- Background on Wrapped Bitcoin (wBTC)
- Concerns Over Transparency and Ownership
- Details of the Proposed Offboarding
Sky, the decentralized finance (DeFi) platform formerly known as MakerDAO, announced a proposal to completely remove Wrapped Bitcoin (wBTC) as collateral from its ecosystem. This decision is driven by growing concerns over the transparency and governance of wBTC’s underlying assets.
Background on Wrapped Bitcoin (wBTC)
Wrapped Bitcoin (wBTC) is a token that represents Bitcoin on the Ethereum blockchain, allowing BTC to be used in decentralized finance applications. With a market capitalization of $8.8 billion, wBTC plays a crucial role in DeFi as a collateral asset. Sky currently holds approximately $200 million in loans backed by wBTC, according to CoinDesk.
Concerns Over Transparency and Ownership
The proposal to offboard wBTC stems from concerns raised by BA Labs, a prominent risk management firm in the DeFi space. According to their report, there are significant transparency issues related to wBTC, particularly regarding its custodian, BitGlobal. BA Labs argue that wBTC's custodial setup, which recently transitioned to a joint operation with BitGlobal, poses risks due to Tron Founder, Justin Sun’s alleged involvement. The firm alleges that Sun may have control over BitGlobal through concealed ownership structures involving shell companies and nominee directors.
Details of the Proposed Offboarding
The proposal to offboard wBTC will involve several steps, starting with an Executive Vote on September 26. If approved, Sky will begin the process of removing wBTC as collateral from its lending platforms, including Legacy Vaults and SparkLend. The timeline for this transition is set to unfold over multiple phases, with a full removal expected within 180 days.
This move comes at a time when Coinbase is preparing to launch cbBTC, a new tokenized Bitcoin product that aims to challenge wBTC's dominance. cbBTC will be backed 1:1 by Bitcoin reserves and managed by Coinbase, presenting a direct competitive threat to BitGo’s wBTC, which currently holds a 96.6% market share in the Ethereum ecosystem.
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