I said it and it is a bold claim
Let's get into it.
If you are using BTC on DeFi (or CeFi, we won't debate that here) you have a few options.
(Marvel Comics, THOR #1, 2007, Coipel)
Option #1:
Use ThorChain and native BTC
Option #2:
Use wBTC, renBTC, BTCB or some other custodial wrapped BTC where you need to trust the entity that issued the token, which is effectively an IOU for real Bitcoin. I am pretty sure that all of these services are fairly centralized. BTCB is bitcoin held by binance for example.
Option #3:
Use sBTC in the near future on the COSMOS ecosystem.
I wrote this yesterday all about synthetic assets on THORChain. If you want more background on synths, you can find them in that post.
What is the difference?
The difference is how we get the IOU. sBTC is minted on THORChain and your Bitcoin is held by the THORChain protocol. This is a decentralized protocol that is able to issue you a synthetic BTC (sBTC) that is 100% backed and held by a decentralized protocol.
Binance is a big company. There is a kingpin (CZ). A lot can happen that could turn BTCB into a worthless IOU. That is not to say that BTCB is going to go to zero... I highly doubt that and do trust binance with funds, but BTCB is issued by binance as a 1:1 representation of the BTC that they hold that belongs to you in theory. They are holding the BTC. It is their keys and therefore it IS their Bitcoin. The BTCB is valued the same as BTC simply because binance has proven to be a good custodian.
Wherever there is a central point of failure, you need to trust that entity with your Bitcoin. With sBTC, it is different. It was minted with your keys and a decentralized protocol is holding onto the assets. You are trusting the security of the protocol, but there is no central point of failure. CZ can fake his death and leave with trillions of dollars in the biggest rug pull of all time. I doubt he would do that, but he could.
DeFi is going to be flipped on it's head
(marvel comics)
sBTC will be able to move into DeFi spaces on the COSMOS ecosystem. In my opinion, this is going to make the COSMOS ecosystem (and THORChain) the number one for TVL in DeFI. Between the ability to use native BTC on ThorChain and to create sBTC on ThorChain and use it in the COSMOS, I think these superior methods will catch on like wild fire.
Osmosis currently has 1.6 billion dollars locked on it WITHOUT BTC, ETH, or BNB as currencies available (1, 2 and 4 respectively in market capitalization). When THORChain synths are able to travel in to COSMOS, OSMOSIS TVL should see a big spike as 3 of the largest coins will now be available as sBTC, sETH and sBNB. Of course, any asset on THORChain will be able to be synthesized and pooled (in theory). sDOGE, sLTC, sBUSD, sBCH are just a few more options we will be able to see in the coming days.
What is cool about this?!
In order to mint synths, the native asset needs to be pooled on THORChain. 1 sBTC would be backed by the RUNE/BTC pool with 0.5 BTC and $19,500(ish) of RUNE (at the time of writing).
The sBTC can then be sent to the COSMOS and likely OSMOSIS which is the biggest exchange over there. Minting one sBTC locks up 1 BTC worth of TVL on THORChain (50% BTC / 50% Rune). The sBTC then moves over to OSMOSIS and locks up 1 BTC on OSMOSIS.
If it was possible (and it is not due to how many synths can be minted... but go along with me here) to mint 21,000,000 sBTC, and then all of that sBTC were to get locked on OSMOSIS... we would have 42,000,000 BTC locked in DeFi!!!
What I am getting at is that not only is sBTC the superior IOU for BTC, but by minting sBTC, and locking it somehwere in the COSMOS, we are really doubling the amount of TVL in the DeFi space.
With wBTC or BTCb, the BTC itself is just locked in a vault somewhere and the IOU gets locked up as TVL. 1 BTC of TVL / IOU. With sBTC, you get 2x the TVL because the IOU is minted through TVL. Pretty cool stuff!
What to take away from this
I think that the future of DeFi is COSMOS and THORChain. The synths that we will be able to mint on THORCHain and use on the COSMOS are superior to wrapped versions and will effectively double TVL. I am assuming when all of this is ready to fly that OSMOSIS is going to establish itself as one of the biggest (if not the biggest) DEX. THORChain will obviously be another major DeFi player in it's own right as much of the value coming to OSMOSIS will be coming from value locked on THORChain.
This is still to come as synths on THORChain are a very new development and still don't have much of a use case. Staking vaults for synths are coming to THORChain and synths will be able to be used on platforms like OSMOSIS in the not too distant future.
I think for anyone concerned about "not your keys, not your crypto" will be pretty pumped up about synthetic assets such as sBTC and will likely migrate funds in that direction.
Thank you for reading and I look forward to your comments.