Most- if not all, DFI platforms are built using Ethereum. But Bitcoiners are getting involved in Defy: Huge amounts of Bitcoin are entering the Ethereum Smart Agreement so they can be used to invest in Defy products that are essentially tokenized. Enter Bitcoin DFI.
* In short:
1. Decentralized Finance (DFI) platforms have been built in Ethereum, but bitcoin holders are getting involved by "locking" their coins.
2. Bitcoin DFI involves locking Bitcoin into smart contracts that give them Ethereum-based tokens that represent the largest cryptocurrency by market cap.
3. Bitcoins are using DFI to earn passive income by locking their bitcoin in Ethereum.
You may have heard of Decentralized Finance (DFI). It is the new craze to enter the cryptocurrency world with the investment of billions of dollars in DFI products in 2020 alone.
Increasingly, bitcoin holders are locking their coins in exchange for tokens that can be used on DFI platforms; Being involved with DFI.
What is DFI?
DFI products are tools built primarily in Etherium that aim to view, modify, and replace existing methods of receiving, disbursing, and banking as traditional money.
DFI's goal is to make the world of finance accessible to everyone (or anyone with an Internet connection).
Why Bitcoin will be involved?
Most DFI platforms are built on Ethereum. However, there are many people who own a lot of bitcoin who want to get involved. So it is becoming increasingly easy for people with Bitcoin to be able to invest in DFI platforms with their funds.
Bitcoin is the largest cryptocurrency by market cap, so things are moving in a direction that connects assets with DFI products.
How does Bitcoin DFI work?
Bitcoin DFE basically works by allowing Bitcoin - a currency in a blockchain - to run on a very different, separate blockchain from Etherium.
How? This is where things get a little complicated.
You cannot use Bitcoin directly on Etherium platforms As mentioned earlier, blockchains are different. To do this, Bitcoin needs to be converted into a currency that represents Bitcoin but it is indeed an Etherium-based token.
Then, Bitcoin is basically locked into a smart contract, (a piece of code that gives instructions for copying the contract) and can be used on the network. Think of it as an exchange.
Bitcoin uses DFI for passive income
Why would anyone want to place their bitcoin in an Ethereum Smart deal, you might ask, when they can just buy an Ethereum token directly and start from there?
Working your bitcoin in the form of passive income is a good reason. We all know that a lot of people hold their Bitcoin as a value store not to buy things online (basically intentionally) or to pay for remittances.
Furthermore, there are many more cryptocurrencies that now serve that purpose, some argue. So while Bitcoin is just sitting around investing in the hope that its value will skyrocket one day, why not use it to make money for you?
One of the ways to earn passive income with Bitcoin is to pay with Bitcoin and use a DFI platform to earn interest which would otherwise just sit there. It works like this: Convert Bitcoin to Ether or Direct Die (a stable, pegged to USD) and place it on a platform where you can lend it and get the loan back with interest.
One way to do this is to use the MACARDAO platform.
Who is leading the Bitcoin DFI space?
A relatively new concept, there are currently a few major companies at the top of this space. These include wrapped Bitcoin (WBTC), RenvM and RSK.
1. WBTC is a central collaboration between Maker, Compound, Kibar Network and other DFI protocols, including Av. It works to lock the bitcoin in the Ethereum blockchain in exchange for the same quality ERC-20 token.
2. RenVM is a network that holds bitcoins (among other cryptocurrencies) and serves to represent those currencies as ERC-20 tokens.
3. The global lending platform RSK works to help users earn interest by making stable conversions with their bitcoins before lending.
What does Bitcoin DFI have in the future?
Right now, more bitcoins are being sent to Etherium than ever before; Priced at about 1 1 billion as of September 2020. This is undoubtedly due to the rise of DFI. As the view has grown in popularity, so have the methods of running bitcoin on such national platforms.
Space companies are converting bitcoin quantities into ERC-20 tokens.
As long as DFI is not popular, we see new companies offering a quick, easy and inexpensive way to help Bitcoin work on DFI platforms in this space
