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WBTC weekly issuance surpasses Bitcoin mining output! Bitcoin system may be in danger

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WBTC weekly issuance surpasses Bitcoin mining output! Bitcoin system may be in danger

Last week, the generation of Bitcoin cross-chain asset WBTC on the Ethereum blockchain saw a significant increase, with the amount even surpassing the mining output of Bitcoin for that week. While this phenomenon may be beneficial to the Ethereum ecosystem in the short term, it is expected to have a negative impact on the Bitcoin system in the long run.

Explosive Growth of WBTC

The ERC20 version of Bitcoin (WBTC) contract generated 6,785 bitcoins last week, while only 5,738 bitcoins were mined that week, indicating that bitcoins are entering the Ethereum blockchain at an astonishing rate. Data shows that at the time of writing this article, around 29,000 BTC are locked in the WBTC sidechain, with a market value exceeding 300 million USD.

The main advantage of locking BTC and converting it to WBTC is that they can be used in a wider range of DeFi applications, such as minting DAI, serving as a value storage tool on the Ethereum chain, or participating in liquidity mining (such as Curve), among other uses. FTX CEO Sam Bankman-Fried also confirmed a significant increase in WBTC liquidity on FTX's over-the-counter trading platform.

Adverse Effects on the Bitcoin System

With the growth of the DeFi sector, more attention is being paid to the future of cross-chain assets. In addition to WBTC, more second-layer (Layer2) cross-chain protocols are actively being developed, hoping to move bitcoins from the Bitcoin blockchain to the Ethereum chain, such as renBTC issued by Ren Protocol, which also saw a surge in trading volume last week.

However, critics point out that while this can bring diversity to the Ethereum ecosystem and overall value enhancement, it may have negative implications for the Bitcoin blockchain.

The reason being that the current block reward is 6.25 BTC and will further reduce to 3.125 BTC by 2024, meaning that block rewards will decrease while transaction fees become increasingly important for miners. If a large portion of BTC is locked in sidechains like WBTC, renBTC, or pBTC, the transaction activity in the Bitcoin blockchain will significantly decrease, ultimately making it difficult for Bitcoin miners to sustain.