The decentralized finance (DeFi) protocol Threshold has proposed merging its tBTC token with Wrapped Bitcoin (WBTC) to address governance issues and enhance decentralization.
Threshold's Proposal for the Merger
On August 29, Threshold presented a proposal on its governance forum to merge its tBTC token with WBTC. The aim is to replace WBTC’s centralized custody and mint/burn model with Threshold’s decentralized custody and permissionless mint/redeem mechanism.
Context and BitGo Partnership
On August 9, BitGo, the cryptocurrency custodian supporting WBTC, announced a planned partnership with Hong Kong-based crypto exchange BiT Global. The partnership aims to diversify U.S.-centric control and transfer partial management of the multisignature wallet custodying WBTC’s Bitcoin backing to BiT Global. This announcement was controversial due to the involvement of Justin Sun, sparking concerns about possible misappropriation.
DAO Reaction and Future Steps
Threshold seeks to address these concerns by granting Threshold DAO privileges to mint and redeem WBTC, transferring freeze functions to the DAO. According to the proposal, new tBTC minting will be disabled, and existing tBTC supplies will be redeemable 1:1 for WBTC. Additionally, Block Analitica Labs proposed closing all new wBTC debts and preventing new borrowing against wBTC collateral.
The proposal by Threshold aims to enhance decentralization and secure BTC storage through advanced DAO governance mechanisms.
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