As a seasoned crypto investor with more than a few battle scars from the wild west of digital assets, I’ve learned to keep my eyes wide open and my fingers on the pulse of the ever-evolving blockchain landscape. The recent decision by Sky (formerly MakerDAO) to remove Wrapped Bitcoin (WBTC) from its lending and borrowing ecosystem is a move that has caught my attention for all the right reasons.
Previously known as MakerDAO, the organization now called Sky has successfully completed a governance decision to exclude Wrapped Bitcoin (WBTC) from its lending and borrowing system. The vote, which was finalized on September 19, garnered strong community backing due to growing worries about WBTC’s custodianship and potential associations with blockchain entrepreneur Justin Sun, who has been involved in some contentious issues.
On Sky’s official site, it’s stated that approximately 90% of the governance group endorsed a proposal to eliminate WBTC as collateral. Out of all votes cast, about 95,826 MKR tokens backed this move, while around 11.83% chose not to vote, and no opposing votes were tallied. This significant decision signals a pivotal moment in the platform’s future direction.
Key Concerns over WBTC’s Custodianship
The decision to withdraw WBTC from Sky’s lending pool arises due to apprehensions expressed by its advisors at BA Labs. In August, they brought attention to potential risks associated with the ownership and management of WBTC, sparking rumors that Justin Sun or his associates might be involved.
The business has raised concerns about Sun’s history in the blockchain sector potentially creating substantial risks for a decentralized finance (DeFi) system as a counterparty. They suggest reevaluating Wrapped Bitcoin’s (WBTC) function within Sky’s network.
Back in August, BitGo, who looks after WBTC, announced plans to hand over management of this asset to a partnership with BitGlobal, an organization with strong ties to Justin Sun. This joint venture, operating under regulatory oversight in Hong Kong, has raised some eyebrows due to Justin Sun’s contentious reputation within the crypto community.
Consequently, BA Labs suggested that Sky should discontinue support for Wrapped Bitcoin (WBTC) on their platforms. On September 12th, Sky’s team took action to address these concerns by proposing to remove WBTC from both their SparkLend service and Legacy Vaults. This move aimed to minimize risks related to Sun’s influence.
Justin Sun Defends WBTC amid Criticism
In the face of escalating debates about WBTC’s future, Justin Sun openly supported the asset, distancing it from any regulatory issues in China. On September 13th, Sun clarified that WBTC, along with USDT and Tron, were not intertwined with Chinese regulations, taking a jab at Coinbase’s newly launched alternative, cbBTC.
Contrary to Sun’s promises, the community within Sky chose to proceed with plans to sever ties from WBTC. This action underscores Sky’s dedication to protecting its own ecosystem by minimizing potential hazards and outside dangers.
Since Wrapped Bitcoin (WBTC) is being phased out, the protocol is now investigating other wrapped Bitcoin alternatives. In a proposal put forth in September, Sky suggested Coinbase’s cbBTC and Threshold’s tBTC as possible replacements for WBTC within their lending and borrowing markets.
According to advocates, these options offer a safer and more open system for managing digital finance collateral.
More DeFi Protocols to Follow Sky’s Move
In addition, it’s not just Sky that is moving away from Wrapped Bitcoin (WBTC). LlamaRisk has suggested in the AAVE community to eliminate WBTC’s loan-to-value ratio completely, expressing worries about BitGo’s handling of the asset transfer.
Actually, it’s important to note that the proposal for Aave to delist Wrapped Bitcoin (WBTC) came from a risk provider, but it doesn’t represent a definitive decision made by Aave itself to remove WBTC. This was simply a suggestion put forth by the risk provider.
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2024-09-20 12:15