DeFi analyst David Hoffman thinks the rise of Bitcoin-pegged assets on Ethereum is a bullish development for both Ethereum and BTC.
Crypto podcaster Luke Martin focused two of his shows this week on decentralized finance, noting that there’s now about $1 billion worth of tokenized BTC now living on Ethereum.
Hoffman, the chief of operations at RealT, a tokenized real estate platform, tells Martin that Wrapped Bitcoin will provide risk-averse Bitcoiners an opportunity to profit off their holdings.
“Bitcoiners as a culture are generally much more risk averse than what we see in the shenanigans in DeFi right now. DeFi and Ethereum are all about experimentation and pushing the boundaries, seeing what we can really do, and Bitcoiners are really scared to risk their Bitcoin, because one of the value propositions of Bitcoin, built into the hard cap of Bitcoin, is ‘don’t lose it.'”
But Hoffman says that Bitcoin can become financialized on Ethereum and integrated with decentralized finance (DeFi) protocols, providing those conservative Bitcoiners profit opportunities.
“With WBTC, you can submit your BTC into MakerDAO or Compound, and then you can draw debt based off of that, and so this is really advantageous for people who don’t want a taxable event on their Bitcoin, but they do want to leverage some liquidity or some of that value in that Bitcoin.”
Hoffman notes that Bitcoin holders can take the next step with Compound, which offers the ability to lend out Wrapped Bitcoin to others who will pay interest denominated in WBTC. He also notes that it’s “totally on the cards” that people will be able to yield farm with Wrapped Bitcoin in the future.
Hoffman acknowledges that using BTC on Ethereum is currently more risky than putting Bitcoin in the crypto wealth management firm BlockFi, many Bitcoiners’ preferred method. However, he believes that in the future, it will be equally or even less risky to put Bitcoin on Ethereum, noting that BlockFi has know-your-customer (KYC) requirements.
Overall, the RealT executive thinks tokenized Bitcoin is good for the values of both BTC and ETH.
“I think Bitcoin on Ethereum is bullish for Bitcoin because that’s a Bitcoin supply sink. It’s also bullish for Ethereum because economic activity is inherently bullish [for] Ethereum. It’s bullish [for] both.”
He also thinks Ethereum is Bitcoin’s long-awaited second layer.
“Ethereum is Bitcoin’s L2 that [Bitcoiners] wish that or think that they are going to get. As soon as they just come to terms with the fact that Ethereum is the L2 that they’ve been hoping for and just come to terms with the fact that all of their hopes and dreams about Bitcoin’s L2 are going to be fulfilled on Ethereum, the easier this is going to be.”
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