Written by: BlockBeats
Yesterday, BitGo's official blog showed that BitGo and BiT Global are creating a joint venture to diversify WBTC's custody and cold storage businesses across multiple jurisdictions, and BitGo will become a minority shareholder in the new joint venture. It is reported that BiT Global is a regulated trust and corporate service provider (TCSP) headquartered in Hong Kong, with a strategic partnership with Justin Sun and the Tron ecosystem.
As soon as the news came out, users speculated that Justin Sun might have significant influence or control in the joint venture that manages WBTC. This matter has a significant impact on the DeFi market, and the market is worried that the transfer of control of WBTC to him will bring unpredictable risks.
Jupiter co-founder meow published a "Letter to New and Old Custodians of WBTC" on social media, stating that Bitcoin held by WBTC should not be used for other purposes and hoped that BitGo could clarify the community's doubts.
The first project to respond in the DeFi market was MakerDAO, the largest acceptor of WBTC. MakerDAO plans to initiate a proposal to "reduce the size of WBTC collateral" in the executive vote on August 12 to deal with potential risks of changes in custody rights.
BA Labs, a crypto risk analysis and assessment agency, said that given the upcoming change in WBTC custody, WBTC collateral integration faces higher potential risks on Maker and SparkLend. If Bitgo or other relevant parties cannot convincingly prove the security of maintaining the existing WBTC collateral integration, BA Labs will consider further adjusting parameters to protect the protocol until WBTC collateral on Maker and SparkLend is completely removed.
In response to the above doubts, Justin Sun said, "BTC has not changed compared to before. The audit is conducted in real time and can be accessed through the website. The minting process is entirely managed by custodians Bitglobal and Bitgo, following the same procedures as before. Simply put, Bitglobal and Bitgo will not sign any unaudited transactions. The keys are still protected using the same Bitgo cold wallet technology and offline keys, and are backed up in multiple countries and regions. My personal participation in WBTC is purely strategic. I do not control the private keys of the WBTC reserves, nor can I move any BTC reserves."
But Justin Sun's statement did not calm the market. BitGo's CEO Mike Belshe responded on Monday, saying that he would downplay Justin Sun's involvement in the joint venture and emphasized BitGo's focus on security.
Long-term commitment. Belshe said: "BiT Global has a dedicated team managing multiple customer accounts, and they have a responsibility to ensure safekeeping. They can't lend the funds out, they can't just give the funds to Justin Sun, me or anyone else without violating the law and risking jail time." He also said: "In terms of audits, we have always had wbtc.network, which will continue to operate."
So why did the cooperation between BitGo and Justin Sun's related companies trigger such a strong market reaction? What is the relationship between BitGo and WBTC, and what impact will the cooperation have on the market? BlockBeats sorted out the views of some industry insiders as follows:
Aunt Ai (On-chain data analyst)
There have been a lot of discussions today about "changes in WBTC custody rights" - MakerDAO's new proposal considers closing new WBTC lending and reducing Spark's WBTC lending ratio to 0; Sun Ge came out to clarify, and Jupiter Lianchuang also published an article to express doubts.
This tweet will sort out the relevant data of $WBTC to help everyone better understand how important this familiar but somewhat unfamiliar asset is to the current crypto ecosystem.
The Origin of WBTC
WBTC (Wrapped Bitcoin) is an ER20 token issued on the Ethereum network, whose value is pegged to Bitcoin at a one-to-one ratio; each WBTC has a corresponding Bitcoin as a reserve, which is managed by a custodian (currently Bitgo) to ensure that WBTC holders can redeem it for Bitcoin at any time.
WBTC was first proposed in 2017, and the white paper was officially released and put into use in 2019. By 2020, the scale of locked BTC had exceeded US$2.1 billion, making it a well-deserved "bridge between Bitcoin and Ethereum."
WBTC data
Currently, WBTC supports Ethereum/Base/Kave/Osmosis/Tron networks, of which Ethereum mainnet minting accounts for as high as 99.8%. As of today, 154,726 WBTC (worth US$9.45 billion) have been minted, accounting for 0.78% of the total market value of Bitcoin.
Data from the Dune panel "WBTC: Supply Dynamics" shows that currently more than 41% of WBTC is used in the lending ecosystem, of which MakerDAO is the largest usage scenario (acceptor), and nearly 32% is used for direct transactions.
WBTC proofreading information
The impact on the security and actual use of WBTC is currently unclear. If you want to learn more about WBTC partners/specific transactions for minting and destruction/BTC custody addresses, etc., you can go to the website to find relevant information. The official has disclosed it very completely.
Overseas Crypto KOL
@iamDCinvestor: WBTC’s dramatic performance is a great example of why ETH has such a strong value proposition in the crypto and DeFi space.
@art_pleb: Agree without irony. My argument has always been that BTC will dominate if it has a relatively trust-minimized bridge to DeFi apps on a higher performing chain. Probably L2s or ETH/SOL.
If this does not happen, ETH has a bright future ahead thanks to its native on-chain functionality.
Liu Feng (Founder of BODL Fund)
The launch of WBTC is one of the most important landmark events in the gestation period before the Ethereum DeFi ecosystem burst into great vitality. It was the coldest time in the second half of 2018 when BitGo and the DeFi protocol, which was still in its infancy but had begun to show vitality, jointly launched WBTC, introducing BTC assets into the Ethereum ecosystem in a relatively centralized way, but with good reputation among participants.
Now the situation has changed drastically.
To put it simply, BitGo brought WBTC to Justin Sun's door: those precious Bitcoins that need to be locked to mint WBTC will have an additional custodian service provider in the future - a company called BiT Global from Hong Kong. The point is: this BiT Global is a joint venture between BitGo and Justin Sun. The question is, is BiT Global reliable? BigGo announced that BiT Global is a "TCSP (Trust or Company Service Provider)" licensed company in Hong Kong, which seems pretty bluffing. . . However, does the TCSP license have any value? . . Anyway, the data I saw is: this license was launched in 2018, and as of September 2020, more than 7,300 licenses have been issued. . .
You can taste it for yourself.
By the way, the information I saw was that BiT Global was registered and established on August 9, 2023. There was also an important news that month: BitGo was previously unable to produce audit reports on time, and Galaxy Digital cancelled the acquisition agreement. It failed to win the lawsuit, so it had to suspend its acquisition of Prime Trust, lay off employees, reduce costs, and find money to save itself. Finally, in August 23, it announced that it had raised $100 million.
When BitGo announced this round of financing in August 2023, it was coy about not disclosing who the investors were in this round. Later, it was reported that some of the new investors were from Asia. Now it seems that Sun Ge may have already had a hand in BitGo at that time. This is just speculation. BitGo is a centralized custodian, and WBTC is a centralized synthetic asset. I think BitGo has a responsibility to make these arrangements clear, otherwise...
Waterdrop Capital CEO Dashan also said in the comment section, "For problems that can be solved with technology, don't test human nature."
Insight Finance
Bitcoin fell, and WBTC caused a huge shock.
MakerDao released a proposal to sell off:
The community of DeFi project MakerDAO launched a proposal to clear WBTC in Maker's collateral warehouse. The proposal caused a huge shock in the industry. After all, Maker is the largest collateral lending protocol in the industry, and currently manages nearly 5 billion US dollars of 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 10 billion US dollars.
WBTC may cause a large number of Defi projects and L2 projects to be at risk: Currently, many Defi projects will choose WBTC to flow in from Ethereum. Once WBTC is anchored, most projects will be implicated. Just like a cluster bomb surge.
