Threshold Proposes Partnership to Increase WBTC Decentralization
How will BitGo and BiT Global Respond? Plus Lido, Aave, and Arbitrum Updates.
Wrapped Bitcoin, or WBTC, has been the standard for bringing Bitcoin into the DeFi ecosystem for years. Created in 2019 by BitGo and others, WBTC is converted into an ERC-20, bringing Bitcoin liquidity to Ethereum and other chains. BitGo has been the primary custodian of the BTC backing WBTC.
However, in August of this year, BitGo announced that it is transitioning WBTC custody to a multi-jurisdictional framework through a joint venture with BiT Global. The idea is that this change will enhance security by “diversifying both custodial jurisdictions and locations for the underlying Bitcoin, which was previously held in the United States.” But there was a revelation in the announcement: “This is a strategic partnership between BitGo, Justin Sun, and the Tron ecosystem,” the post says. This set off alarms in many communities — including, for example, that of DeFi OG Maker/Sky, where there was an (ultimately unsuccessful) move to prevent new borrowing against WBTC collateral.
Enter Threshold
Last week, Matt Luongo posted in the Threshold Network forum to propose a way for Threshold to “work together with BitGo, BitGlobal, and the greater WBTC ecosystem to further decentralize WBTC, maintaining its healthy lead on other BTC tokens across DeFi.” Threshold is the organization behind tBTC, a decentralized alternative to WBTC that has been in operation since 2020 and today secures $1.2 billion across DeFi. (tBTC just hit the supply cap on Aave, for example.)
Luongo’s proposal recommends that BitGo and BitGlobal further decentralize WBTC by expanding its signer set through the Threshold network, thereby reducing single points of failure. The plan involves integrating BitGo and BitGlobal into the network, offering fee-free decentralization options for WBTC holders, and eventually decentralizing WBTC’s operational management. A 16% mint of Threshold’s T tokens is proposed to align interests, including strategic grants and delegations to critical stakeholders, with milestone-based vesting linked to BTC migration levels. Technical improvements, such as increasing the number of signers and upgrading to Schnorr/ROAST protocols, are intended to strengthen custody security. Funding and economic model working groups are also suggested to ensure the long-term sustainability and economic security of tBTC and the Threshold network.
Stepping Back
Stepping back for a moment from the particulars of Luongo’s proposal, it’s fascinating to observe a decentralized entity (Threshold) with a proven product (tBTC) pitch a partnership proposal to large, well-capitalized corporations such as BitGo and BiT Global. While BitGo’s Mike Belshe publicly responded to the Maker/Sky proposal to back away from WBTC, there’s no public indication so far that he or anyone from BiT Global is interested in Threshold’s proposal. In some ways, the proposal could be seen as calling the bluff of WBTC’s current backers. How interested in decentralization and security are they really? What might the answer to that question reveal about WBTC more broadly?
🔍 Key Developments Across the Ecosystem
1. Lido Proposes Onboarding Bolt to the Lido Alliance
Lido DAO is considering a proposal to onboard Bolt as a new member of the Lido Alliance. Bolt is a staking infrastructure provider focused on enhancing decentralization by allowing smaller operators to participate in staking services. By joining the Lido Alliance, Bolt aims to contribute to the growth and security of the Ethereum network, while diversifying the set of validators within Lido's ecosystem. Community discussions are primarily focused on how Bolt can help improve decentralization and security, but some members are raising questions about how Bolt’s infrastructure will integrate with Lido’s existing services.
2. Moonwell Proposes Adding wRSETH Market to Base & Optimism
Moonwell DAO is considering adding a wRSETH market to the Moonwell platform on Base and Optimism. This proposal aims to expand the availability of wrapped RETH (Rocket Pool's liquid staking derivative) to the Moonwell markets, allowing users to leverage wRSETH in lending and borrowing activities. Adding wRSETH could increase liquidity and offer more options for DeFi participants across the Base and Optimism networks. Community members have been discussing the potential risks and benefits, particularly liquidity and interest rate modeling.
3. Arbitrum Proposes Enhancing Multichain Governance by Upgrading RARI Governance Token
Arbitrum DAO is exploring a proposal to upgrade the RARI Governance Token as part of a broader initiative to enhance multichain governance. This upgrade aims to improve the token's utility and enable more seamless governance across various chains. The proposal has sparked discussions around the technical aspects of the upgrade, including how it will affect governance participation, security, and integration with other platforms. Supporters of the proposal argue that it will enhance the efficiency of multichain governance, while others are keen on ensuring that potential risks are carefully mitigated.
4. Aave Proposes World Liberty Financial Aave v3 Instance on Ethereum Mainnet
Aave DAO is conducting a temperature check on the proposal to launch a World Liberty Financial Aave v3 instance on the Ethereum mainnet. This proposal seeks to bring new financial products to the Aave ecosystem, expanding the platform's reach and capabilities. The initiative enhances capital efficiency and provides users with additional financial tools and services. Community discussions are focused on the potential benefits, including increased liquidity and diversified product offerings, while some members are raising concerns about possible security risks and how this new instance will interact with existing protocols on Ethereum.
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