jakiro
Overnight BTC continued to slightly repair up to the 61-62k range.Hey, the dawn is quiet here.The bears have no fantasy, and the bulls have no temper.Maybe five years later, a joke will be circulating in the industry: I have a friend who is still waiting for BTC of 20,000 yuan.
Jiaolian saw it online that some netizens firmly believe that BTC will fall back to $20,000, or even $10,000.In fact, if you can see 10,000 yuan, you can see 1,000 yuan; if you can see 1,000 yuan, you can see 100 yuan, 10 yuan, 1 knife… On the road to bearishness, you are not lonely, and there is no end..
Yesterday, the community of well-known DeFi project MakerDAO launched a proposal to clear WBTC in Maker’s mortgaged warehouse.As soon as the proposal was released, it caused a huge shock in the industry.After all, Maker is the largest mortgage lending agreement in the industry and currently manages nearly $5 billion in various digital assets on the chain.WBTC is the largest BTC cross-chain asset on the Ethereum chain, currently managing more than 150,000 BTC with a total value of nearly US$10 billion.
Let’s read the original text of this proposal first:
Translate:
WBTC Changes and Risk Mitigation – August 10, 2024
background
Yesterday, on August 9, Bitgo announced plans to transfer control of WBTC products to a joint venture with BiT Global.This will result in the dispersion of custody in multiple jurisdictions, including Hong Kong and Singapore, compared to current custody in the United States.Bitgo disclosed that this change implements a partnership with Justin Sun and Tron (Tron) ecosystems; therefore, we can infer that Justin Sun will have a significant impact or control over the joint venture that manages WBTC.This change of control is expected to be completed within 60 days.
This is somewhat similar to the previous situation regarding control of TUSD stablecoins, which was discussed in the Maker forum.Since TUSD was placed under Justin Sun’s control, market operational processes and transparency have deteriorated, including several major decouplings caused by the resignation of the former management team, suspension of real-time certificates of reserves, and disruptions in redemption services.We also see other Justin Sun-related projects showing concerning signs of possible misappropriation, such as replacing Huobi’s USDT reserves with stUSDT, a RWA project controlled by Justin Sun, claiming to hold U.S. Treasury reserves, but notProvide clear audit or evidence to prove there is support.Overall, we find that Justin Sun’s participation as a controlling stake in the new WBTC joint venture poses unacceptable risks.
We also noticed that Bitgo itself appears to have had some negative developments lately, including the failed acquisition of Galaxy Digital, which has withdrawn for undisclosed reasons.This, coupled with the unexpected decision to divest WBTC products, could be a sign of Bitgo’s internal financial distress and negatively impact Bitgo’s counterparty risk.While some risk factors are purely speculation, it makes sense to act cautious given the key role WBTC collateral plays in DeFi.
Suggested measures
Given the upcoming change of control, BA Labs believes that the integration of WBTC collateral on Maker and SparkLend poses higher risks.BA Labs recommends that stability facilitators propose the following immediate actions to limit the growth of WBTC risk, which will be included in the next upcoming execution vote on Monday, August 12:
Core Vault:
WBTC-A DC-IAM Line (Maximum DC): Decreased from 500 million to 0
WBTC-B DC-IAM Line (Maximum DC): 250 million to 0 from 250 million
WBTC-C DC-IAM Line (Maximum DC): Decreased from 500 million to 0
SparkLend:
Disable WBTC lending
Reduce WBTC LTV from 74% to 0%
If Bitgo or other responsible persons cannot convincingly prove that maintaining current collateral integration is safe, we will consider further recommendations to change parameters to protect the agreement and reduce counterparty risk until and including possible cancellation of all Maker and Spark WBTC collaterals entirelyProduct integration.”
Friends who don’t know much about the complex relationships and development history of the crypto industry may be confused by these nouns and concepts.Let’s briefly explain the teaching chain to readers:
First of all, everyone needs to understand a question: under what circumstances does your BTC truly belong to you?
