Threshold, a decentralized finance (DeFi) protocol, is proposing a merger of its Bitcoin wrapper token, tBTC, with Wrapped Bitcoin (WBTC) to protect the latter from a controversial change in control. The proposal, posted on Threshold’s governance forum on August 29, seeks to “save WBTC” after recent concerns about its future.
BitGo, the custodian managing Bitcoin backing WBTC, recently announced a partnership with BiT Global, a crypto exchange based in Hong Kong. This partnership, aimed at expanding WBTC’s reach beyond the U.S., would give BiT Global partial control of the multisignature wallet that holds WBTC’s Bitcoin reserves. However, the involvement of Justin Sun has raised alarms in the community, with many questioning his past activities and potential misuse of collateral.
To counter these concerns, Threshold suggests replacing WBTC’s current centralized custody and minting model with its decentralized and permissionless system. WBTC, an ERC-20 token backed by Bitcoin, currently holds a market cap of around $9 billion, making it the leading Bitcoin wrapper.
The proposal involves transferring the control of WBTC to the Threshold decentralized autonomous organization (DAO), which would bring decentralized custody and a permissionless bridging mechanism to WBTC. Threshold would gain the exclusive rights to mint and redeem WBTC, while all other merchant rights would be removed, and the WBTC DAO’s privileges would be transferred to Threshold DAO.
If accepted, this plan would phase out Threshold’s own tBTC, with tBTC minting halted and the existing supply redeemable 1:1 for WBTC or native BTC. The proposal echoes similar concerns from risk management firm Block Analitica Labs, which recently suggested limiting new debts against WBTC collateral due to risks associated with the control change.