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Cryptocurrency News Articles
Sky Reconsiders WBTC Offboarding Plan After New Recommendation From BA Labs
Sep 25, 2024 at 11:57 am
Decentralized finance (DeFi) pioneer Sky, formerly Maker, is reconsidering its plan to offboard Wrapped Bitcoin (WBTC) as collateral for its lending protocol
Decentralized finance (DeFi) pioneer Sky, formerly Maker, may reconsider its plan to offboard Wrapped Bitcoin (WBTC) as collateral for its lending protocol following a new recommendation from one of its key advisers.
On Sept. 24, BA Labs recommended pausing the WBTC offboarding plan following a lengthy conversation with BitGo co-founder Mike Belshe on Sky’s governance forum.
The move follows BitGo’s clarifications about changes in management or custody of WBTC, control of the signing keys, and commitment to give advance notice of changes.
BitGo committed to providing at least 60 days of public written notice before any future changes to entities controlling WBTC keys. Belshe emphasized that BitGo created this “60-day standard” and has always followed it.
BA Labs team member and DAO delegate “monet-supply” said with these commitments in mind and overall WBTC exposure falling to $170 million in total borrowing, the collateral risk is in a “more acceptable range.”
The new recommendations will be put up for an executive vote on Oct. 3.
BitGo was the sole custodian of the Bitcoin backing WBTC until August, when it entered into a partnership with Tron founder Justin Sun’s BitGlobal to transfer custody, sparking concerns among the Sky community.
This led to a governance vote on Sept. 19 for a proposal to offboard WBTC collateral. The vote passed with 88% in favor of the platform removing its exposure to wrapped Bitcoin in a five-step process starting in early October.
Belshe’s responses indicated a level of frustration while emphasizing BitGo’s track record and commitments. He also questioned the logic of favoring Coinbase’s centralized cbBTC over WBTC.
BA Labs also discussed the importance and limitations of proof of reserves for WBTC and suggested comparing risks between WBTC and Coinbase’s cbBTC.
Other specific parameter changes recommended included reducing liquidation penalties, adjusting liquidation ratios, and lowering the liquidation protocol fee for Sky’s Legacy Vaults and SparkLend.
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