Use Cases and Risks With Wrapped Bitcoin on MakerDAO

I made a long-form LeoPedia tutorial and accompanying video explaining what Wrapped Bitcoin (WBTC) is and how it works. In it, I also mentioned a particular use case that was the original reason for me spending the time to learn about WBTC in the first place.

MakerDAO is a lending protocol that I’ve also covered in a previous LeoPedia guide. The protocol allows you to establish a proxied vault, deposit some crypto in it and take out a loan against that collateralized crypto. All possible thanks to the Ethereum network.

One major “problem” with MakerDAO is that it was native to Ethereum only (in fact, it still is native to Ethereum). The issue that people had with lending protocols on ETH is that you could only use ETH or ETH-based tokens to interact with collateralized positions. Many people — myself included — have wanted to setup a vault utilizing Bitcoin to take out a loan.

I personally find Bitcoin to be a much more stable asset for collateralized loans than something like ETH or BAT.

By leveraging WBTC, you can now have a “Bitcoin-equivalent” collaterlized in a MakerDAO vault. My favorite place to establish these vaults and manage them is at oasis.app.

In this clip, I talk about the use cases of this kind of collateralized loan and also some of the risks associated with using both WBTC and MakerDAO.

Show Notes: https://leofinance.io/hive-167922/@khaleelkazi/qlkftrhv

Full wBTC Guide: https://leopedia.io/what-is-wrapped-bitcoin-wbtc/