Threshold Network proposes bold plan to further decentralize WBTC Threshold Network proposes bold plan to further decentralize WBTC
BitGo recent shifted WBTC's custody model to a multi-signature technology across three countries, including the US, Singapore, and Hong Kong.
2 min read
Updated: Oct. 10, 2024 at 10:57 am UTC
Cover art/illustration via CryptoSlate. Image includes combined content which may include AI-generated content.
Threshold Network has proposed further decentralizing BitGo’s Wrapped Bitcoin (WBTC) amid its recent challenges in the DeFi market.
On Oct. 9, Matt Luongo, founder of the Bitcoin-focused venture studio Thesis, outlined the goal of expanding the number of signers involved in managing the WBTC asset using the Threshold Network.
This proposal follows Threshold Network’s earlier offer to acquire WBTC. At the time, the platform proposed a deal valued at $36.4 million in T tokens to facilitate the transition of WBTC from centralized custody to Threshold’s decentralized model.
WBTC’s custody model
On Oct. 8, WBTC’s custody shifted to a structure spread across three countries, including the United States, Singapore, and Hong Kong.
BitGo initially served as the sole custodian of the Bitcoin backing WBTC. However, it recently formed a joint venture with BitGlobal to manage the asset.
This new custody arrangement employs a multi-signature system, requiring two signatures to approve transactions or transfer funds from the wallet.
However, BitGlobal’s ties to the controversial Tron founder Justin Sun have led several DeFi protocols to consider removing WBTC from their platforms.
WBTC is a tokenized version of Bitcoin that operates on the Ethereum blockchain as an ERC-20 token. Bitcoin fully backs it at a 1:1 ratio and is commonly used as collateral in DeFi applications.
Notably, WBTC has a market capitalization of more than $9 billion, according to its website.
Advancing decentralization
Luongo praised BitGo’s decision to adopt a geographically distributed custody model, noting that this approach spreads risk and could prevent any single jurisdiction’s unilateral seizure of funds.
However, he emphasized the need to continue decentralizing WBTC by expanding the signer group through the Threshold network.
He proposed a phased approach that would gradually increase the number of signers and maintain the current market structure. BitGo and BitGlobal would join the Threshold network as the signing set grows, establishing a decentralized custody system for WBTC without immediately altering related contracts.
Luongo described this path as a cost-effective way for WBTC holders to decentralize their assets through Threshold’s tBTC Bitcoin bridge, offering seamless onboarding for retail users and institutions.
According to him, the ultimate goal is to create a widely adopted, decentralized, BTC-backed token that caters to various market participants.
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Oluwapelumi Adejumo
Oluwapelumi values Bitcoin's potential. He imparts insights on a range of topics like DeFi, hacks, mining and culture, underlining transformative power.
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