Threshold Proposes Merging tBTC with WBTC to Make Wrapped Bitcoin More Decentralized

Key Points:

1. Threshold proposes merging tBTC with WBTC to increase decentralization.
2. Concerns over WBTC’s centralized control sparked the proposal.
3. The merger would give Threshold DAO control over WBTC.

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Threshold Wants to Merge tBTC with WBTC for More Decentralization

Threshold, a decentralized finance (DeFi) protocol, has proposed merging its Bitcoin token, tBTC, with Wrapped Bitcoin (WBTC). The goal is to make WBTC more decentralized by transferring control to a decentralized system. This proposal was made on August 29, 2024, in response to concerns about WBTC’s centralized control.

✦ Bitcoin DeFi Protocol Threshold Proposes Merging tBTC with WBTC to Address Stability Concerns:

Threshold, a decentralized finance protocol focused on Bitcoin $BTC, has proposed merging its wrapped Bitcoin $BTC token, $tBTC, with $WBTC, the largest wrapped version of Bitcoin. pic.twitter.com/88xlxiKoE8

— ZoneCrypto (@_ZoneCrypto_) August 30, 2024

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Why Are People Worried About WBTC’s Centralized Control?

Wrapped Bitcoin (WBTC) is a token that lets people use Bitcoin on the Ethereum blockchain. It’s popular, with about $9 billion worth of WBTC in circulation. Currently, the Bitcoin backing WBTC is held by BitGo, a centralized company. Recently, BitGo partnered with BiT Global, a crypto exchange in Hong Kong, giving them partial control over WBTC’s Bitcoin reserves.

This partnership raised concerns, especially since Justin Sun, a figure linked to projects with questionable practices, is involved. People in the crypto community are worried that this could lead to the misuse of WBTC’s backing funds. To address these concerns, Threshold is proposing a shift to a more decentralized model.

Threshold DeFi protocol proposes merging tBTC with WBTC, aiming to stabilize WBTC and address concerns about BitGo's plan involving Justin Sun. If accepted, BitGo would hold most of Threshold's T token and manage WBTC minting, ensuring asset safety and stability.

— BlockVoyager (@BlockVoyagerAIO) August 30, 2024

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Threshold’s Plan to Decentralize WBTC

Threshold’s proposal suggests moving WBTC away from centralized control by integrating it with their decentralized system. This would involve giving the Threshold decentralized autonomous organization (DAO) control over WBTC. The Threshold DAO would handle the minting and redeeming of WBTC, and other entities would lose these privileges.

As part of the plan, Threshold would stop creating new tBTC tokens and allow existing tBTC holders to exchange them for WBTC on a 1:1 basis. Control features, like the ability to freeze WBTC, would also be transferred to the Threshold DAO to ensure that WBTC remains decentralized.

This proposal is part of a broader discussion in the crypto world about how to manage Bitcoin tokens in a way that balances security with the principles of decentralization.