Threshold community proposes merger to safeguard WBTC amid growing concerns – CoinJournal
- Threshold community proposes merging tBTC with WBTC.
- The proposal is driven by concerns over WBTC’s stability due to Justin Sun’s involvement.
- According to the proposal, BitGo will receive T tokens, becoming a major stakeholder in Threshold Network.
In a strategic move to protect the future of Wrapped Bitcoin (WBTC), a proposal dubbed “#saveWBTC – a merger with Threshold’s tBTC” has been put forward to merge the decentralized tBTC token of Threshold with BitGo’s WBTC.
The proposal, currently under discussion on Threshold’s forum page, comes in response to rising concerns within the crypto community regarding WBTC’s stability following BitGo’s partnership with Hong Kong-based BiT Global, a company partly owned by Justin Sun, founder of the Tron ecosystem.
Unease with Justin Sun’s involvement with WBTC
The partnership has raised alarms due to Sun’s controversial track record, with past incidents of misappropriating collateral. This unease has already led major DeFi protocols like MakerDAO to limit their exposure to WBTC, halt its use as collateral, and consider fully offboarding the asset.
Aave, another significant player in the DeFi space, is also closely monitoring the situation.
The Threshold, WBTC merger proposal
The merger proposal seeks to replace WBTC’s centralized custody and merchant-based mint and burn model with its decentralized and permissionless mint/redeem mechanism. This transition aims to ensure the safety and stability of the underlying collateral, reassuring users and protocols reliant on WBTC.
The plan involves granting Threshold’s DAO merchant privileges for WBTC while disabling tBTC minting, allowing existing tBTC holders to redeem WBTC at a 1:1 ratio.
As part of the proposal, BitGo would receive a grant of T tokens, making it the largest stakeholder in the Threshold Network.
The merger would be implemented in stages to ensure a seamless transition, with a fallback plan to offboard WBTC safely if the proposal is declined.
By combining WBTC’s established user base and liquidity with tBTC’s decentralized technology, Threshold aims to preserve WBTC’s role in the DeFi ecosystem, ensuring that the concerns over BiT Global’s involvement do not destabilize the broader market.
