Wrapped Bitcoin Using Hive: How That Would Change Things
By now, we all know the issues with Bitcoin The network is slow and, at times, expensive. This was addressed by the development of the Lightning Network Here we have a transfer of value layer that is designed to take the pressure off the main network.
The problem with Lightning, according to many, is the lack of infrastructure incentive. Bitcoin was developed with the miners being the ones who receive rewards. That is the only payout from the blockchain.
Hence, all new bitcoin goes through the miners first.
Lightning does not have any incentive other than transaction fees. This means the node operators are dependent upon themselves to turn a profit. It is a model that could work when activity is flowing and fees are high. However, does a small node operator have a chance? This is something that many question.
This network depends upon economies of scale. Obviously, the node with major liquidity and massive traffic are going to get ahead. This means others will seek to tap into this. However, who are the ones that are operating these nodes?
Many envision a day where there are a few major node operators. This makes sense because of the economic breakdown. Unfortunately, since this is another layer, it has nothing to do with the base layer decentralization.
In short, are we looking at a time when some of these node operators end up falling under KYC requirements.? Could we see major players entering and operating nodes understanding they can monetize in other ways? Again, this point of concern was raised.
Hive As The Transfer Layer
We know that Hive offers fast and feeless transactions. This is the opposite of Bitcoin. Could the two be joined to set up Hive as a transfer layer for this coin?
It is something the SpkNetwork has discussed on occasion. Their view is that Hive could operate as such if a wrapped version of BTC was placed on a sidechain. Here we could see a massive change in how things operate.
Wrapped BTC could use Hive to transfer value and settle the transactions. Under this circumstance, HIVE (or HBD) could be used to settle the transaction, moving the value from one wallet to the other. This would take place behind the scenes as the user would move it like any other token.
Like Lightning, the idea is to add capability for token utility that expands beyond the main network. Under this scenario, bitcoin would effectively be riding on top of Hive.
The advantage is there is an incentive system in place for Hive. The node operators already are rewarded for conducting the transactions. A sidechain that models a similar concept, which is being constructed, would provide what Lightning doesn't. Transaction fees would be part of the equation but not the entire story.
This is the power of smart contracts. It is something that opens up all kinds of opportunities for Hive, including being the transaction layer for Bitcoin.
Hive To Bitcoin Access
Another major advantage to this is that Hive would get direct access to Bitcoin. Right now, it takes some effort to get from the Hive coins to BTC. With the crackdown on CEX, this is not likely to get any easier.
To start, the Hive Backed Dollar (HBD) is likely going to be banned from most exchanges, at least in the developed world. As regulation comes down, it is probably that algorithmic stablecoins will be banned. That puts HBD operating in the world of DeFi.
Another factor is the centralized exchanges are coming under attack. We all know the situation with Binance. It is likely to continue. Exchanges will ultimately be controlled by the same financial entities that control them in the traditional markets. Regulations favors the powerful incumbents.
In the end, this will only pertain to cryptocurrency transactions relating to fiat. We will likely see the crypto-to-crypto transactions handled through liquidity pools and DEX.
Hence, getting direct access to Bitcoin is an advantage. Even Gary Gensler and the SEC is not bothering with that network. That means BTC could be the coin that is used to get into and out of fiat.
Naturally, this could change as regulation comes down and governments adopt their stance on cryptocurrency. That said, the safest bet at this point appears to be Bitcoin in this regard.
That isn't to say other tokens couldn't also be wrapped on this system. However, when dealing with the big one, we are opening up access that does not come with something like Litecoin.
In Conclusion
Is this something that will put Hive at the top of the cryptocurrency market? Absolutely not.
What we are dealing with is another potentiality that adds value to the Hive ecosystem. The future of Hive lies in the cumulative impact of all the development that takes place.
We have to always bear in mind that Hive is an access token. Anything that generates more transactions on Hive is helping push value to the network and, hopefully, the coin.
It is the circular economy that so many talk about. This is another addition that could enhance the offers of Hive.
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It is great that SPKNetwork is working in the direction of accessing Bitcoin through Hive on a sidechain, these expansions all strengthen the Hive network as well as give us the decentralized options to transform cryptocurrency with the exclusion of the CEXs.
It is great they are working on it. We will see when it comes into being. I know there is a lot being worked upon but, for the moment, it is on the agenda. It might be into the fall and nearing the end of the year before it can get some serious attention.
This is all a process.
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That is an excellent idea! Is anyone developing something like that yet that you are aware?
SpkNetwork is working on it.
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That is an excellent idea! Is anyone developing something like that yet that you are aware?It is great that SPKNetwork is working in the direction of accessing Bitcoin through Hive on a sidechain, these expansions all strengthen
Joining BTC and HIVE and benefitting from each other's strengths. Blessing to the SpkNetwork team. Hopefully, such an idea would materialize in months to come. I think you mentioned three problems that will be addressed once this idea has been implemented:
It is a major benefit to all of us.
We will have to see what happens.
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Yes, I am excited too to see the impact of such a change.
I need to write about this. The Lightning people think they will wrap "shitcoins" and "stablecoins" (many of them consider these to be the same) on Lighting.
The reality is Lightning is the worst place to wrap anything.
I'm pretty sure we'll be wrapping BTC before you're usefully wrapping anything.
Says Hive's resident Lightning expert.
I hope I captured the essence of Lightning and was correct in my assessment.
As for the point of your comment, I do recall you getting into a tiff and telling they that they have a "shit network". So yeah we will likely develop the wrap before they do.
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Integrating Hive as a transfer layer for Bitcoin through a wrapped version on a sidechain could address the issues of slow transactions and high fees. While the Lightning Network lacks infrastructure incentives, Hive's existing reward system for node operators could provide a solution. This is a direction where Hive could capitalize on its strong features, hopefully we'll see more projects deriving from such integrations.
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This will be a great feature for Hive to have. It would solve the issue of high fees for transacting BTC and the shortcomings of the lighting network. Many things can be built on top of it.
Isn't btc already wrapped within hive engine?
There might be a version on there.
What is being discussed is much more expansion and likely will allow for more development tied to the wrapped token created.
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I think you are referring to SWAP.BTC which I am not sure whether it is kept in a wallet similar to how a centralised exchange keeps BTC for its customers or it is built into the second layer and is created for each user as their own quasi wallet. I have not really asked how it works or gone to ask the developers of the second layer.
Is it decentralised? I am not good with code so cannot for the life of me be 100% or even 10% sure how it all works. But I am thinking what you as saying is already within hive engine.
Interesting to read thank you for sharing!
liquidity is the key the more liquid a market is the more investors it attracts
Hive Engine has the swap.BTC token already… I can deposit and withdraw BTC from there, withdrawals just require like .01 to withdraw so that’s why I use the swap.LTC
There always tons of ideas yet to be roll on hive blockchain time will tell how massive hive ecosystem will be in the marketplace years from now.
You can already withdraw Bitcoin directly from Hive in one process. Using a service like SimpleSwap or using the wrapped version of Bitcoin in Hive-Engine.
This is an interesting perspective. Hive as a value transfer layer for Bitcoin would theoretically alleviate the bottlenecks in the Bitcoin base layer that make it pretty much unusable for micropayments, let alone daily transactions, especially since fees are higher than PayPal.
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