MakerDAO Halts New WBTC-Collaterized Loans Due To Its BitGo Concerns
The decentralized finance (DeFi) platform Maker DAO has discontinued the issuance of new loans with wrapped BTC as collateral.The DAO's executive vote reduced the WBTC debt ceiling to zero DAI, cutting out BitGo's WBTC-backed fresh loans
The decision came amid growing concerns over the asset's security stance and BitGo's management.
MakerDAO Governance Approves The Halt Of WBTC-Backed New LoansMakerDAO governance approved the contributors' proposal to discontinue new loans with BitGo's wrapped bitcoin as collateral.
The latest Executive Vote has been approved by Maker Governance.
The following changes were executed within the Maker Protocol on August 15th at 13:24 UTC:
WBTC Vault Debt Ceiling Reductions
WBTC-A, WBTC-B, and WBTC-C were removed from the... pic.twitter.com/kJHaWY3tEt
- Maker (@MakerDAO) August 15, 2024
The DAO upheld the decision through an executive vote,bringingdown the WBTC debt ceiling to zero.As a result, the platform revealed its move to stop new borrowing against WBTC. Further, the decision has set the loan-to-value (LTV) ratio for WBTC to 0%.
Usually, MakerDAO allows its users to mint DAI coins as an over-collateralized loan. The new decision will not impact all existing WBTC-backed loans since their liquidation limits won't change.
MakerDAO's decision is based on the project's commitment to standard safety measures and risk management. It conducted a risk analysis on BitGo, the company behind wrapped bitcoin (WBTC)
Notably, the DAO is skeptical of BitGo's recent disclosure of collaborating with BiT Global, an entity affiliated with Tron founder Justin Sun. Sun is prominent in the crypto space as a controversial personality, and his contentious background speaks volumes.
BitGo is pleased to announce the move of its WBTC business to the world's first multi-jurisdictional and multi-institutional custody via a unique partnership and joint-venture with BiT Global.
This upgrade will occur 60 days from today with no disruption or interruptions to... pic.twitter.com/yNUoyTwsqL
- BitGo (@BitGo) August 9, 2024
The partnership will transfer WBTC's custody from the US to several jurisdictions, such as Hong Kong and Singapore. These indications in the collaboration between BitGo and BiT Global would be alarming to MakerDAO contributors.
Also, there are concerns about the emergence of a centralized authority on wBTC via the partnership. However, BitGo has tried to calm the situation in a statement, emphasizing security as its priority.
In an online discussion on X, BitGo CEO Mike Belshe disclosed the tenets of the collaboration.He reiterated that the two companies will maintain strict legal and security measures to ensure continuous protection and integrity of the assets.
Look forward to discussing tomorrow. New link:https://t.co/gaeTVvULMv
- Mike Belshe (@mikebelshe) August 13, 2024
Again, Belshe explained that Justin Sun has no access to the crypto custodian's asset keys. He reassured the public that the asset was not under the influence of a centralized authority.
MakerDAO Commits To High-Standard Security PracticesBelshe stated: There is no single party that has the ability to mint or steal from the underlying treasury."
The need for continuous scrutiny of digital asset custodians can't be over-emphasized in the industry. MakerDAO is a decentralized autonomous organization that operates in a decentralized pattern by using smart contracts.
The group creates and enforces agreements as software codes that it executes on the Ethereum blockchain. Through democratic practices, members of the DAO use the governance token Maker (MKR) to vote for changes and decisions on the platform.
MakerDAO's latest decision reflects its move to maintain a transparent operational system for its community.
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