The Rise of BTC Pegging: The Proportion of Bitcoin in the Ethereum Ecosystem Approaches 1%

Bitcoin and Ethereum, as the dual giants in the world of Crypto Assets, have long had differences in their monetary attributes. Bitcoin is often regarded as a fundamental currency, being labeled as "digital gold" and "the anchor of the encryption world." In contrast, the monetary attributes of Ethereum tend to be more application-oriented, with practitioners often focusing on leveraging "monetary applications" at a higher level.

However, the booming DeFi seems to break this subtle division of labor, even allowing Ethereum's currency role to overshadow others. The ERC-20 format Bitcoin, namely "anchored BTC," has rapidly expanded in recent months, especially in the just-passed July, with the issuance of anchored BTC surging by about 70%. Data shows that as of August 5, the total issuance of anchored BTC in the Ethereum ecosystem has reached 20,472 coins, close to 1% of the total Bitcoin supply, accounting for 0.59% of the total market value of ETH.

From the perspective of BTC anchoring, wBTC holds an absolute majority with a 75.8% issuance share, followed closely by Ren BTC and sBTC with shares of 11.2% and 4.89%, respectively. Together, the three account for over 90% of the issuance share, highlighting their important position.

On-chain indicators show that these three BTC-pegged assets excel in total address count, active address ratio, and large transfers. In July, renBTC saw the most significant increase in total address count, growing by approximately 111% over 30 days. During the same period, the average active address ratio of the three BTC-pegged assets was above 5%, outperforming ETH's performance during the same period, and comparable to USDt-erc20 levels.

In terms of transfer value, wBTC and renBTC have carried considerable trading volumes: wBTC had a peak of large transfers reaching 20,000 BTC within 30 days, with an average transfer amount close to $50 million over 7 days; renBTC had a peak of large transfers nearing 1,300 BTC within 30 days, with an average transfer amount of approximately $11.5 million over 7 days.

The explosive growth of BTC pegging is mainly attributed to two key factors: the opening of staking for leading lending projects and the liquidity mining craze. In May, MakerDAO included wBTC as collateral for generating DAI, significantly enhancing the potential of DAI. As of August 1, nearly half of the wBTC has been staked in MakerDAO.

Following closely, the "liquidity mining" craze led by Compound and jointly promoted by projects like Curve, Synthetix, and REN further pushed up the entire BTC pegged sector. On June 18, after Synthetix, Curve, and Ren jointly launched a new liquidity incentive pool, the on-chain metrics of wBTC, renBTC, and sBTC significantly increased, with multiple indicators nearly increasing tenfold in a short period.

However, the growth of BTC pegs also faces significant bottlenecks. Firstly, there is insufficient scalability, limited by the share of DeFi in the entire Crypto Assets market and the issuance mechanisms of various BTC pegs. Secondly, the process from generation to transfer and then to participating in yield farming remains relatively complex, with hidden risks that hinder some users from participating. In addition, the early emergence of centralization in BTC pegs has led to an average whale holding rate of 92%, which is not conducive to the widespread distribution of tokens.

There are different opinions in the industry regarding the development of BTC anchoring. Some are concerned that it may lead to a decrease in Bitcoin on-chain transactions, affecting network security. Others believe that this is a win-win situation for both Bitcoin and Ethereum, as it can enhance the network economic activities and liquidity of both.

In the past 7 days, the on-chain indicators primarily pegged to BTC have shown signs of fatigue and even a downward trend. As the enthusiasm for liquidity mining gradually fades, it remains to be seen whether BTC can continue to maintain a strong growth momentum.