- DeFi protocol Threshold proposes a BitGo merge to address WBTC custody concerns.
“Concerns” linked to Justin Sun’s involvement remain at large amongst DeFi players.
As a seasoned analyst with over two decades of experience in the cryptocurrency market, I have seen numerous partnerships and mergers that have either made or broken projects. In this case, Threshold’s proposal to merge with BitGo seems like a strategic move to address the lingering custody concerns related to WBTC.
Despite recent modifications aimed at addressing perceived risks linked to Justin Sun’s participation, it appears that BitGo’s worries about the custody of Wrapped Bitcoin (WBTC) are still not fully resolved.
In a move aimed to “save WBTC” and address the custody concerns once and for all, Bitcoin DeFi protocol Threshold has proposed decentralizing WBTC before Justin Sun’s BiT Global involvement.
The protocol, which operates a decentralized wrapped BTC version, tBTC, proposed a merger with BitGo to ensure the “safety” of WBTC. Part of the proposal read,
“By merging the user base, partnerships, market depth, and reputation of WBTC with the decentralized storage system and borderless linking technology of tBTC, we can more effectively reach BitGo’s goal of providing secure custody services across multiple regions and institutions.”
Is BitGo’s WBTC custody changes not enough?
In the context given, it’s been noted that Justin Sun’s authority over the custody and management of the Bitcoin reserves backing Wrapped Bitcoin (WBTC) has sparked some “questions” or “doubts.”
Although BitGo’s CEO, Mike Belshe, stated that Justin Sun’s influence wouldn’t impact the functioning of WBTC, certain DeFi participants, such as Threshold, are still exhibiting a degree of caution.
Among the concerns expressed by one of Threshold’s representatives, Ashley, regarding the decentralization of Wrapped Bitcoin (WBTC), is the recent action taken by Sun, who withdrew 12,000 BTC from the reserve backing the Tron-based USDD stablecoin. This move has added to the apprehension about giving control over WBTC custody to Sun.
“The idea is to decenteralize #WBTC ahead of Justin Sun potentially gaining influence over the Wrapped Bitcoin domain.”
Additionally, Ashley stated that both Maker (MKR) and Aave (AAVE) have taken steps to minimize risk and are planning to lower their involvement with Wrapped Bitcoin (WBTC), despite Belshe’s affirmations. She was confident that the proposal would alleviate these apprehensions.
The plan is designed to tackle these issues and maintain the long-term security of WBTC within the digital currency market.
As a researcher examining the Threshold Proposal, I find that it outlines a scenario where BitGo would transfer WBTC (Wrapped Bitcoin) to their decentralized network, in return receiving approximately 15% of their native token, T. This proportion of tokens currently equates to an estimated value of around $36 million according to the current market prices.
Some hailed the proposal. One of the users stated,
This statement can be rephrased as: “It could bring a significant victory for Threshold, BitGo, and the Decentralized Finance (DeFi) community that is cautious about potential risks related to the new Wrapped Bitcoin counterparty.”
Win for Bitcoin DeFi?
Another user and DeFiLlama executive viewed the proposal as equivalent to WBTC acquisition. He said it was a great deal because WBTC’s cumulative revenues were about $12 million, almost triple Threshold’s offer.
As I write this, neither Mike Belshe nor Justin Sun have spoken out about the proposal in public, leaving its potential endorsement uncertain.
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2024-08-31 01:12