- Justin Sun’s strategic move on WBTC raises concerns.
A few hours later, there was no significant impact on WBTC’s TVL or flows.
As a seasoned researcher with over two decades of experience in the ever-evolving world of blockchain and decentralized finance (DeFi), I find myself constantly intrigued by the latest developments. The recent partnership between Justin Sun’s Tron-based firm, BiT Global, and BitGo to handle WBTC custody operations is no exception.
In the news recently is Justin Sun, the founder of Tron, due to his role in the management of Wrapped Bitcoin (WBTC) storage. His company, BiT Global, has teamed up with BitGo for a pioneering initiative that aims to provide cross-border and multi-institutional custody services.
Despite it, some community members have expressed worries about decentralization due to the partnership, leading the executive to address and justify his actions. A portion of Sun’s response stated,
‘My participation with WBWrapped Bitcoin (WBTC) is purely strategic. I don’t hold the secret access codes (private keys) for the WBTC reserves, so I can’t transfer or manipulate any Bitcoins stored within them.’
Sun added that,
As someone who has spent years immersed in the ever-evolving world of blockchain technology, I firmly believe that fostering relationships centered around projects promoting decentralization, security protocols, and safety is essential. To me, Wrapped Bitcoin (WBTC) serves as a cornerstone in the decentralized finance (DeFi) ecosystem, and I am committed to ensuring its continued growth and success. With my extensive experience and passion for this innovative field, I eagerly anticipate contributing to WBTC’s future development and ensuring it remains a vital component of the DeFi landscape.
Reaction to Justin Sun’s WBTC move
From a broader standpoint, Wrapped Bitcoin (WBTC) is among the most significant collateral tokens in the Decentralized Finance (DeFi) sector. Each WBTC token represents an equal amount of Bitcoin, thus allowing Bitcoin’s liquidity to be integrated into the Ethereum-based DeFi system.
Following the Sun’s partnership with WBTC, a key DeFi player Maker flagged the move as a risk.
In simpler terms, it appears that Sun’s significant stake in the newly formed WBTC partnership introduces an unmanageably high level of risk.
Maker cited a lack of transparency in other Sun’s projects, including Huobi’s USDT reserves. Additionally, the firm labeled BitGo a counter-party risk after Galaxy Digital’s recent failed acquisition.
Due to this development, Maker was considering removing WBTC from their platforms unless BitGo could guarantee that their new partnership would be secure.
Let’s discuss additional suggestions for adjusting parameters to enhance protocol safety and minimize risks from counterparties. These adjustments may extend to completely removing all connections related to Maker and Spark Wrapped Bitcoin Collateral, if necessary.
In response, BitGo CEO Mike Belshe countered Maker’s worries, arguing that they were more of a reaction to Justin Sun rather than based on actual facts.
‘This seems to be more a reaction to the Justin Sun name than to facts.’
In a suggestion from the co-founder of Wormhole, Dan Reecer, he encouraged players to choose decentralized Bitcoin (wrapped BTC) that is held by decentralized guardians instead.
‘Another example of decentralization not being a priority until there’s a wakeup call.’
The decentralized wrapped BTC calls were also echoed by Austin Federa, Strategy executive at Solana Foundation.
A decentralized form of wrapped Bitcoin is crucial. It’s astonishing that, fifteen years into the Bitcoin revolution, we’re still reliant on centralized guardians for safety.
State of WBTC
As I write this, Wrapped bitcoin (WBTC) held approximately $9.4 billion in total value locked (TVL). Despite worries arising over Sun’s participation, there was no immediate indication of a sharp drop in TVL or outflows.
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2024-08-11 15:04