MakerDAO Considers Restricting DAI Minting Against WBTC Amid Restructure Plans

MakerDAO is evaluating whether to halt the minting of its DAI stablecoin using Wrapped Bitcoin (WBTC) as collateral.

The discussion has emerged following an announcement from BitGo, the team responsible for WBTC, regarding a restructuring that would transfer control of WBTC to a new joint venture that includes BiT Global and Justin Sun’s Tron ecosystem.

On August 10, BA Labs, a Web3 risk and analytics group, proposed on MakerDAO’s governance forum to reduce WBTC vault debt ceilings to zero and disable WBTC borrowing on SparkLend, a money market protocol.

BA Labs highlighted that while these measures would stop new borrowing against WBTC, they wouldn’t immediately affect users with existing loans or DAI already minted with WBTC as collateral.

Justin Sun’s Involvement Poses Risks

The main concern driving this proposal is the involvement of Justin Sun, the founder of Tron, in the new joint venture.

BA Labs pointed to previous issues with TrueUSD, a stablecoin linked to Sun, which they claim faced operational and transparency problems after being sold to a Sun-affiliated group.

These issues included the suspension of real-time proof of reserves, price volatility, and disrupted redemption services.

BA Labs argues that Sun’s involvement in the new WBTC management structure poses a significant risk to MakerDAO.

BA Labs suggested that MakerDAO and Spark should consider fully offboarding WBTC unless BitGo and its partners can convincingly demonstrate that the current collateral arrangements remain safe.

Currently, around 10% of DAI’s 5.2 billion token supply is backed by WBTC, with MakerDAO’s vaults holding $500 million worth of the token.

Additionally, $289.3 million worth of WBTC is deposited in SparkLend, accounting for 7% of the protocol’s $4.1 billion in total value locked.

The BitGo restructuring is set to take effect after 60 days, following the announcement made on August 9.

DAI, currently the third-largest stablecoin behind Tether and USD Coin, faces potential implications from this restructuring.

Community Divided Over the Proposal

The proposal has sparked a debate within the MakerDAO community.

Some members, including Maker’s ecosystem team, support BA Labs’ recommendations, while others express reservations.

GFX Labs, an analytics provider for MakerDAO, described the proposal as “extreme,” arguing that it would be inconsistent with how Maker handles other centralized assets.

Another community member, Sparkuser, dismissed the proposal as an overreaction.

In response, rival tokenized Bitcoin issuers, including ckBTC, tBTC, and dlcBTC, have begun pitching their products as potential alternatives to WBTC.

BitGo’s CEO, Mike Belshe, criticized the proposal, calling it a knee-jerk reaction to Sun’s involvement.

Belshe assured that BitGo would continue to co-sign transactions and that the underlying security of WBTC would remain unchanged.

However, BA Labs remained unconvinced, citing a lack of transparency in BitGo’s announcement.

They requested detailed information about BiT Global, its directors, ownership structure, and the rationale behind the restructuring.

Belshe responded that providing such details would require disclosing confidential information, and suggested that MakerDAO conduct due diligence through a formal non-disclosure agreement.

Justin Sun also addressed concerns about his involvement, stating on social media that his role in WBTC is strategic and that he does not control the private keys to WBTC reserves.

Recently, I've heard that the community has some concerns about my involvement in various projects, including WBTC. I would like to clarify the following points:

There have been no changes to WBTC compared to before. The audits are conducted in real-time and can be accessed via…

— H.E. Justin Sun 孙宇晨 (@justinsuntron) August 10, 2024