MakerDao Governance Approves wBTC as Collateral to Generate Dai with Bitcoin’s Liquidity


Ethereum based DeFi, Maker Protocol, will now leverage Bitcoin’s liquidity following a recent vote by its community to add wBTC as collateral for DAI tokens. The Wrapped Bitcoin (wBTC) tokens are backed on a 1:1 basis by BTC giving the project a competitive edge within the $1 billion DeFi market. Notably, wBTC marks the fourth digital asset to be integrated with Maker Vaults for Dai token generation. The other three include ETH, BAT & USDC which was added in March.

An official announcement by Maker through a blog on May 3 went on to note that the community had considered the underlying exposure before the decision to add wBTC. According to the publication, Maker Protocol will further add appropriate risk measures within its ecosystem in order to accommodate the new collateral. Some of the new outlined wBTC risk parameters include a 1% stability fee, 150% liquidation ratio, 3% minimum bid increment, 13% liquidation penalty, and a 6-hour bid duration amongst others.

The Value Proposition

As mentioned earlier, the fundamental value addition in the wBTC integration is liquidity creation. The blog echoes that,

“WBTC will help bring greater liquidity to the Ethereum and decentralized finance (DeFi) ecosystems, and to decentralized exchanges (DEXs).”

Maker users and new prospects interested in generating Dai with their Bitcoins will basically leverage the wBTC ‘bridge’ to use Bitcoin on Ethereum DeFi’s. They can simply do this by registering on Coinlist and use the platform’s features to wrap Bitcoins and send it to a compatible wallet. These digital assets will then be used in the creation of wBTC vaults within the Maker ecosystem to generate Dai tokens.

Currently, the wBTC market cap is over $10 million despite being in existence for only a year. It also seems this digital asset is picking up well within the Maker Protocol; around $32,000 worth of Dai tokens have already been minted based on a wBTC collateral according to DaiStats. The blog also added that Maker’s ecosystem is quite dynamic which means this DeFi could add more collateral assets in the future,

“The flexibility of the Maker Protocol means that almost any kind of asset that can be tokenized can be added as collateral in the system, so long as it has appropriate risk parameters and is approved by Maker Governance.”

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