Is there DeFi for bitcoin?

Yes, on Ethereum.

Nothing has beaten bitcoin over time for returns, but there’s one thing bitcoin can’t do on its own: create more bitcoin.

A smart trader can get in and out of bitcoin and dollars in a way that will earn them more bitcoin, but this is tedious and risky. It takes a certain kind of person.

DeFi, however, offers ways to grow one’s bitcoin holdings – though somewhat indirectly.

For example, a user can create a simulated bitcoin on Ethereum using BitGo’s WBTC system. They put BTC in and get the same amount back out in freshly minted WBTC. WBTC can be traded back for BTC at any time, so it tends to be worth the same as BTC.

Then the user can take that WBTC, stake it on Compound and earn a few percent each year in yield on their BTC. Odds are, the people who borrow that WBTC are probably doing it to short BTC (that is, they will sell it immediately, buy it back when the price goes down, close the loan and keep the difference).

A long HODLer is happy to gain fresh BTC off their counterparty’s short-term win. That’s the game.

In the next article we will talk abou the risks involved.