As a seasoned researcher with years of experience navigating the dynamic landscape of decentralized finance (DeFi), I find myself intrigued by Sky’s reconsideration to offload Wrapped Bitcoin (WBTC) as collateral. My journey in this field has taught me that nothing is ever set in stone, and decisions can change with new information and discussions within the community.
Previously known as MakerDAO, Sky is now considering a reversal on its recent decision to remove Wrapped Bitcoin (WBTC) as collateral for its non-custodial lending protocols, SparkLend and Legacy Vaults. This change in stance arises after a new suggestion from one of its influential advisors following thorough deliberations within the Sky community.
Currently, SparkLend manages approximately 60.45 million dollars’ worth of debt secured by WBTC, as per data from Block Analitica. The initial governance vote had steered the direction towards WBTC offboarding, but recent updates could potentially lead to a change in this decision.
WBTC Offloading Decision Background
The decision to remove WBTC collateral was agreed upon following a governance vote that ended on September 19. Over 88% of the participants backed this proposal, representing approximately 95,826 MKR tokens. A small portion, around 11.83%, abstained from voting, but no one voted against it.
This administration’s choice initiates a gradual withdrawal process for Wrapped Bitcoin Collateral, which is planned to unfold from October 3rd until November 28th.
The action was initiated due to worries expressed by Sky’s consultative group, BA Labs, about Justin Sun’s participation in the partnership between BitGo and BitGlobal. In August, BitGo, which had been the sole custodian of the bitcoin backing WBTC, entered into a strategic agreement with Sun. BA Labs expressed concerns that Sun’s history with related projects could potentially present a risk from a counterparty perspective, given that approximately $200 million in loans on the platform were secured by WBTC as collateral.
Fresh Reconsideration
Even though the matter was initially put to a vote for offboarding, it continued to be a topic of ongoing debate. Mike Belshe, CEO of BitGo, played a significant role in these discussions on Sky’s forums. He explained that the misconception existed about the custody agreement with BitGlobal, and neither Sun nor any other entity would have sole authority to modify the key management practices at either BitGo or BitGo Singapore – two entities responsible for managing the multi-signature keys for the custodian.
On September 20, Belshe reassured the community that they would not possess the power to alter crucial management practices.
Based on new details provided by BitGo, BA Labs feels more confident about their current Wrapped Bitcoin (WBTC) custody arrangement. They noted that the amount of WBTC available on their platform has already decreased, with associated borrowing now at approximately $170 million.
Following an assessment, BA Labs considers the risk level as “less worrying” and advises that the withdrawal of Wrapped Bitcoin (WBTC) should be temporarily halted for an unspecified duration.
On September 18th, another significant DeFi platform called Aave also encountered a comparable proposal within its governance forum regarding its Wrapped Bitcoin (WBTC) holdings. Unlike Aave’s decision to not withdraw from WBTC, founder Stani Kulechov mentioned that the platform is contemplating an idea to decrease its dependence on this token. Currently, Aave manages approximately $990 million in debt exposure related to WBTC.
The WBTC market cap now stands at $9.7 billion, down 40% from its 2021 peak of $15.68 billion.
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2024-09-25 12:19