MakerDAO Moves Away From WBTC Over Controversial Custodian

MakerDAO passed a proposal to disable borrowing against wrapped bitcoin (WBTC) and reduce the WBTC vault debt ceilings to zero.

The motion, approved on Aug.15, will reduce MakerDAO’s exposure to WBTC and prevent future WBTC borrowing, however current WBTC positions and uses will remain unaffected “for now,” the proposal said.

The move is a response to the decision of WBTC’s custodian Bitgo, to transfer control of the asset to a joint venture consisting of itself and BiT Global. Bit Global includes a partnership with Justin Sun, the controversial founder of the Tron blockchain.

MakerDAO contributors found the development to be a potential security concern when considering Sun’s reputation, which was most recently called into question when TrueUSD (TUSD) depegged in January. Sun became heavily involved in TUSD after he minted 25% of the TUSD supply and sent the funds to a HTX, a centralized exchange that he controls.

Maker is not the only large decentralized finance (DeFi) primitive that is considering changing their WBTC usage. Members of the Aave community are preparing a proposal to also move away from WBTC, and implement tBTC as an alternative.

It was reported by Unchained on Aug 15, that Marc Zeller, head of the Aave-Chan Initiative, wrote to the outlet stating “his organization is actively working to onboard tBTC and aims to have a governance vote on the improvement proposal by next week.”

While these DeFi giants move away from WBTC, it remains the largest tokenized version of Bitcoin by a landslide. WBTC’s market capitalization is just over $9 billion, nearly 50 times larger than tBTC and its $185 million market cap.

However, there are rumors that a new tokenized Bitcoin alternative may be coming to market soon after Coinbase cryptically posted “cbBTC. Coming Soon” on Aug 13.