As an analyst with over two decades of experience in the volatile world of cryptocurrencies, I have seen many twists and turns that could make even the most seasoned investors question their convictions. The recent developments surrounding Sky’s decision to phase out its exposure to wrapped Bitcoin (WBTC) is yet another instance of the unexpected events that shape this dynamic industry.
In response to a controversy arising from the announcement made by the WBTC team regarding the increased involvement of Tron blockchain founder Justin Sun and BiT Global, a cryptocurrency custody firm he advises, Sky – a well-known DeFi protocol – is phasing out its ties with Wrapped Bitcoin (WBTC).
Based on a governance announcement made on Thursday, the entity responsible for DAI stablecoin will be taking out wrapped Bitcoin (WBTC) collateral from the Sky Ecosystem, affecting both Legacy Vault Types and SparkLend. This move is significant within the digital asset industry as currently, Sky has around $200 million in loans secured by wrapped Bitcoin.
It is important to note that WBTC allows holders of the asset to use the market-leading cryptocurrency, Bitcoin (BTC), on other blockchains. The digital asset plays a vital role in the crypto lending and borrowing sector as well, and WBTC has a market capitalization of $8.8 billion and a trading volume of $148 million.
As Sky explained, the termination process, or offboarding, will be carried out gradually across various Executive Votes. This procedure is slated to initiate during the Executive Vote scheduled for September 26, 2024.
Furthermore, BA Labs, a company known for risk management and a key advisor within the Sky Ecosystem, has issued a cautionary notice about the potential risks linked to Sun’s collaboration on the Wrapped Bitcoin project. They have also suggested a phased approach to eliminate all ties with WBTC, which would involve five stages, each requiring a vote before implementation.
“We find that legal due diligence would not provide an adequate level of assurance,” said BA Labs.
Instead, Sky urged the digital asset community through social media platform X (formerly known as Twitter) to shut down their Wrapped Bitcoin Legacy Vaults and SparkLend positions since the protocol will no longer interact with wrapped Bitcoin. Furthermore, BA Labs suggested that Sky consider integrating other cryptocurrencies for use as collateral rather than wrapping Bitcoin.
Big Moves Have Big Consequences
Last week, BitGo, the company responsible for WBTC, declared that it would hold a smaller percentage of shares in its own initiative. Instead, Justin Sun and BiT Global will take the majority ownership, making all significant decisions concerning the wrapped Bitcoin project. Notably, while WBTC is primarily utilized on Ethereum, it can also be found on other platforms such as Binance Smart Chain (Base), Kava, Osmosis, and Tron.
As a researcher, I’m excited to share that, building upon BitGo’s assertion, Coinbase, a prominent American cryptocurrency trading platform, has chosen to capitalize on this development by confirming the launch of their own wrapped Bitcoin product known as Coinbase Wrapped BTC (cbBTC). The exchange announced that cbBTC will be recognized pari passu with BTC in its order book and will be minted on both Ethereum and Binance Smart Chain (Base).
Currently, cbBTC boasts a market capitalization of approximately $111,575 and a trading volume of around $169,778. Notably, there are other emerging players in the field such as dlcBTC, tBTC from Threshold, and FBTC which enjoys the backing of Mantle Network.
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2024-09-13 12:16