Threshold Network Proposes to “Save” WBTC by Merging tBTC

Tags: threshold, wbtc

Summary: Bitcoin DeFi protocol Threshold Network proposes merging their tBTC bitcoin version with WBTC. This move aims to address concerns about WBTC’s centralization following BitGo’s announcement to transfer partial control to Justin Sun’s BiT Global.

What is Threshold Network ($T token)?

Threshold Network is a combination of two protocols: NuCypher (specializing in decentralized encryption) and Keep Network (specializing in blockchain anonymity).

Can Threshold Network (T) “Save” WBTC?

WBTC is one of the largest and most widely used “wrapped” bitcoin versions currently. It is heavily used in DeFi applications and cryptocurrency exchanges (CEX). However, recent events surrounding BitGo’s announcement to transfer WBTC control to Justin Sun’s BiT Global have raised concerns within the community.

According to Click Digital, many in the industry doubt the transparency and support of projects related to Justin Sun. This issue has been raised for years. For example, the USDD stablecoin related to Tron recently sold bitcoin as a reserve asset without community consent.

This has led protocols that use WBTC as collateral or for trading to re-evaluate their choices. MakerDAO has voted to disable WBTC borrowing, while Aave will “continue to monitor the situation.”

To address this, Threshold Network, a decentralized platform that connects Bitcoin to DeFi through services like tBTC (a decentralized Bitcoin “wrapped” version built on the Threshold Network, allowing users to convert Bitcoin into ERC-20 tokens on Ethereum) and the cross-chain Wormhole protocol (connecting around 20 blockchains, including Ethereum, Binance Smart Chain, Solana, and Avalanche), has presented a bold proposal. They aim to merge tBTC with WBTC.

Why does Threshold Network want to merge tBTC with WBTC? What are the benefits?

According to the proposal, BitGo would become the “largest holder” of Threshold’s T token, and the control of WBTC’s minting and burning mechanisms would be transferred to the Threshold DAO.

This brings several advantages:

• Ensuring Security and Stability: Transitioning to Threshold’s decentralized custody model would ensure the security of WBTC’s collateral, reassure the market and users about WBTC, and protect DeFi protocols tied to WBTC.
• Enhancing Decentralization: Merging WBTC with tBTC would enhance WBTC’s decentralization, aligning with BitGo’s goal of multinational and multi-institutional governance.
• Supporting BitGo: BitGo would become the largest shareholder of Threshold Network, benefiting from the success of Threshold’s decentralized custody model.

Summary of Threshold Network’s WBTC-tBTC Merger Proposal

Information	Content
Goal	To address concerns about WBTC’s centralization after BitGo transfers partial control to Justin Sun’s BiT Global
Proposal	Merge Threshold Network’s tBTC bitcoin version with WBTC
Threshold Network’s Role	Providing a decentralized platform connecting Bitcoin to DeFi, including tBTC and Wormhole
BitGo’s Role	WBTC’s custodian, becoming the largest holder of Threshold’s T token
Benefits of the Merger	– Ensure WBTC’s security and stability<br>- Enhance WBTC’s decentralization<br>- Support BitGo by becoming the largest shareholder of Threshold Network
Challenges	BitGo has not yet approved the proposal. If rejected, Threshold would have to find ways to support protocols switching to tBTC or cbBTC
Expected Outcome	– Improve WBTC’s transparency and security<br>- Support DeFi development by creating a decentralized and reliable “wrapped” bitcoin version
Conclusion	DeFi is a promising market, and Threshold Network’s proposal to merge tBTC with WBTC is a significant step. Will it succeed? We’ll have to wait and see.

Will This Proposal Be Accepted?

The question is whether BitGo will accept this proposal. BitGo CEO Mike Belshe dismissed concerns about Justin Sun’s influence on WBTC. He asserts that this will make WBTC more decentralized through multinational and multi-institutional governance.

However, Threshold’s proposal has not yet been approved by BitGo. If rejected, Threshold could still mint more T tokens to help protocols switch to tBTC or cbBTC (a “wrapped” bitcoin version provided by Coinbase).

Will this proposal succeed? We’ll have to wait and see.

Comments

It’s exciting to see Threshold Network’s efforts to address centralization concerns, a major worry in DeFi. The proposal to merge tBTC with WBTC is a bold move, demonstrating their agility and adaptability to market changes. Whether this proposal succeeds, we need to closely watch. However, Threshold Network’s questioning of WBTC’s security and transparency and their offering of a decentralized alternative shows that DeFi is becoming more mature and striving towards a more open and reliable ecosystem.

Further Questions and Issues to Consider

Regarding the merger proposal:

• How will the tBTC-WBTC merger process work? Will WBTC conversion to tBTC happen directly or through stages?
• What are Threshold Network’s specific goals? What do they want to achieve after merging tBTC with WBTC?
• Will the merger impact WBTC’s value? Could WBTC’s value increase or decrease after the merger?
• Besides addressing centralization, what other benefits could the merger bring? Could there be benefits in efficiency, costs, or features?

Regarding the possibility of acceptance:

• Why hasn’t BitGo accepted Threshold Network’s proposal yet? Are there technical, legal, or benefit-related concerns?
• What conditions could BitGo impose to approve the proposal? Would they ask Threshold Network to change the proposal or make additional demands?
• What are the benefits and risks for BitGo if they accept the proposal? Could the merger affect BitGo’s role in the WBTC ecosystem?
• Do other protocols in DeFi support Threshold Network’s proposal? Would they be willing to switch to tBTC or cbBTC if the proposal is rejected?

Regarding the future:

• If the proposal is rejected, what plans will Threshold Network have? Will they continue to seek other solutions to address WBTC’s centralization?
• How will this event affect DeFi’s development? Could the tBTC-WBTC merger set a precedent for other DeFi projects?
• Can WBTC maintain its position in the DeFi ecosystem? Will competition from other “wrapped” bitcoin versions affect WBTC?

Conclusion

DeFi is a market with tremendous potential, and Threshold Network’s proposal to merge tBTC with WBTC is a notable step. Will this proposal succeed? The answer remains uncertain. However, this initiative shows the DeFi community’s concern about addressing centralization and security issues within blockchain ecosystems. Threshold Network’s willingness to provide a decentralized solution for WBTC, one of the most important digital assets today, shows that DeFi is becoming increasingly powerful and capable of changing the way traditional finance operates.

Note: Some information, such as BitGo rejecting Threshold’s proposal or other protocols switching to tBTC or cbBTC, is not yet confirmed.