RSK has released a new and radically revised version of its two-way peg for swapping BTC between the Bitcoin and RSK Networks. Powpeg, so named because it’s a Proof of Work (PoW) peg, enables BTC to be locked into a multisig address, and a corresponding amount of RBTC to be minted on RSK. Once issued on the RSK network, RBTC can be used to mint stablecoins, and for borrowing and trading.
Powpeg essentially works as a non-custodial option for converting BTC, given that the mechanism is controlled by a dozen signatories, using a ‘vetocracy’ that prevents collusion. This makes for a more decentralized system than that deployed by EOS, for example, with its Block Producers.
Peg in, Peg Out
Under the new system RSK has introduced, users wishing to create RBTC must peg BTC into a specific multisig address on the Bitcoin chain. An SPV proof that the funds have been locked is generated and sent to a bridge smart contract. Upon receiving the proof, the smart contract issues the same amount of RBTC on the RSK chain. This is how users peg in with Powpeg, and to peg out they simply reverse the process.
The Powpeg system RSK has devised has analogies with Blockstream’s Liquid sidechain, but provides greater decentralization in that ‘Pegnatories’ are unable to censor transactions or deleteriously affect the network. With strong assurances in place in terms of transaction finality and integrity, users will be able to mint RBTC in confidence, which should boost the total number of bitcoin circulating on RSK.
Bitcoin Defi Shows Record Growth
Despite Ethereum having caught headlines for the value of crypto assets locked into defi protocols this year, the real story has been about the growth in tokenized BTC. Pegged assets such as WBTC, renBTC, tBTC, and sBTC have all seen their market cap expand rapidly, as bitcoin has been put to use on Ethereum – and on Binance Chain and TRON too, where wrapped versions of BTC are available.
In addition, yield farms have emerged that are focused on boosting the utility of bitcoin-based defi. The latest, Badger.Finance, launched its liquidity mining program on December 3, enabling users to stake tokenized BTC such as renBTC-CRV as well as pooled versions of BTC that are issued by Harvest.Finance. 21 million BADGER tokens will be mined in this manner, matching BTC’s supply, before a rebase token that’s pegged to the price of BTC, known as SETT, launches in a fortnight.
RSK, meanwhile, has been doing its bit to build out its defi ecosystem, and to increase the ways in which BTC can be used to generate yield. This year, Money on Chain launched its BTC-collateralized stablecoin platform on RSK, and Sovryn has introduced a service for BTC-based borrowing and lending. RSK’s end goal is to make its network the natural home for bitcoin defi, building on the strengths of being anchored to the Bitcoin blockchain, with which RSK is merge mined.
The release of Powpeg is a crucial step forward in eliminating centralized or semi-centralized chokepoints, to ensure that BTC can enter the defi ecosystem without the need to pass through a custodian. Once RBTC has been issued, RSK users can look forward to accessing services that mirror those available on Ethereum, with the added benefit of lower fees and higher throughput.
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