AAVE DAO recently received a proposal to integrate cbBTC , Coinbase's upcoming new Bitcoin wrapper, into its V3 platform on Ethereum mainnet and Base.
AAVE founder Stani Kulechov explained that the proposal is intended to solidify AAVE ’s position as a leading platform for launching tier-1 assets.
The new proposal aims to expand options for Bitcoin holders to participate in the DeFi ecosystem on AAVE V3. Integrating cbBTC would provide users with more opportunities to leverage their Bitcoin, which could boost liquidation and participation on the platform.
The integration of cbBTC fits with AAVE ’s strategy of providing high-quality assets. It allows users to access Coinbase’s liquidation while still taking advantage of AAVE’s established lending and borrowing features.
The proposal argues that a partnership between a major centralized exchange and a leading DeFi platform could attract mainstream users and boost the platform’s growth. At the same time, the proposal also highlights concerns regarding Wrapped Bitcoin (WBTC) due to its association with TRON founder Justin Sun. The proposal points out:
“Given the current volatility of WBTC, having alternative BTC Token to use on AAVE is essential. The trust in Coinbase as an issuer and custodian could make cbBTC a more reliable option than WBTC.”
The proposal concludes that, while cbBTC may cannibalize WBTC’s market share, it still offers a valuable alternative that could drive BTC adoption on AAVE.
Meanwhile, an AAVE user named Midapple expressed concerns that the inclusion of cbBTC may be premature, as the asset has yet to be fully operational.
The user raised a number of unanswered questions, including the minting mechanism, liquidation concerns, and Proof of Reserves. Midapple also highlighted potential regulatory risks, noting that Coinbase could face challenges that could impact cbBTC. They also raised concerns about custody risks, noting that if cbBTC relied too heavily on Coinbase, it could create a single point of failure.
Finally, Midapple concludes:
“It appears that the standard due diligence process has been bypassed and cbBTC is receiving special treatment that other assets do not receive. This sets a dangerous precedent and calls into question the integrity of our decision-making process.”
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