Ethereum Becomes Bitcoin’s Largest Sidechain Despite Debates
The Ethereum (ETH) network now has more Bitcoin (BTC) held in reserves compared to the Lightning Network, based on on-chain statistics. Duri9ng the publication, Wrapped Bitcoin (WBTC) has close to 4,000 BTC or $34.7 million held in reserves. On the other hand, the Lightning Network has only 925 BTC or $8.3 million.
Recently, several people on Twitter congratulated the Ethereum network for being Bitcoin’s largest second layer or unofficial sidechain. And this is because the Total Value Locked (TVL) for BTC-pegged ETH tokens exceeded the Lightning Network as well as Blockstream’s Liquid platform combined.
Looking at the statistics on Defi Pulse, a web portal, the Lightning Network has a TVL of about 925 BTC lately. With that, this indicates that the Lightning Network reserves hold approximately 0.01% of the overall BTC in circulation. Since May 7, 2020, the TVL on the Lightning Network platform has held about $8 to $9 million. But before that, it has about a million dollars less than the current TVL on April 28, 2020.
Aside from that, the BTC-pegged ETH tokens dubbed as Wrapped Bitcoin have seen an enormous demand lately. As of now, about 3,900 BTC are held in the WBTC reserves. With the recent exchange rates, there is about $34.7 million worth of BTC held. Moreover, the demand spiked massively over the past week and a half.
For example, on May 11, 2020, WBTC’s TVL only held about $11 million worth of BTC. Following that date, the TVL for the BTC-pegged Ethereum token surged significantly. And it is now capturing 4x more than the LN platform.
BTC-Pegged ETH Tokens
More on WBTC, the Ethereum network also has some other BTC-pegged ETH tokens. Also, the protocol has more tether (USDT) than the OMNI Layer Network. Aside from tether, a vast majority of the crypto economy’s stablecoin such as DAI, USDC, TUSD, and PAX all leverage the ETH network as well.
Despite that, the high number of interests in people using Ethereum for stablecoins and BTC-pegged ETH tokens using the ERC20 standard, ETH co-founder still has some concerns.
Someone commented on Twitter on how it’s 2.5x more BTC on Ethereum compared to Blockstream’s Liquid project. And Vitalik Buterin, EtH co-founder, answered, “I’m worried about the trust models of some of these tokens.
He continued, “It is disheartening if there ends up being $5b of BTC on Ethereum, and the keys are held by a single institution.”
Buterin did not reveal which project he was talking about. However, a lot of people assumed that it was all about WBTC. The project WBTC does have a custodian. And the company Bitgo secures its reserves.
The company also offers a clear web portal. It enables people to verify custody Bitcoin addresses against the TVL among WBTC’s coffers. As the Lightning Network receives a fair share of criticism over the years, Blockstream’s Liquid has been criticized by the community too.
Recently, Blockchair Nikita Zhavoronkov tweeted about the issue, “Ziya Sadr asks if an Iranian company may become a Liquid Functionary, (Blockstream CEO Adam Back) tried to dodge the question. While the Terms of Service on their website gives a clear answer: NO.”
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