Lending protocol Sky (formerly MakerDAO) will vote to completely deprecate wrapped Bitcoin (WBTC) from its ecosystem, according to an article posted on a governance forum on Thursday. Since the proposal would affect $200 million in loans on the platform that are collateralized by WBTC, this could become a major development in the DeFi (decentralized finance) space.
WBTC is a wrapped token backed 1:1 by Bitcoin (BTC), allowing investors to use Bitcoin on other blockchains. The token plays an important role as collateral in the DeFi lending field and has a market value of approximately US$9 billion.
According to previous reports by Zombit, cryptocurrency custody company BitGo announced last month that it would transfer its WBTC business to a multi-jurisdictional joint venture established in cooperation with Hong Kong-based custody provider BiT Global, forming a joint venture between BitGo, Tron blockchain ecosystem and Tron A "strategic partnership" between founder Justin Sun This news has triggered concerns among some people in the encryption market, believing that it may face challenges in the DeFi ecosystem.
Due to concerns about the connection between Justin Sun and the custodian of WBTC's underlying assets, BA Labs, a DeFi risk management company influential in the governance of the Sky protocol, had recommended reducing exposure to WBTC. On Thursday, BA Labs proposed a five-step process to gradually remove all WBTC exposure from collateral assets, with the first step starting on September 26, with votes on each step.
BA Labs stated in the proposal that "we found that legal due diligence did not provide sufficient assurance" and suggested that if the proposal is passed, alternative products should be introduced on the platform.
According to an article published by BA Labs, there are currently about $73 million worth of loans on Sky-affiliated lending platform SparkLend that are collateralized by wBTC, while there are $127 million in WBTC-related debt in Sky’s Legacy Vaults. Sky recommends WBTC users of Legacy Vaults and SparkLend to close their WBTC positions.
The controversy surrounding WBTC has intensified the activity of competitors offering alternatives, including dlcBTC, Threshold’s tBTC, and FBTC powered by the second-layer network Mantle. Notably, American cryptocurrency exchange Coinbase yesterday announced the launch of its own wrapped Bitcoin, cbBTC.
