Sky to Vote on Ditching Wrapped Bitcoin (WBTC) From Its Ecosystem

Sky, the decentralized finance lender formerly known as MakerDAO, will vote on fully ditching wrapped bitcoin (wBTC) from its ecosystem

Sky, the decentralized finance lender formerly known as MakerDAO, will vote on fully ditching wrapped bitcoin (wBTC) from its ecosystem, in a move that could potentially remove a substantial amount of loans from the platform.

The governance vote was proposed by BA Labs, an influential voice in the Sky protocol's governance, due to perceived risks from Tron founder Justin Sun's involvement with the custodian for the underlying assets.

Sky is one of the biggest DeFi projects and issuer of the $5 billion decentralized stablecoin DAI, so the development has been closely tracked by crypto analysts and blockchain industry watchers.

On Thursday, BA Labs proposed to gradually offboard all wBTC exposure from collateral assets in five steps, with the first one starting on Sep. 26. Each step will be voted on.

“We find that legal due diligence would not provide an adequate level of assurance,” BA Labs said in its proposal.

BA Labs also recommended onboarding alternative products to the platform should the proposal pass.

A spokesperson for Tron did not immediately return a request for comment.

Competitors energized

Currently, there are some $73 million in loans collateralized with wBTC on Sky-affiliated lending platform SparkLend, and another $127 million debt against wBTC in Sky's legacy vaults, according to the BA Labs post.

Tensions flared up around wBTC following crypto custody firm BitGo's announcement earlier this month that it planned to transition control of the asset to a joint operation with a custody platform called BiT Global.

The deal, which distributed control over the project's custody to three entities globally instead of just one, was cast as a way of helping to decentralize the operation.

According to an Aug. 9 press release, BiT Global is a global custody platform with regulated operations based in Hong Kong, being registered as a Trust and Company Service Provider (TCSP), and is "a strategic partnership between BitGo, Justin Sun, and the Tron ecosystem."

BitGo CEO Mike Belshe earlier this month defended the joint firm's autonomy from Sun and Tron.

BitGo CEO Says Wrapped Bitcoin’s Critics Aren’t Being ‘Intellectually Honest’ About Their Concerns

The drama around wrapped bitcoin has energized competitors offering alternative versions of the token, including dlcBTC, Threshold's tBTC and FBTC, which has the support of Mantle Network.

Notably, crypto exchange and custody giant Coinbase debuted its own wrapped bitcoin competitor earlier Thursday.