Sky, a pioneer in decentralized finance and previously known as Maker, is moving forward with its initiative to offload wrapped Bitcoin (WBTC) collateral from its platform. A recent governance vote concluded on September 19, where the Sky community showed overwhelming support for removing WBTC exposure, approving the proposal with 88.17%, totaling 95,826 MKR pledged. Only a small portion, 11.83%, abstained from voting, with no dissent noted, although participation was limited to 13 major holders of MKR.
The process to offload WBTC will be conducted in several phases, starting on October 3 and culminating on November 28. Currently, Sky’s SparkLend, a decentralized liquidity protocol, holds $61.38 million in collateralized debts backed by WBTC. concerns regarding WBTC were raised by BA Labs, an advisory group, back in August, leading to a proposal on September 12 to offboard WBTC variations from both SparkLend and Legacy Vaults. The apprehension stemmed from recent changes in WBTC ownership, particularly tied to Justin Sun and his affiliates, causing worries about counterparty risks linked to their prior activities.
Further complicating matters, BitGo, the custodian responsible for the Bitcoin backing WBTC, formed a partnership with BitGlobal, affiliated with Justin Sun in August. This relationship raised additional concerns about WBTC’s reliability. Meanwhile, Sun has spoken publicly in defense of WBTC, asserting that it remains unaffected by any Chinese regulations.
In response to these complications, Sky is exploring alternatives for wrapped Bitcoin , considering options like Coinbase’s cbBTC and Threshold’s tBTC to replace WBTC as collateral. The broader DeFi landscape is witnessing similar hesitations, as shown by a recent request on the governance forum of a major competitor, Aave, to lower its exposure to WBTC due to concerns regarding BitGo’s partnership and its ramifications for the transparency of WBTC. As of now, the wrapped Bitcoin market on Ethereum sits at about 152,942 BTC with a market capitalization nearing $9.6 billion, reflecting a significant drop from previous highs.
