2 DeFi giants launch Bitcoin-linked tokens

Important facts:
  • Loans are collateralized in tokenized versions of ETH and receive EBTC in return.

  • Both companies have been growing for years, primarily in the Ethereum ecosystem.

BadgerDAO, an organization that provides infrastructure for the development of decentralized finance (DeFi) applications, and Lido, the largest liquid Ethereum staking pool, have launched an asset called EBTC.

EBTC It is a crypto asset Which seeks to maintain parity with the price of Bitcoin (BTC) and is developed on the Ethereum network. It is exclusively backed by Lido’s stETH token. And powered by allegedly immutable smart contracts with minimal reliance on counterparties, they report.

It should be remembered that STETH is a synthetic asset that represents ether deposits on Lido. Liquid Ethereum staking is a service provided by Lido, which allows people to stake ETH to node operators. These stake Ethereum 2.0 smart contracts. In return, pool users receive another token – which, in Lido’s case, is stETH – representing staked ether (ETH), as explained by CriptoNoticias.

According to the platform designed for eBTC, the crypto asset was created “as a direct response to the shortcomings of the centralized and opaque financial infrastructure that is common within the sector.” The most famous tokenized BTC on Ethereum is Wrapped Bitcoin (WBTC). It is a centralized development and issued by a company that holds units of BTC in custody to support it.

Instead, as the EBTC developers explain, this token “moves away from the centralized solutions for borrowing Bitcoin that are currently seen in the market.”

One thing to keep in mind with smart contracts is their susceptibility to hacking. The loss of parity between EBTC and BTC should also be considered. Investors may be affected if the price of eBTC drops below the price of BTC. This would not be the first time that a stablecoin loses parity with the underlying asset.

EBTC will be the protagonist in a new lending ecosystem

According to its website, the new initiative offers anyone in the world the possibility to “borrow BTC at no cost.”

To do this, in addition to the creation of eBTC, A decentralized application developed that allows you to order loan in this currency, These are collateralized into tokenized versions of ETH such as stETH, wETH and wstETH.

In this case, EBTC represents an ETH-based collateralized debt position (CDP) with liquid staking allegedly powered by immutable smart contracts.

According to the lending platform, this allows users to “determine the creditworthiness of the asset they are borrowing/holding at all times, eliminating the need for trust in the counterparty.”

To access EBTC loans, a CDP is opened and a certain amount of collateral (e.g. STETH) is deposited.

In the next step, the borrower can choose the loan amount in EBTC to avail CDP Requires a minimum guarantee of 110%, below which borrowers will be liquidated,

At the time of writing this article, a loan simulation was conducted. For 8 stETH, worth $28,533, the platform offers 0.19902099 eBTC, which is equivalent to $13,909, as seen in the following image.

The eBTC lending platform looks like this. waterfall: ebtc.finance

The platform also allows guarantee indices ranging from 125%, 150% to 200%, with the first being more risky and the second being less risky.

It is important to shed light on that These EBTC loans are granted without commission and do not generate interest On capital or loan. “Instead, the protocol earns income for its stability by taking a percentage of the ETH performance staked as collateral,” it explained.

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