The decentralized finance (DeFi) platform Sky, formerly known as MakerDAO, has proposed to completely remove Wrapped Bitcoin (wBTC) as collateral from its ecosystem. This decision will be debated in an upcoming governance vote on September 26, 2024.
Background on wBTC Removal
Wrapped Bitcoin (wBTC) is a token that represents Bitcoin on the Ethereum blockchain, allowing BTC to be used in decentralized finance applications. wBTC plays a crucial role in DeFi as a collateral asset with a market capitalization of $8.8 billion. Sky currently holds approximately $200 million in loans backed by wBTC.
Transparency and Ownership Concerns
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. The firm alleges that the involvement of Tron Founder Justin Sun in BitGlobal poses risks due to concealed ownership structures and nominee directors. "We see there is a long history of concealment of ownership, movement of funds without clear authority, lack of transparency, and actions that could negatively impact end users or lead to impairment of assets or custodial services," BA Labs stated.
Details of the Proposed Plan
The proposal to offboard wBTC will be decided in 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 transition will unfold over multiple phases, with a full removal expected within 180 days. Additionally, this move comes as 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.
The decision to remove wBTC from Sky's ecosystem marks a significant move amid ongoing discussions about transparency and ownership in the DeFi space. Users should anticipate important changes in the coming months as the vote and subsequent actions determine the future of this asset within the ecosystem.
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