Hold onto your hats, crypto enthusiasts, because there's a whirlwind brewing in the world of Aave and Coinbase Wrapped Bitcoin (cbBTC)! Aave, the Ethereum-based lending protocol, is seeing a surge in cbBTC thanks to a shiny new incentives program. But while this is like a party on the blockchain with increased liquidity and adoption, there’s a twist to this tale that could leave some users biting their nails.
Imagine this: a treasure trove of rewards waiting for you on Aave's platform through their Merit program. This program is designed to sprinkle some crypto fairy dust on users who are actively participating. Whether it's holding stkGHO, Aave's staked stablecoin, or borrowing USD Coin (USDC) on Coinbase's Ethereum-based layer-2 protocol, Base, there's something for everyone!
Back in mid-August, the Aave community got together to roll out the Merit incentive program on Base, aiming to boost Aave’s presence in the crypto universe. Fast forward to mid-September, and Coinbase was gearing up to launch cbBTC. Aave was quick on the draw, proposing to bring this wrapped token into their ecosystem.
Now, here's where it gets juicy. In just a month after cbBTC hit the scene, a service provider from Aave spilled the beans—Aave was holding about 56% of all cbBTC out there! They also let slip that a new Merit program was in the works for cbBTC, where users could earn rewards by using cbBTC as collateral to borrow USDC, swapping USDT debt to USDC, or making the switch from BitGo’s Wrapped Bitcoin (WBTC) to cbBTC.
Since this new cbBTC Merit program kicked off on October 24, Aave's seen a dazzling increase of 2,700 BTC in cbBTC—worth a cool $200 million! This surge brought the total cbBTC on the network to 7,500 BTC out of a circulating 11,885 tokens. With cbBTC now standing as the fourth largest asset for borrowing USDC, it's causing quite a stir, accounting for 12% of all collateral.
But here’s the kicker. IntoTheBlock, the market analytics wizards, have pointed out a risky little dance that’s happening. With users playing the “lend cbBTC -> borrow USDC -> lend USDC” game, there's been an increase in recursively deposited USDC debt. This could spell trouble because if a USDC whale decides to leave the party, users might find themselves unable to repay their loans in time.
So, while the cbBTC surge is exciting, it’s a reminder that in the world of crypto, you always need to keep an eye on the exit door. Stay savvy, folks!
