Bitcoin Bitcoin
+0.076%
– Threshold, a decentralized finance protocol, is proposing a merger with WBTC, the largest “wrapped” version of Bitcoin by a country mile.
Under the plan, BitGo will become the “largest holder” of Threshold’s T tokens while also transferring control of the WBTC minting and burning mechanisms to “ensure the continued stability of WBTC, the sanctity of its collateral, and the safety of users and protocols that rely on it.”
The move comes weeks after BitGo, the cryptocurrency vault that currently manages the BTC underlying WBTC, announced plans to transfer some control of its assets to a joint venture with Justin Sun’s BiT Global, drawing criticism and skepticism from a broad swath of the cryptocurrency industry.
In response to the supposed BitGo-Sun agreement, several protocols that use WBTC, an ERC-20 token representing Bitcoin on the Ethereum blockchain, for collateral or trading have announced that they are considering offboarding the asset. In a recent MakerDAO governance vote, Disabling additional WBTC borrowing has been ratified. Crypto lender Aave said it would “continue to monitor the situation.”
There have been concerns over the transparency and support of several projects associated with Justin Sun over the years, such as the USDD stablecoin associated with Tron, which was recently Abandoning Bitcoin as a Reserve Asset Without the consent of the community Protea It was reported that HTX (formerly Huobi), advised by Sun, replaced its USDT holdings with assets linked to Sun. STUSDT.
Threshold Network is a decentralized platform that connects Bitcoin to DeFi, with a variety of services, including its own wrapped version of Bitcoin, tBTC, and a cross-chain token protocol Wormhole that connects to about 20 blockchains. It was created in 2022 by merging two similar protocols, NuCypher and Keep Network.
‘An alternative approach will ensure safety and stability’
If the proposal submitted by NuCypher co-founder MacLane Wilkison is approved, Threshold will mint an additional 1,655,250,000 T tokens, increasing the supply by 15%, or approximately $36 million, which will belong to BitGo. BitGo will then transfer token freezing and minting/redemption rights for WBTC to the Threshold DAO.
Threshold also disables the minting of tBTC, which is exchangeable 1:1 for WBTC and maintains Bitcoin custody in multiple wallets. WBTC has a market cap of around $9 billion, and there are around $200 million of tBTC in circulation.
“This alternative approach will ensure the safety and stability of the underlying collateral, provide peace of mind for market participants and WBTC users, and protect the many DeFi protocols that have significant exposure to the asset as collateral,” Wilkison said.
It is unclear whether Threshold came up with the idea before BitGo before publication. BitGo CEO Mike Belshe said Against the fear of Justin Sun’s intervention WBTC will change its risk profile. Belshe claimed that the plan will further decentralize WBTC through multi-jurisdictional and multi-institutional custody.
Wilkison said that even if the proposal is rejected, the threshold could be set to mint additional T tokens to defer the cost of transitioning the protocol to an asset such as tBTC or the cbBTC token proposed by Coinbase.
Disclaimer: The Block is an independent media outlet providing news, research and data. As of November 2023, Foresight Ventures is the largest investor in The Block. Foresight Ventures invests in other companies in the cryptocurrency space. Cryptocurrency exchange Bitget is an anchor LP of Foresight Ventures. The Block continues to operate independently to provide objective, influential and timely information on the cryptocurrency industry. Current financial disclosures are as follows:
© 2024 The Block. All rights reserved. This article is provided for informational purposes only. It is not provided or intended to be legal, tax, investment, financial or other advice.