First off
The reason we provide the ability to stake wBTC on BitcoinVN is that our trade desk and liquidity management team no longer feels comfortable holding wBTC as a BTC-equivalent asset on our books.
If you don’t understand what this means, this product is definitely not for you!
In summary, our team has identified an elevated risk of a depeg event with wBTC and, as a result, aims to minimize the potentially adverse impact of continued exposure to wBTC.
We perceive holding wBTC as an elevated risk and strongly urge any investor or holder of wBTC to conduct thorough due diligence before adding exposure to wBTC to their portfolio.
wBTC in trouble?
As widely publicized, wBTC entered into a deal this summer with a Justin Sun-controlled entity, raising significant concerns across the industry. Justin Sun’s track record as a “crypto corporate raider” (notable for acquisitions such as Poloniex, Huobi, and TUSD) has fueled skepticism about the continued safety of the collateral backing the wBTC token.
Collateral at Risk?
A widespread concern is that the Bitcoin backing wBTC could become a key target in this corporate rearrangement. Given Sun’s history of aggressive moves within the crypto space, this concern is not without merit. Industry insiders fear that these assets could be repurposed or mishandled in a way that undermines the token’s stability.
Industry Response
The market reacted swiftly to these developments, with the creation of alternative Bitcoin-backed IOUs. Among the first to emerge were cBTC by American crypto exchange Coinbase and kBTC by Kraken. Kraken, chaired by Bitcoin OG Jesse Powell, has established itself as a trusted centralized exchange, making kBTC an appealing alternative for those seeking more reliable Bitcoin-backed tokens.
Other notable entrants are expected, as market participants scramble to fill the gap left by waning trust in wBTC. This diversification of Bitcoin-backed tokens indicates broader industry apprehension about wBTC’s future.
BitcoinVN’s Assessment
These concerns are shared by the BitcoinVN team, which has internally downgraded wBTC from being equivalent to native BTC in terms of its risk profile. The deal with Justin Sun has fundamentally altered the trust dynamics around wBTC, and our team now considers holding wBTC to carry elevated risks.
Additional Data Points
- Transparency Issues: Unlike competitors such as Coinbase and Kraken, which have a long-standing reputation for transparency, wBTC’s latest deal has introduced opacity regarding the governance of its collateral.
- Centralization Risks: The involvement of Justin Sun introduces heightened centralization risks, as his entities have historically shown limited regard for transparency or adherence to industry norms.
- Industry Skepticism: Prominent voices in the crypto community have raised alarms, calling for a reevaluation of wBTC as a trustworthy asset. This shift has already led to declining liquidity for wBTC across major exchanges.
- Custodial Concerns: Concerns about custodial integrity have surfaced, with speculation that BTC reserves backing wBTC might not be as secure or transparent as previously assumed.
Given these factors, BitcoinVN urges all users to conduct thorough due diligence before considering exposure to wBTC. While alternative Bitcoin-backed tokens are emerging, nothing replaces the security and simplicity of holding native BTC.
wBTC staking – how does it work?
So, now that we’ve addressed the risks, if you’re still willing to take the plunge and expose yourself to wBTC:
“What’s in it for me?”
As a wBTC liquidity provider to BitcoinVN via our staking program, you’ll earn a cut of 0.1% of the exchange swap volume generated on all swaps involving wBTC.
The initial maximum vault size is capped at 1 wBTC, as our team expects this amount to be sufficient to meet the current swap demand for wBTC.
This program offers an opportunity to earn rewards while contributing to wBTC liquidity – if you’re comfortable taking on the associated risks.
Why no native BTC staking?
Given that BTC is the primary reserve asset utilized by BitcoinVN, we do not have any need for external liquidity provision on this asset.
This question has been answered in more detail here:
https://bitcoinvn.io/news/why-is-there-no-btc-staking-option/
