Transacting BTC on the ETH Network?

This one is confusing, hold on tight!

Start from the Beginning?

Since original conception of Bitcoin, there has been "companion protocols" which allow for greater levels of usability. Lightning Network allows for much faster and cheaper transactions. While Liquid Network supports the traders in the space.One of the many benefits of decentralized and open source software - global development! An interesting trend is developing among Ethereum Maximalists, and this blog will serve as an investigation into their recent behavior.. 


This is the ecosystem where tokenized protocols can thrive. ETH is much more flexible and dynamic with the ability to support and develop dApps. Programmable interfaces between users allows for Decentralized Finance (Defi), which is an intriguing opportunity.

An interesting application of these technological advancements is the ability to transact/trade in psuedo-Bitcoin. Its completely possible to "Tokenize Bitcoin" and loan it out via the diverse variety of emerging defi projects. One could compare this to the idea of loading a giftcard with native currency. You're still make the purchase in the intended native currency (Bitcoin/dollars), but now you've got a unique way to transact/store/spend (ETH/Giftcard).

  • Another way to think about this concept is that you are getting all the benefits of the ETH network, but the value being exchanged is in Bitcoin. All of this Bitcoin is now called "Off-Chain Supply".

Lets Look at the Data:

The trend is clear! There has been an uptrend in the total supply of Bitcoin which has been held in "off chain" applications since June 2019. This is an interesting observation because it shows a net trend of liquidity/interest out of the Bitcoin network and into the ETH network.
I think that this is only the beginning for collaboration between the two networks. As this market grows, more and more dApps will become available to allow for seamless interaction between the two. Anyone can argue that Bitcoin's features as a means of transaction are lack luster compared to modern tech. This fixes that.
This figure tells a more cumulative and holistic story by investigating the relative distribution of BTC within decentralized apps. There are many different off chain applications for BTC, and the proportion of them changes as the projects make headway. The first movers affect is very powerful!

Wrapping it all up:

I just wanted to differentiate between the progressions which have been happening for Bitcoin. First is the companion protocols like Lightning Network which are created internally by the community for use within the same project. Second is the off-chain protocols which are externally derived and allow for outside applications of Bitcoin. There is a large conceptual difference between the two and which is important to understand - but the commonality is a large benefit and progressive development of the projects to allow for synchrony and mutual success.


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