Bitcoin Merger Proposal with WBTC

Bitcoin (BTC) focused decentralized finance protocol Threshold is proposing a merger with WBTC, the largest wrapped bitcoin.

Proposal Details

Under this plan, BitGo would become the largest holder of Threshold’s T token, while transferring control of the WBTC mint and burn mechanism. This move aims to ensure the stability of WBTC, as well as the integrity of its collateral and user safety.

Background

This proposal follows scrutiny faced by BitGo after a plan to transfer partial asset control to a joint venture with Justin Sun’s BiT Global. In response, several protocols using WBTC as collateral announced they may offboard the asset. Notably, a recent MakerDAO vote to disable WBTC borrowing was ratified.

Threshold Network connects bitcoin to DeFi through various services, including its wrapped bitcoin, tBTC, and cross-chain token protocol Wormhole. It was created by merging NuCypher and Keep Network in 2022.

Alternative Proposal for Safety and Stability

If the proposal from NuCypher co-founder MacLane Wilkison is approved, 1,655,250,000 new T tokens would be minted, increasing the supply by 15% and vesting it with BitGo. BitGo would then transfer WBTC minting privileges to the Threshold DAO, ensuring custody of the bitcoin and halting minting of tBTC.

This strategy aims to enhance the safety and stability of the underlying collateral, reassuring market participants reliant on WBTC collateral as stated by Wilkison. However, the acceptance status of the proposal remains unclear.

BitGo CEO Mike Belshe has defended that Justin Sun’s involvement won’t compromise WBTC’s risk profile, asserting that the plan decentralizes WBTC via multi-jurisdictional custody.

Conclusion

If rejected, Threshold may still mint the additional T tokens to manage costs related to switching assets.