Sky, formerly known as MakerDAO, has made a decisive move to strengthen its DeFi ecosystem by officially removing Wrapped Bitcoin (WBTC) from its lending and borrowing platforms. This follows a governance vote that concluded on September 19, with nearly 90% of the community voting in favor of the proposal. The decision is a response to rising concerns over WBTC’s custodianship and potential ties to controversial blockchain entrepreneur, Justin Sun.
Sky’s Governance Vote – A Clear Message
Sky’s governance vote saw overwhelming support, with 95,826 MKR tokens cast in favor of removing WBTC. Interestingly, 11.83% of participants abstained, and no opposition votes were recorded, signaling broad consensus within the community. This marks a significant shift in the protocol’s strategy, underscoring the growing influence of its community-driven governance.
The removal of WBTC stems from concerns raised by BA Labs, one of Sky’s advisory teams. In August, BA Labs flagged potential risks regarding the control and ownership of WBTC, speculating that Justin Sun or his affiliates may be involved. Given Sun’s controversial history within the crypto world, Sky’s advisors recommended a reassessment of WBTC’s role within the platform.
BitGo, the custodian of WBTC, added fuel to these concerns when it disclosed plans to transition WBTC’s control to a joint operation with BitGlobal, a company closely associated with Justin Sun. This partnership, operating out of Hong Kong, raised red flags among DeFi platforms due to Sun’s controversial reputation.
BA Labs expressed concerns that Sun’s involvement could introduce counterparty risks to Sky’s DeFi ecosystem. Following this advice, Sky’s governance team moved swiftly, proposing the removal of WBTC from both its SparkLend platform and Legacy Vaults on September 12.
Justin Sun Defends WBTC
Despite these concerns, Justin Sun publicly defended WBTC on September 13, rejecting claims that it was tied to regulatory issues in China. Sun further criticized Coinbase’s alternative wrapped Bitcoin product, cbBTC, and emphasized that WBTC, along with Tron and USDT, were not subject to Chinese regulatory scrutiny.
However, Sun’s reassurances did little to sway Sky’s governance community. The overwhelming support for removing WBTC indicates a clear desire to distance Sky’s platform from potential external risks associated with Sun and WBTC’s custodianship.
With WBTC set to be phased out, Sky is actively exploring alternatives. Among the options being considered are Coinbase’s cbBTC and Threshold’s tBTC, both of which have been praised for offering a more transparent and secure framework for DeFi collateral. These alternatives could provide the stability and transparency that Sky seeks as it continues to build a robust DeFi ecosystem.
Also Read: Aave Holds Steady – Navigating The WBTC Restructure Amid $9.65B Market Cap Uncertainty
A Broader DeFi Shift?
Sky’s decision to remove WBTC may be the beginning of a broader trend within decentralized finance. LlamaRisk recently proposed a similar move in the AAVE community, recommending that WBTC’s loan-to-value (LTV) ratio be reduced to zero, though no formal decision has been made.
As the crypto world continues to evolve, Sky’s decisive governance vote reflects the platform’s commitment to safeguarding its ecosystem and responding to the concerns of its community. This move sets a precedent that other DeFi platforms may soon follow.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
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