BitGo recently announced an initiative to decentralize the issuance of Wrapped Bitcoin (WBTC) through a partnership with Justin Sun. The move, while strategic, has raised concerns among investors due to Sun’s controversial reputation in the crypto ecosystem.
Investors wary of projects involving Justin Sun
Bitcoin is widely considered a store of value by most cryptocurrency enthusiasts, including Ethereum users. For several years, BTC has been integrated into Ethereum and its layer 2 decentralized finance (DeFi) protocols through Wrapped Bitcoin (WBTC).
WBTC is an ERC-20 token on the Ethereum blockchain, representing a real Bitcoin held by the reserves of BitGo, a company specializing in financial services for digital assets. It is BitGo that thus ensures the 1:1 parity between WBTC on the Ethereum blockchain and BTC on the Bitcoin blockchain.
🪙 Learn more about Wrapped Bitcoin (WBTC)
BitGo recently announced the move of WBTC custody to a “multi-jurisdictional” solution. This initiative aims to strengthen the security of WBTC by diversifying the jurisdictions and locations where Bitcoins will now be stored not only in the United States, but also in Hong Kong and Singapore.
Bitcoin is valued for its decentralization and censorship resistance. However, Entrusting your BTC to a third party to receive a token on another blockchain in return does not allow you to benefit from the qualities of Bitcoin, but only from the volatility of its price..
BitGo's initiative therefore has the main objective of making the issuance of WBTC less centralized, and less dependent on US regulation.
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However, this announcement is not entirely positive. In addition to potentially complicating the issuance of WBTCs due to the different legislations that the WBTC will have to face, The initiative is based on a joint venture with Hong Kong-based BiT Global and a strategic partnership with the Tron ecosystem and its CEO, Justin Sun..
Justin Sun's involvement in Wrapped Bitcoin issuance has raised concerns among investorsgiven the reputation for lack of transparency and recurring problems associated with the projects the contractor leads.
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Projects that Justin Sun is involved in, such as TUSD, have often been marked by significant degradation.including the suspension of real-time proof of reserves, significant parity losses due to service interruptions, and the resignation of previous management teams.
Because of all of these elements, Justin Sun's involvement in the issuance of WBTC is interpreted by investors as an additional risk to the protocol.
In reaction, The BA-Labs team proposed an executive vote to decide whether MakerDAO should hold WBTC in its reserves to mitigate this risk.The vote is scheduled for today, August 12, 2024.
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Source: BitGo, Maker DAO
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First attracted by the lure of gain, I am now trapped deep into the rabbit hole. With no way out, I have no choice but to share my knowledge and transmit the passion I have for the blockchain universe. I am also the creator of Adopt a Block, an educational site dedicated to Bitcoin.
Marius Farashi Tasooji
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