With Bitgo announcing a strategic partnership with Justin Sun and the Tron ecosystem, there has been a lot of outcry.
They intend to move their business from the United States to a multi-jurisdictional custody through a partnership with BiT Global based in Hong Kong.
While Bitgo has stated they will continue using the same cold storage system, many people are (rightfully so) nervous about their assets being mixed in with Justin Sun’s other projects, which have not always fared so well.
The CEO has been communicative on feedback, agreeing to discuss people’s questions.
wBTC Offboarding
The harsh reality is that wBTC has dominated the “Bitcoin on Ethereum” space because of its longstanding integrations within major DeFI platforms like Aave and Maker. This has made it difficult for any other product to gather a significant amount of TVL.
A proposal calling for wBTC to be removed from Maker has been extensively supported.
This is important because wBTC CDPs contribute ~10% of the DAO’s revenue.
If this proposal passes, and similar proposals also pass across the major DeFI platforms, wBTC will face massive redemptions.
I believe this is the right step to take. Even assuming there are no issues with wBTC, it makes sense for DeFI apps to slowly offboard wBTC in favor of decentralized protocols.
We shouldn’t risk the use of centralized products in decentralized financed applications.
For what it’s worth, if OP_CAT goes live (estimated Q1 2025), Starknet or a separate Bitcoin rollup will likely be the best place to interact with Bitcoin because it will be native, not requiring any wrappers that come with additional risk.
wBTC Alternatives
For now, there are several good alternatives for getting exposure to Bitcoin or using Bitcoin in DeFI.
If you’re just looking to get exposure to Bitcoin (and cannot use a CEX), here are some options listed with the best BTC output from a 500,000 USDC swap:
- tBTC: 8.194 (requires an additional transaction to burn tBTC for native bitcoin with a .2% redemption fee.)
- ShapeShift: 8.183
- Thorswap: 8.159
- Chainflip: 8.125
tBTC provides the best output and allows you to use your BTC in DeFI.
The current TVL is ~3100 BTC ($190M), and there are zero minting fees. They also allow minting with Solana.
While tBTC is not yet integrated into any of the *core* DeFI platforms, there is currently a proposal to onboard onto Maker in light of wBTC potentially being removed.
I expect tBTC to be ‘picked’ if issues arise with wBTC, as they are the most capital-efficient for swapping and also the most integrated within DeFI.