Wrapped Bitcoin

Bitcoin

DeFi

when

Decentralized finance (DeFi) pioneer Sky, formerly Maker, is reconsidering its plan to offboard Wrapped Bitcoin as collateral for its lending protocol after receiving a new recommendation from key adviser BA Labs.&nbsp;
On Sept. 24, BA Labs recommended pausing the 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>) offboarding plan following a lengthy <a data-ct-non-breakable="null" href="https://forum.makerdao.com/t/wbtc-changes-and-risk-mitigation-10-august-2024/24844/48" rel="null" target="null" text="null" title="null">conversation</a> with BitGo co-founder Mike Belshe on Sky’s governance forum.&nbsp;
The move follows BitGo’s clarifications about changes in management or custody of WBTC, control of the signing keys, and a commitment to give advance notice of changes.&nbsp;
BitGo committed to providing at least 60 days of public written notice before any changes to entities controlling WBTC keys. Belshe emphasized that BitGo created this “60-day standard” and has always followed it.
BA Labs team member and DAO delegate “money-supply” said with these commitments in mind and overall WBTC exposure falling to $170 million in total borrowing, the collateral risk is in a “more acceptable range.”
<blockquote>
 “While we continue to have concerns about BitGlobal serving as a signer for WBTC, we find it is no longer at a level requiring immediate collateral offboarding [...] Therefore, we recommend indefinitely pausing the collateral offboarding procedures.”
</blockquote>
The new recommendations will be put up for an executive vote on Oct. 3. 
<img alt="Sky rethinking plan to offboard WBTC after discussion with BitGo CEO" name="" src="https://s3.cointelegraph.com/uploads/2024-09/0192273e-e211-7b16-b240-98e6d9f15764">
SparkLend exposure to WBTC has fallen to $61 million. Source: Spark Explorer
BitGo was the sole custodian of the Bitcoin backing WBTC until August, when it entered into a partnership with Tron founder Justin Sun’s BitGlobal to transfer custody, <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/maker-sky-eyes-dropping-wrapped-bitcoin-justin-sun" rel="null" target="null" text="null" title="null">sparking concerns among the Sky community</a>.
This led to a <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/sky-maker-going-ahead-plan-offboard-wrapped-bitcoin" rel="" target="_self" text="null" title="https://cointelegraph.com/news/sky-maker-going-ahead-plan-offboard-wrapped-bitcoin">governance vote on Sept. 19</a> for a proposal to offboard WBTC collateral. The vote passed with 88% in favor of the platform removing its exposure to wrapped Bitcoin in a five-step process starting in early October.
Belshe’s responses indicated a level of frustration while emphasizing BitGo’s track record and commitments. He also questioned the logic of favoring Coinbase’s centralized cbBTC over WBTC:
<blockquote>
 “You’re proposing to move all the current WBTC, POR [proof-of-reserves]-mitigated risk to CB [Coinbase], when they don’t have POR and have said they won’t ever do it. That’s potentially adding $1 billion of uncollateralized risk against CB, and you think this is somehow less risky.”&nbsp;
</blockquote>
Related: <a data-ct-non-breakable="null" href="https://cointelegraph.com/news/sky-maker-going-ahead-plan-offboard-wrapped-bitcoin" rel="null" target="null" text="null" title="null">DeFi lending protocol Sky to drop wrapped Bitcoin after governance vote</a>
BA Labs also discussed the importance and limitations of proof of reserves for <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">WBTC</a> and suggested comparing risks between WBTC and Coinbase’s cbBTC.
Other specific changes recommended included reducing liquidation penalties, adjusting liquidation ratios and lowering the liquidation protocol fee for <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 Legacy Vaults and SparkLend</a>.&nbsp;
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 rethinking plan to offboard WBTC after discussion with BitGo CEO

Cointelegraph

Other articles published on Sep 25, 2024

Charles Hoskinson Claims Ethereum is a "Dictatorship"

Coinpedia Fintech News

Michael Saylor's MicroStrategy to Issue $700M in Senior Convertible Notes to Buy More Bitcoin

Analysts Predict Bitcoin Surge to $67,000 in October

Binance Demands Release of Executive Before Meeting Nigerian Crypto Regulations: Report

Coinpedia Fintech News

Join our free newsletter for daily crypto updates!