Wrapping Bitcoin to lend and stake HIVE

in #hive-167922last month

Yesterday I played around a bit with WHIVE, swapping it to ETH, trading that for Bitcoin and finally bought back HIVE. And ended up with more HIVE than I started with (read it here: https://peakd.com/hive-167922/@partitura/swapping-whive-around).


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@taskmaster4450 wrote in this post about possible usecases for WHIVE. One idea he mentions is to use bitcoin as a collateral to take out a loan in WHIVE, swap that to HIVE, stake it and use it for curation. That way you can actually use bitcoin to earn from the inflation of staked HIVE plus the earnings from curation.

Today I actually put that idea to the test. The first step is to figure out how to wrap bitcoin and get (or create) WBTC. Of course I could buy WBTC directly from various exchanges, but I wanted to do the whole trip.

As far as I could find there are only a few exchanges or places where you can actually wrap BTC to get WBTC. One of those places is https://coinlist.co. And of course, you first have to create an account.

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It requires full KYC, so if you're not willing to do that, the road ends here.

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Once you are approved, you can start trading. I bought some bitcoin on bitvavo (as that is the easiest and quickest way to buy crypto from fiat if you're Europe bound), created a deposit address on coinlist for bitcoin and send it there. The bitcoin-page of the coinlist-wallet has a button that says "Wrap"

Pressing that buttons leads to a screen where the amount of bitcoin to be wrapped can be entered.

Pressing 'Review' leads to a further screen where the transction can be confirmed. And, voila, I have wrapped my bitcoin.

I then clicked the "Withdraw" button and entered the address of my Metamask-wallet. And sure enough, after a little while the WBTC turned up in my Metamask-wallet (though I first had to manually add 'WBTC' as a token to be viewed in the Metamask-wallet). Then I went to https://oasis.app. Two ago I already created an ETH-vault to play around with DEFI-loans, so my overview looks like this:

Pressing on he plus-sign in the left hand part of the screen give to possibility to create a new vault.

I choose WBTC and pressed "Continue". The Vault then needs to be set up and the permission to oasis.app to spend the WBTC has to be signed.

To save some money on the fees I choose the slow transaction rate. Metamask told me I had to wait for more than 20 minutes, yet the transaction was complete in less than two. In the next screen I had to choose how much of my wbtc I wanted to lock in the vault and how mucht DAI I wanted to generate with it. It's obviously not possible to take out a loan in WHIVE directly, so I have to go through the intermittent phase of DAI. I choose to play it rather safe and only take out 100 DAI. That makes the collateralization rate close to 300%, which means that the price of bitcoin shall have to drop to $5930.30 before my vault is liquidated. Not impossible but not very likely at the moment.

After clickking on the continue-button, I got one more chance to review my choices before actually opening the vault.

After opening the vault the 100 DAI is present and available for action in my Metamask-wallet. With uniswap that DAI can be converted into WHIVE.

The first transaction failed, with status "Fail with error 'UniswapV2Router: INSUFFICIENT_OUTPUT_AMOUNT'. " No idea what that means, exactly, so I tried a second time, only this time for 250 WHIVE. And that transaction went through and there were 250 WHIVE in my Metamask-wallet.

Nearly there. Now the WHIVE must be converted to HIVE and delivered to my HIVE-account. To unwrap WHIVE, I went to https://whive.network website and entered my Hive username in the "WHIVE to HIVE" box.

That gave me a deposit address that's valid for 7 days, linked to my HIVE-account, so feel free to use this address in your own experiments... :-). The WHIVE generated out the DAI can then be sent to this address and it will be deposited in my HIVE account. And then it is a simple action to power it up.

And there you have it. I borrowed powered up HIVE with bitcoin as collateral. It is not a fast proces. It took me several hours to work my way through all the steps outlined above. A next time will be quicker, though, because I do not need to generate a new vault. I can just add new WBTC to my existing vault.

With the curation rewards I can pay off the debt. Admittedly, that will take a while with only 250 Hive Power. However, as I have a bit more, I should be able to pay off the debt in one or two weeks. And if I buy more bitcoin in future, I can do the same proces again. And grow both my bitcoin ánd HIVE holdings simutaneously. How cool is that?

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Thanks for the post, this is what I've been looking for :) Although the KYC does not make me happy :(

Thanks, but I want to wrap some :)

Sorry to bother you,
I've tried adding some liquidity for WHive-DAI pair
the transactions (LOL 3 of them actually) were confirmed but no liquidity changed
https://uniswap.info/pair/0x416c3a7fe2a9e8cc82c59eda30ef2c1c4e49b459

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The stats page (.info) needs some time to update.

Yeah, me too. But the liquidity on pair wHive-DAI is very low. I'm afraid it's so low I could loose all my funds

Perhaps there are other merchants in the WBTC-world who swap bitcoin without KYC? I did not specifically look for that.

Aye, but as far as I know, all custodians require kyc for wrapping.

I'm not really a finance guy that much. How does collateral work here? Do you have your BTC on the use or are they stored until you'll pay back your debt?

The BTC is locked up. If you want to use the btc voor something else, you'll have to pay back the debt first.

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Two great explainers that should be cleaned up, formatted and published onto LeoPedia.

Posted Using LeoFinance

I have no access to LeoPedia, perhaps @khaleelkazi can help here?

It took me several hours to work my way through all the steps outlined above

Quicker next time, but still seems like far to much effort!

Nice write up though, if I have a day free at some point I might give it a shot :)

Actually, the second time I did this took a lot longer than the first time, because of some glitch in the protocol that prevented me from taking out a loan. After a day or so, the glitch wasn't there anymore.
If you have some spare BTC lying around you should certainly give it a try. Ity almost feels like playing to acquire some HIVE in this way.