More than 550 bitcoin ($5.8 million) has now been locked up in an Ethereum-based protocol, called wrapped bitcoin.
Wrapped bitcoin is a token on the Ethereum network backed by bitcoin and pegged to its value. In the same way that a company offering a U.S.-dollar backed stablecoin has a reserve of U.S. dollars (in theory), wrapped bitcoin involves locking up amounts of bitcoin. The purpose of it is to bring liquidity over to the Ethereum network and allow for funds held in bitcoin to be used within applications on the Ethereum network—including decentralized finance (DeFi).
This has a secondary result: it reduces the amount of bitcoin in circulation (for as long as the bitcoin is locked up). And as anyone who has witnessed a bitcoin halvening knows, a reduction in the supply of bitcoin puts upward pressure on its price. Despite this, 550 bitcoin will not make much of a dent, considering that the circulating supply of bitcoin is about 12 million (official figures say 17.8 million but about one third is estimated to be lost or inaccessible).
But looking further down the line, it might start to make a difference. Wrapped bitcoin has only been around since January this year. Since the start of July, the amount of bitcoin that has been locked up in the network has jumped 70 percent. And with the rise of DeFi apps in general, with more awareness being raised—especially around Maker DAO—this number could start growing rapidly.