The answer is that the BTC in the Bitcoin address that you have and only the private key you have, corresponds to and controls, is the BTC that truly belongs to you.
For example, “address” is the safe number, and “private key” is the key to open the safe.
Quiz: You have 3 BTCs in your account on a certain exchange.How many BTC do you have?The correct answer is: 0.
The situation of WBTC is more complicated than the situation of exchange accounts.
WBTC is also a so-called “digital asset”, which is also placed in the “safe” (address), and is controlled by the “key” (private key) in your own hands.However, it is different from the BTC above:
1. The safe that installs WBTC is not the same batch of safes as the one that installs BTC.The safe that installs BTC is orange; the safe that installs WBTC is blue.Another name for this batch of blue safes is “Ethereum”.
2. There is no real BTC in WBTC.It’s just a “white strip” locked in a blue safe, just a white strip.
For example, if BTC is electronic gold, then WBTC is electronic paper gold.
It can be seen that even assets owned by private keys and addresses may not be real underlying assets.
Quiz: You have 1,000 USDT in your Ethereum address.How many dollars do you have?The correct answer is: $0.
The crypto industry is full of confusing concepts.For example, the term “cross-chain”.The common narrative is this: you cross-chain 1 BTC to Ethereum, and then you have 1 WBTC in your Ethereum address.
The truth is: BTC has always been only available in Bitcoin’s orange safe.BTC can never be “crossed” or “transferred” to other blockchains (other color safes), such as Ethereum.
The so-called “cross-chain BTC to Ethereum” is:
1. You take out the BTC that you really own in your own orange safe and hand it over to another orange safe managed by a company (such as BitGo mentioned above).After this step is completed, you lose your BTC.
2. This company, also known as the custodian, will issue a “white stick” on Ethereum, namely WBTC, which is roughly the same as the number of BTC you handed over to the company in the previous step (excluding procedures) and then put the “white bar” WBTC into your blue safe on Ethereum.After this step is completed, you get “White Bitcoin” – WBTC.
It can be seen that whether the WBTC you have can still be exchanged for BTC, and whether the trustee is honest and reliable.Obviously, holding and using WBTC must always face third-party risks.This is an inevitable price.
The design mechanism of WBTC is to adopt (1) reliable custodians and (2) multi-custodian strategies to reduce third-party risks.
Some smart friends may say that by using technical means to automate hosting and completely eliminate the participation of the custodian, can we avoid third-party risks?Unfortunately, the tortuous path of industry development has taught people a bloody and tears: the so-called automated code that eliminates the participation of trustees cannot escape the clutches of hackers.
Code vulnerability, hackers steal coins.The fourth party risk became the sword of Damocles hanging on everyone’s head.The risks are far beyond those of third-party risks.The result is that so far, WBTC is still the most popular and largest cross-chain protocol on Ethereum with cross-chain (the largest number of hosted BTCs).
Teaching Chain even speculates pessimistically that the difficulty of designing a fully automated, 100% reliable decentralized cross-chain protocol may be no less than reinventing a BTC.In other words, the probability of success is close to 0.
Well, now everyone understands how huge impact will BitGo, as an important custodian behind WBTC, have his business transfer behavior on WBTC’s security – essentially the security of BTC behind it?
What’s more, the object it intends to transfer is suspected to be controlled by Brother Sun, who is full of controversy in the industry, which has caused great concerns in the community about asset safety.
What was Satoshi Nakamoto’s original intention to invent BTC?Eliminate dependencies on trusted third parties.
Don’t believe in human nature.Don’t believe in the promise of red-mouthed white teeth.Don’t trust anyone.
Only the real BTC held on the chain eliminates all secure holdings of trusted third parties.
During the 2021 bull market, Jiaolian once crossed the chain and put some WBTC into Maker as collateral, but later all positions were closed at the end of 2021.Currently, no WBTC is held.
There is a saying that a gentleman does not stand under a dangerous wall.Let me share with you.
