Key Points to Note: 📝
- The governance body of Sky, previously known as MakerDAO, has opted to eliminate wrapped Bitcoin (WBTC) from its list of collateral options.
- The decision succeeded with an overwhelming 88% vote in favor.
- Concerns were raised linked to BitGo, the custodian of WBTC, due to its collaboration with BitGlobal, a company associated with Justin Sun.
- Sky plans to discontinue WBTC usage gradually, starting from October 3 and finishing on November 28.
- Other decentralized finance (DeFi) platforms, like Aave, are also reassessing their reliance on WBTC.
This year, the decentralized finance platform Sky, which was formerly known as MakerDAO, has made a pivotal governance decision regarding its collateral lineup. The community voted decisively to phase out wrapped Bitcoin (WBTC) as a collateral asset in its lending protocol.
The governance vote, spanning three days and wrapped up on September 19, 2024, saw an impressive 88.17% of community members support the removal of WBTC. This decisive action stemmed from rising concerns over changes to WBTC’s ownership and custodianship, primarily flagged by BA Labs, an advisory group closely associated with Sky.
These concerns were amplified following an announcement in August 2024 revealing that BitGo, the original custodian for WBTC, would shift its control through a partnership with BiT Global, a firm linked to Tron founder Justin Sun. This shift raised questions about the reliability of WBTC as a collateral asset.
The SparkLend protocol, part of Sky’s decentralized liquidity platform, currently holds WBTC-backed collateralized debts amounting to $61.38 million. Now, as reported, Sky will execute the offboarding of WBTC in stages, which will start on October 3, 2024, and is slated to wrap up by November 28, 2024.
This development is notable given that Sky has roughly $200 million tied up in loans that are backed by WBTC. Wrapped Bitcoin itself is among the most significant cryptocurrencies, boasting a valuation near $10 billion, thereby enabling users to leverage Bitcoin assets on other blockchain platforms such as Ethereum.
In response to the emerging concerns, Justin Sun defended the integrity of WBTC, asserting that the asset, along with stablecoins like USDT, operates independently of any Chinese regulatory confines. He also highlighted the “impressive track record” of WBTC compared to any alternative options being discussed by skeptics.
Despite Justin Sun’s reassurances, the Sky community proceeded with its decision to phase out WBTC. The platform is exploring various alternative wrapped Bitcoin options for collateral, including cbBTC from Coinbase and tBTC from Threshold.
Other Platforms Evaluating Their Stance on WBTC 🏦
Sky is not the only entity reconsidering its stake in WBTC. On September 18, discussions emerged in the Aave governance forum seeking feedback on reducing exposure to wrapped Bitcoin amid similar fears associated with BitGo’s alliance with BiT Global. Aave, being a leading DeFi lender, has outstanding debts of around $990 million tied to WBTC.
However, Aave’s co-founder Stani Kulechov clarified the stance, indicating that although concern was expressed, Aave is not actively removing WBTC from its resources. Instead, the dialogue was focused on curbing its exposure rather than an outright offboarding, revealing a somewhat divided sentiment on whether WBTC should remain part of their collateral framework.
This is incorrect. Aave is not offboarding wBTC; this is a proposal from one of the risk providers to cap wBTC. Study Aave DAO first.
— Stani (@StaniKulechov) September 19, 2024
As of now, the wrapped Bitcoin supply on Ethereum stands at roughly 152,942 WBTC, with a market capitalization estimated at around $9.6 billion. Interestingly, this marks almost a 40% decline since its peak of $15.8 billion recorded in November 2021.
The methodical approach adopted by Sky to withdraw WBTC gradually from its collateral list, starting from October 3 and concluding by November 28, appears strategic in nature, as it may help in mitigating potential market fluctuations during this period.
Final Thoughts: 🚀
In conclusion, the recent developments regarding Sky’s decision to remove WBTC from its collateral options spotlight significant shifts in the DeFi landscape. As platforms like Aave also ponder their exposure to wrapped Bitcoin, the ongoing adjustments reflect broader apprehensions within the decentralized finance sector regarding asset security and regulatory implications.
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