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DeFi Lending Giant Sky Sets Vote to Offload Wrapped Bitcoin as Justin Sun Concerns Linger

Sep 12, 2024

As a seasoned crypto investor with years of experience navigating the volatile and ever-evolving world of digital assets, I find myself closely following the latest developments in DeFi, particularly the ongoing saga surrounding Sky and wrapped Bitcoin (wBTC). Having witnessed firsthand the rise and fall of numerous projects, I can’t help but feel a sense of deja vu as this drama unfolds.

As a crypto investor, I’m keeping an eye on some exciting developments in the DeFi space. Specifically, Sky, previously known as MakerDAO, has announced a potential game-changer: they’re planning to vote on removing wrapped bitcoin (wBTC) from their ecosystem. Currently, over $200 million of loans are collateralized by this token, so this decision could have significant implications for the DeFi landscape.

WBTC stands for Wrapped Bitcoin, which serves as a means for users to employ their Bitcoin (BTC) across various different blockchain networks. It plays a significant part in the world of decentralized finance (DeFi), functioning as collateral, and boasts a total market value of approximately $9 billion.
BA Labs, a significant figure in Sky protocol governance, previously suggested decreasing the involvement with wBTC, as they saw potential risks associated with Tron founder Justin Sun’s relationship with the custodian of the underlying assets. Sky is a major DeFi project and emits the $5 billion decentralized stablecoin DAI, making this proposed change a topic of close scrutiny among crypto analysts and blockchain observers.
On Thursday, BA Labs suggested a phased reduction of all Wrapped Bitcoin (wBTC) holdings from their collateral assets over a period of five stages. The initial phase is set to commence on September 26, and each stage will require a vote before implementation.

In their proposal, BA Labs stated that a thorough legal examination wouldn’t offer sufficient confidence or guarantee.

BA Labs recommended onboarding alternative products to the platform should the proposal pass.

Competitors energized

At present, loans totaling approximately $73 million are secured by wBTC on the lending platform SparkLend that is associated with Sky. Additionally, there is around $127 million of debt owed against wBTC in Sky’s old vaults, as reported by BA Labs.
In recent times, there has been an escalation of tension surrounding wBTC after the crypto storage company, BitGo, announced its intention to transfer management of the asset to a partnership with a custodial platform known as BiT Global.

The agreement, which assigned control of the project’s management to three international bodies rather than just one, was viewed as a means to promote decentralization within the organization.

As stated in a press release dated August 9th, BiT Global represents a worldwide digital asset custody platform. This platform operates under regulatory supervision in Hong Kong, where it is officially registered as a Trust and Company Service Provider (TCSP). Notably, BiT Global is the result of a strategic alliance between BitGo, Justin Sun, and the Tron network.

BitGo CEO Mike Belshe earlier this month defended the joint firm’s autonomy from Sun and Tron.

BitGo CEO Says Wrapped Bitcoin’s Critics Aren’t Being ‘Intellectually Honest’ About Their Concerns

The drama around wrapped bitcoin has energized competitors offering alternative versions of the token, including dlcBTC, Threshold’s tBTC and FBTC, which has the support of Mantle Network.

As an analyst, I noticed that on Thursday, Coinbase, a prominent player in the crypto exchange and custody sector, unveiled its alternative to Wrapped Bitcoin.

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2024-09-13 02:51