TLDR
- Sky (formerly MakerDAO) to vote on removing wrapped bitcoin (wBTC) from its ecosystem
- $200 million in loans collateralized by wBTC could be impacted
- Concerns stem from Justin Sun’s involvement with wBTC’s custodian
- Proposal suggests gradual offboarding of wBTC exposure in five steps
- Competitors offering alternative wrapped bitcoin versions are gaining attention
The decentralized finance (DeFi) lending platform Sky, previously known as MakerDAO, is set to vote on a proposal to completely remove wrapped bitcoin (wBTC) from its ecosystem.
This decision could have significant implications for the DeFi space, as Sky currently has $200 million in loans backed by wBTC.
Wrapped bitcoin is a token that allows investors to use bitcoin on other blockchains. It plays a crucial role in DeFi lending as collateral and has a market capitalization of $9 billion.
The proposal to remove wBTC from Sky’s platform comes from BA Labs, a DeFi risk management firm that has significant influence in Sky’s governance.
The main reason for this proposed change is the perceived risk associated with Tron founder Justin Sun’s involvement with the custodian for wBTC’s underlying assets.
BA Labs stated in their proposal that “legal due diligence would not provide an adequate level of assurance” regarding these concerns.
If approved, the proposal would implement a gradual offboarding of all wBTC exposure from Sky’s collateral assets. This process would occur in five steps, with the first step scheduled to begin on September 26. Each step of the offboarding process will require a separate vote.
If you are a user with WBTC collateral in Legacy Vaults (WBTC-A, WBTC-B, or WBTC-C) or SparkLend, please be aware of the WBTC offboarding proposal initiated by @BlockAnalitica.
According to the plan outlined by @BlockAnalitica, and pending governance approval, WBTC offboarding…
— Sky (@SkyEcosystem) September 12, 2024
Currently, Sky-affiliated lending platform SparkLend has about $73 million worth of loans backed by wBTC. Additionally, there is approximately $127 million in debt against wBTC in Sky’s legacy vaults. The removal of wBTC from Sky’s ecosystem could potentially impact these loans.
The concerns surrounding wBTC intensified following an announcement by crypto custody firm BitGo earlier this month. BitGo plans to transition control of the asset to a joint operation with a custody platform called BiT Global.
This new arrangement would distribute control over the project’s custody to three entities globally instead of just one, supposedly to help decentralize the operation.
However, the involvement of BiT Global, which is described as “a strategic partnership between BitGo, Justin Sun, and the Tron ecosystem,” has raised eyebrows in the crypto community.
Despite BitGo CEO Mike Belshe’s assurances about the joint firm’s independence from Sun and Tron, skepticism remains.
The ongoing situation with wBTC has created opportunities for competitors offering alternative versions of wrapped bitcoin. Projects like dlcBTC, Threshold’s tBTC, and FBTC are gaining attention as potential replacements.
Even major players like Coinbase have entered the fray, launching their own wrapped bitcoin competitor on the same day as Sky’s announcement.
As the DeFi community awaits the outcome of Sky’s vote, the potential removal of wBTC from one of the largest DeFi platforms highlights the ongoing challenges and evolving nature of the cryptocurrency ecosystem.
The decision could have far-reaching effects on DeFi lending practices and the broader adoption of bitcoin in decentralized finance applications.
Sky, as one of the biggest DeFi projects and the issuer of the $5 billion decentralized stablecoin DAI, plays a significant role in the DeFi landscape.
