MakerDAO is now accepting wrapped Bitcoin (WBTC) as a collateral asset in the MakerDAO (MKR).
According to the announcement, the inclusion of WBTC among collateral assets will “help bring greater liquidity to the Ethereum (ETH) and decentralized finance (DeFi) ecosystems.”
Bitcoin holders can now turn their BTC into WBTC (bringing Bitcoin to the Ethereum blockchain), and then use it to generate Dai.https://t.co/STskGXQeff
— Maker (@MakerDAO) May 3, 2020
Maker community deliberated on the merits of adding WBTC
WBTC’s addition is considered the fourth collateral type to be approved in the Maker Protocol. Other previously approved assets that can be used as collateral are:
- Basic Attention Token (BAT)
- USD Coin (USDC)
These assets are used to open Maker Vaults to generate the Dai stablecoin.
The idea of adding WBTC was first floated to Maker’s community back on April 23, 2020. In the discussion, the community also talked about the possible risk parameters if ever the WBTC gets to be added to collateral asset types.
According to the announcement:
“The addition of WBTC means that Bitcoin holders can now turn their BTC into WBTC (bring Bitcoin to the Ethereum blockchain), and then use it to generate Dai.”
The announcement also recognized the importance of the Maker Protocol’s flexibility in accommodating the inclusion of asset types that the community decides to add. The announcement said:
“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.”
Brian Avello, general counsel at MakerDAO, said in the previous discussion about the inclusion of BTC that it is “probably the most obvious addition” to the project.
What are the risk parameters determined for WBTC?
As detailed in the announcement, here are the risk parameters that MKR holders and BTC borrowers have to be aware of:
- Stability Fee: 1%
- Liquidation Penalty: 13%
- Liquidation Ratio: 150%
- Dust: 20 Dai
- Debt Ceiling: 10,000,000
- Auction Lot Size: 1 W-BTC
- Minimum Bid Increment: 3%
- Bid Duration: 6 hours
- Max Auction Duration: 6 hours
As of this writing, Daistats data reflect that 119,539 Dai has already been generated out of WBTC.
This comprises approximately 0.11% of all the Dai generated within the Maker Protocol. The total of WBTC locked in Maker vaults is now at 37.3196 WBTCs.
For users interested in generating Dai with their BTC, they can connect their crypto wallets to Oasis Borrow. This will allow them to lock their WBTC in Maker vaults and generate Dai.
Also included in the executive vote is the Maker community’s proposal to lower the stability fee for USDC from 6% to only 0%.