Threshold, a decentralized finance (DeFi) protocol centered on Bitcoin, has put forward a major merger proposal with Wrapped Bitcoin (WBTC), the leading “wrapped” Bitcoin in the crypto market. This proposal seeks to address concerns about WBTC’s stability and collateral backing, particularly in response to recent industry events.
Under the proposed merger, BitGo, the current custodian managing the Bitcoin backing WBTC, would become the largest holder of Threshold’s T token. Additionally, control over the WBTC minting and burning mechanism would be transferred to Threshold, a move designed to “ensure the continued stability of WBTC, the sanctity of its collateral, and the safety of the users and protocols that rely on it.”
This proposal follows recent controversy surrounding BitGo’s announcement to transfer partial control of WBTC assets to a joint venture with Justin Sun’s BiT Global. The proposed BitGo-Sun arrangement has sparked criticism and skepticism across the crypto industry, leading several protocols that use WBTC as collateral or for trading to reconsider their reliance on the asset. For instance, MakerDAO recently ratified a governance vote to disable further WBTC borrowing, and crypto lender Aave is actively monitoring the situation.
Justin Sun, who has been associated with several controversial projects, has also faced scrutiny over the transparency and backing of his initiatives. The Tron-related USDD stablecoin, for example, recently removed Bitcoin as a reserve asset without community approval, while reports have suggested that HTX (formerly Huobi), advised by Sun, replaced its USDT holdings with Sun-connected stUSDT.
Threshold Network, the platform proposing the merger, is a decentralized platform that bridges Bitcoin to DeFi. It offers services such as its own wrapped version of Bitcoin, tBTC, and cross-chain token protocol Wormhole, which connects around 20 blockchains. Threshold was formed in 2022 through the merger of two similar protocols, NuCypher and Keep Network.
The proposed merger with WBTC represents a strategic effort by Threshold to stabilize and secure WBTC’s future amid growing concerns within the crypto community.