum ecosystem through a collaborative project among DeFi players, including Kyber, Compound, Maker, and several others. The WBTC ERC20 token relies on a network of merchants and custodians to perform manual operations of minting and burning WBTC tokens and keeping ownership of the associated Bitcoin.

WBTC is one of several schemes that have emerged in an effort to leverage the value of Bitcoin on the Ethereum network, including Tokenlon’s imBTC, pToken’s pBTC, Synthetix’ sBTC, and the forthcoming tBTC from Keep Network and Summa. Each takes a slightly different approach to issuing tokens, pegging value, and maintaining custody of the underlying Bitcoin assets.

Adding BTC-pegged collateral assets to the Maker Protocol gives users more flexibility in the assets they use to secure their loans and unlocks an enormous new pool of liquidity.

As the ecosystem grows, we can expect additional votes for collateral assets and the continued expansion of decentralized finance powered by people as opposed to banks.