Belshe Recommends Halting WBTC Offboarding
Decentralized finance pioneer Sky, formerly known as Maker, is reevaluating its decision to remove Wrapped bitcoin (WBTC) as collateral in its lending protocol. The reconsideration comes after key adviser BA Labs recommended pausing the offboarding process following discussions on the Sky governance forum.
On September 24, BA Labs advised halting the WBTC offboarding process. This recommendation followed detailed conversations with BitGo co-founder Mike Belshe, who addressed community concerns regarding changes in WBTC's management and custody.
Belshe reassured the community by emphasizing BitGo's commitments, including control over signing keys and a promise to provide at least 60 days' notice before making any significant changes. The 60-day notification standard, according to Belshe, underscores transparency and has been consistently upheld.
Profound Trust and Security in WBTC
Belshe highlighted that these practices aim to maintain trust and security in WBTC as a decentralized financial instrument. In light of BitGo's assurances, BA Labs expressed a more positive stance toward preserving WBTC as collateral.
Monet-supply, a member of the BA Labs team and DAO delegate, stated that with current commitments from BitGo and a reduced exposure of WBTC to $170 million in total borrowing, the collateral risk has become more manageable. Monet-supply added, "While we continue to have concerns about BitGlobal serving as a signer for WBTC, we find it is no longer at a level requiring immediate collateral offboarding."
Therefore, BA Labs recommended indefinitely pausing the collateral offboarding procedures. This new proposal will be subject to an executive vote on October 3, potentially reversing the previous decision made on September 19.
The earlier governance vote, which garnered 88% approval, proposed offboarding WBTC collateral through a step-by-step process starting in October. This proposal arose following BitGo's transfer of WBTC custody to BitGlobal, causing significant apprehension within the Sky community.
Belshe Criticizes Coinbase's cbBTC
In response to community concerns, Belshe expressed dissatisfaction with comparing WBTC to Coinbase's cbBTC, noting that the latter lacks proof-of-reserves (POR) and could introduce more risk. Belshe argued, "You're proposing to shift all current WBTC, POR-mitigated risk to CB, when they lack POR and have stated they will never implement it."
BA Labs also stressed the importance of proof of reserves in mitigating WBTC risks and recommended that Sky evaluate potential risks of WBTC versus Coinbase's cbBTC. Additionally, BA Labs suggested specific adjustments to Sky's lending parameters to enhance risk management.
The primary concern behind this proposal is Justin Sun's involvement, the founder of Tron. Last month, BA Labs raised concerns about Sun's role in the new WBTC management structure, posing a significant risk to MakerDAO. At that time, BA Labs proposed fully offboarding WBTC unless BitGo and its partners could convincingly demonstrate the safety of current collateral arrangements.
