SNEAK PEEK

  • Sky platform may fully offload WBTC, affecting $200M in DeFi loans amid custody concerns.

  • BA Labs pushes for a phased WBTC offboarding due to risks linked to Justin Sun’s involvement.

  • Sky’s decision on WBTC could reshape DeFi lending, impacting $73M on SparkLend, $127M in vaults.

Sky, one of the leading decentralized finance (DeFi) platforms, formerly known as MakerDAO, is poised to make a significant decision regarding the future of wrapped Bitcoin (WBTC) within its ecosystem. 

The platform, managing a large percentage of DeFi lending, plans to put to the vote whether to exit from using WBTC as one of the collateral assets fully. This decision if enacted has the potential to affect around 200 million US dollar equivalent of DeFi loan protocols that use the token as collateral. 

The proposal to remove WBTC from Sky’s ecosystem concerns the involvement of Tron founder Justin Sun with the custodian of the underlying assets. WBTC, a token that enables Bitcoin (BTC) to be utilized on other blockchains, plays a crucial role in DeFi lending, boasting a market capitalization of $9 billion. 

However, the recent developments surrounding the token’s custody have raised red flags within the Sky community.

Concerns arose further about WBTC when BitGo, a leading crypto custody service provider, initiated the process for handing over the asset management to BiT Global, a Hong Kong-based custody provider. The process was designed to distribute custody among three global entities instead of one single custodian, decentralizing the process. 

DeFi risk management firm BA Labs, which holds large sway over Sky’s governance, passed the proposal to dump WBTC. The firm used to suggest decreasing the extent of interacting with WBTC because of the presumed dangers of involvement from Justin Sun. 

On Thursday, BA Labs proposed a phased approach to gradually offboard all WBTC exposure, beginning on September 26, 2024. Each step would require a separate vote from the Sky community.

If you are a user with WBTC collateral in Legacy Vaults (WBTC-A, WBTC-B, or WBTC-C) or SparkLend, please be aware of the WBTC offboarding proposal initiated by @BlockAnalitica.According to the plan outlined by @BlockAnalitica, and pending governance approval, WBTC offboarding…

— Sky (@SkyEcosystem) September 12, 2024

In its proposal, BA Labs emphasized the need for legal due diligence but ultimately concluded that it would not provide sufficient assurance. The firm also suggested that Sky consider onboarding alternative collateral products should the proposal pass.

Sky’s Affiliated lending platform, SparkLend, now has 73 million US dollars equivalent of loans utilizing WBTC as a collateral asset, while Sky’s previous-generation vaulter possesses 127 million US dollars equivalent of debt anchored on WBTC.

The post Sky Set to Vote on WBTC Offloading Amid Justin Sun-Related Concerns appeared first on Today NFT News.