tBTC

Wrapped Bitcoin

Bitcoin

cbBTC

The decentralized finance lending and borrowing platform Sky, formerly known as Maker, has proposed removing Wrapped Bitcoin as collateral within its ecosystem, citing concerns over the token’s close association with Justin Sun.​
<a data-ct-non-breakable="null" href="https://cointelegraph.com/news/maker-rebrands-sky-launches-usds-sky-token" rel="null" target="null" text="null" title="null">Sky’s team</a> <a data-ct-non-breakable="null" href="https://forum.makerdao.com/t/attention-wbtc-vault-and-wbtc-sparklend-users/25080" rel="null" target="null" text="null" title="null">said</a> in a Sept. 12 post on the protocol’s governance forum that it was giving official notice that it would offboard Wrapped Bitcoin (<a data-ct-non-breakable="null" href="https://cointelegraph.com/wrapped-bitcoin-price-index" rel="null" target="null" text="null" title="null">WBTC</a>) variants on SparkLend, its decentralized non-custodial liquidity protocol.
According to the proposal <a data-ct-non-breakable="null" href="https://forum.makerdao.com/t/wbtc-changes-and-risk-mitigation-10-august-2024/24844/26" rel="null" target="null" text="null" title="null">initiated</a> by the BA-Labs team on Sept. 12, the offboarding will be conducted in several steps over multiple executive votes, with the process expected to start on Sept. 26.
It advised users to close WBTC Legacy Vaults and WBTC positions on SparkLend to avoid liquidation.&nbsp;
<figure>
 <img alt="Sky proposes dropping Wrapped Bitcoin over claimed Justin Sun ties" name="" src="https://s3.cointelegraph.com/uploads/2024-09/0191e9e6-8029-74b3-9a6b-ad17d78b872f">
 <figcaption style="text-align: center;">
 SparkLend exposure to WBTC. Source: SparkLend
 </figcaption>
</figure>
SparkLend has a current exposure of $73 million in debt collateralized against WBTC, and legacy vaults have $127 million in collateralized debts.&nbsp;
The team cited “recent changes in WBTC ownership and control, likely involving Justin Sun or affiliates,” as reasoning for the offboarding.
It added that this poses “significant counterparty risks based on past track records with other Sun-affiliated products.”
Citing the August <a data-ct-non-breakable="null" href="https://blog.bitgo.com/bitgo-to-move-wbtc-to-multi-jurisdictional-custody-to-accelerate-global-expansion-plan-2ea0623fa2c8" rel="nofollow noopener" target="_blank" text="null" title="https://blog.bitgo.com/bitgo-to-move-wbtc-to-multi-jurisdictional-custody-to-accelerate-global-expansion-plan-2ea0623fa2c8">partnership</a> between crypto exchange BitGlobal and <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/bitgo-wrapped-bitcoin-custody-multi-jurisdictions-institutions-tron-united-states" rel="null" target="null" text="null" title="https://cointelegraph.com/news/bitgo-wrapped-bitcoin-custody-multi-jurisdictions-institutions-tron-united-states">BitGo</a> — the custodian holding the Bitcoin backing WBTC&nbsp;— risk analyst and DAO delegate “monet-supply” wrote it was “highly likely that Justin Sun or affiliates control BitGlobal, with ownership concealed through shell companies and nominee directors.”
“Justin Sun-affiliated stablecoins and custodial products have a significant negative track record and pose elevated counterparty risk,” continued monet-supply, who added:&nbsp;
<blockquote>
 “Given evidence of concealment and concerns about validity of previous disclosures for Sun affiliated entities and products, we find that legal due diligence would not provide an adequate level of assurance.”
</blockquote>
Control of WBTC is expected to be handed over to the new venture led by BitGlobal as early as Oct. 8, “so we will target to begin derisking collateral exposure by this point in time,” they stated.
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/bitgo-ceo-argues-wbtc-security-unchanged-amid-concerns" rel="null" target="null" text="null" title="null">BitGo CEO argues wBTC security is unchanged amid concerns</a>
Several alternative strategies for Bitcoin (<a data-ct-non-breakable="null" href="https://cointelegraph.com/bitcoin-price" rel="null" target="null" text="null" title="null">BTC</a>) collateral were suggested, including alternative <a data-ct-non-breakable="null" href="https://cointelegraph.com/learn/a-beginners-guide-to-understanding-wrapped-tokens-and-wrapped-bitcoin" rel="null" target="null" text="null" title="null">BTC-denominated</a> assets to fill the gap.
These could be centralized and decentralized tokenized Bitcoin products such as Coinbase’s cbBTC and <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/defi-protocol-threshold-proposes-bitcoin-wrapper-merger-wbtc" rel="null" target="null" text="null" title="null">Threshold’s</a> tBTC products. Sky and Spark would also investigate Bitcoin staking and restaking products.
There are currently around 152,958 wrapped Bitcoin on Ethereum with a market cap of around $8.8 billion, <a data-ct-non-breakable="null" href="https://wbtc.network/dashboard/order-book" rel="null" target="null" text="null" title="null">according</a> to the order book, down 44% from its peak of $15.8 billion in November 2021.
Magazine: <a data-ct-non-breakable="null" href="https://cointelegraph.com/magazine/simple-change-save-ethereum-roadmap-to-hell/" rel="null" target="null" text="null" title="null">Proposed change could save Ethereum from L2 ‘roadmap to hell’</a>

Sky proposes dropping Wrapped Bitcoin over claimed Justin Sun ties

Cointelegraph

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