Bitcoin on the Ethereum Blockchain
Sounds absurd, but it is so: In the meantime there are over 150,000 Bitcoin on Ethereum. Converted from Ethereum this number corresponds to a value of over 2 billion USD.
How can Bitcoin be on Ethereum?
Until some time ago, Bitcoin and Ethereum were two separate crypto-ecosystems that coexisted. Ethereum is generally smaller, but offers more practical applications. Bitcoin was and still is a robust protocol that is less usable but undisputedly has the highest capitalization.
Now it is possible to transfer crypto currencies from one system to another. The goal was to enable Profit Secret owners to participate in decentralized financial protocols. These often offer high profits, but are found almost exclusively on the Ethereum platform.
What is decentralized financing?
Decentralized financing is in contrast to the traditional financial market. It is based on money issued by the state and is therefore centralized. In contrast, decentralized financing is more flexible than traditional structures. Although it is still, by comparison, a „delicate plant“, this new area has been growing steadily since this year. In the meantime, donors around the world have already invested crypto-currencies worth USD 11 billion in decentralized financing.
This is how Bitcoin „came to“ the Ethereum platform
In order to bring the Bitcoin to Ethereum, a „synthetic representation“ of the Bitcoin is created there. This means that the „original“ Bitcoins are exchanged for a version of Bitcoin reproduced on the Ethereum platform.
A well-known example is „Wrapped Bitcoin“. Users transfer their Bitcoin to certain Smart Contracts and receive the Wrapped Bitcoin (WBTC) in return. The Wrapped Bitcoins in turn are secured by the „genuine“ Bitcoins paid in, i.e. they retain their value. In addition, the wrapped Bitcoins can be used as ERC-20 tokens on Ethereum.
Another similar example is tBTC. This works like the wrapped Bitcoins, but the Bitcoins are not stored centrally, but rather trustlessly and anonymously on the network itself.
What happens to the synthetic Bitcoins?
The synthetic Bitcoins can then be used by users on the Ethereum platform according to their wishes. One of the options is to make them available for decentralized financing. The donors receive fees for this. Thus, in addition to the general price increase, one can still have one’s Bitcoin work for oneself.
Later, the user can then reverse the process if desired and exchange his synthetic Bitcoin back for „real“ Bitcoin.