The decentralized finance (DeFi) protocol Threshold has put forth a bold proposal to merge its bitcoin wrapper token, tBTC, with Wrapped bitcoin (WBTC) in a bid to thwart a potential takeover by Justin Sun. The proposal, unveiled on August 29, seeks to safeguard WBTC amid apprehensions surrounding a potential shift in control over the widely utilized bitcoin wrapper.
Justin Sun Involvement Raises Concerns
BitGo recently announced a partnership with BiT Global, a Hong Kong-based crypto exchange, with the aim of diversifying WBTC’s presence beyond the US borders. However, this collaboration entails BiT Global assuming partial control of the multisignature wallet safeguarding the bitcoin reserves underpinning WBTC.
The engagement of Justin Sun, a polarizing figure in the crypto realm, has sparked concerns within the community, with apprehensions about potential misappropriation of collateral associated with his affiliated projects. In response, Threshold’s proposal recommends replacing WBTC’s current centralized custody framework and merchant-driven minting and burning processes with Threshold’s decentralized custody and permissionless mint/redeem mechanism.
This proposed transition would effectively transfer governance of WBTC to the Threshold decentralized autonomous organization (DAO), which touts a more secure and transparent management structure. Threshold's proposal aims to offer a safer alternative to the current custodial arrangements of WBTC, amid fears of Sun's involvement leading to potential risks and uncertainties.
WBTC, boasting a market cap of around $9 billion, is the most popular bitcoin wrapper token in the crypto market. These tokens, like WBTC, represent bitcoin on the ethereum blockchain, enabling BTC to be utilized in various decentralized finance applications.
MakerDAO Considers Restricting DAI Minting Against WBTC
MakerDAO is currently deliberating on whether to cease minting its DAI stablecoin using WBTC as collateral, in light of the proposed changes to WBTC’s management. BA Labs has pointed out past issues associated with TrueUSD, a stablecoin linked to Sun, indicating operational and transparency issues after being acquired by a Sun-linked group. These issues included the suspension of real-time proof of reserves, price fluctuations, and disrupted redemption services.
BA Labs has highlighted the potential risks Sun’s involvement poses to the new WBTC management structure and recommended that MakerDAO and Spark consider completely offloading WBTC unless assurances are provided about the safety of the current collateral arrangements.
Presently, roughly 10% of DAI’s total token supply of 5.2 billion is backed by WBTC, with MakerDAO’s vaults holding $500 million worth of the token. Furthermore, $289.3 million worth of WBTC is locked up in SparkLend, representing 7% of the platform’s $4.1 billion in total value locked.
Responding to the mounting concerns, Justin Sun has clarified on social media that his role in WBTC is strategic and that he does not possess control over the private keys governing the WBTC reserves. This declaration comes amidst escalating unease within the crypto community regarding the potential ramifications of Sun’s involvement in the management of WBTC.
