Posted 2 years ago | by Ben Armstrong
RSK launches Ethereum Bridge – Bitcoin DeFi Coming?
Last week the RSK project announced the creation of Token Bridge which is an interoperability protocol between the Bitcoin-pegged sidechain and Ethereum. Bitcoin DeFi could be coming.
RSK is a smart contract platform that is a sidechain to the Bitcoin (BTC) blockchain. It uses a wrapped version of Bitcoin, rBTC as its native token. Users acquire by depositing BTC into RSK’s bridge wallet working as a two-way peg.
A similar bridge has opened for the Ethereum blockchain, allowing a two-way transfer of any token between the RSK and Ethereum ecosystems. As a result, Ethereum users can transact with wrapped representations of RSK’s rBTC and RIF tokens to gain indirect exposure to the Bitcoin ecosystem.
RSK is Working on Connections for DeFi
RSK users are exposed to Ethereum-based stablecoins such as DAI, and this token ecosystem is growing all the time. DeFi is mostly limited to Ethereum and its token ecosystem, which surpassed $1 billion in locked assets recently.
Through the complex lending system, ETH is used as the main collateral asset to generate the DAI stablecoin. Bitcoin-based DeFi is considered DeFi’s next frontier. MakerDAO’s founder Rune
Rune Christensen, MakerDAO’s founder, said interview with The Spartan Group on November 2019:
“When it comes to a solid decentralized collateral, I think ETH is king. The only thing that can come close to ETH in terms of its importance is of course Bitcoin.”
Bitcoin May Have Room to Grow in DeFi
Since Bitcoin has very limited smart contract functionality, this severely limits the most valuable token in the world of DeFi.. According to Christensen, porting Bitcoin into Ethereum would allow for it to be used as collateral and suggested existing solutions such as Wrapped BTC (WBTC).
Instead of being a decentralized atomic swap, the WBTC transfer process is custodial, “it is essentially impossible to build more decentralized cross-chain solutions.”
Christensen added the only available solution is to have many providers of Bitcoin on Ethereum:
“The way that we have to try to solve that with Maker is rather than just for WBTC to be the sole source of Bitcoin on Ethereum, we want to have hundreds of different versions of wrapped Bitcoin.”
The release of RSK’s Ethereum bridge could a step toward Bitcoin-collateralized DAI living on the Ethereum network.
Maker is the biggest decentralized stablecoin provider but not the only one. There is Money on Chain, which is a similar project built on RSK and uses rBTC for collateral being interest in using the RSK bridge to enter the Ethereum ecosystem.