First off
BitcoinVN is excited to announce the launch of a new staking vault for wrapped Bitcoin (wBTC). This staking program allows users to provide liquidity to wBTC swaps on the platform and earn a share of the transaction fees.
If you’re unfamiliar with wBTC or its use cases, this product may not be for you. wBTC is a tokenized version of Bitcoin designed to operate on the Ethereum blockchain, but recent developments have raised questions about its future stability.
So why offer wBTC staking?
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). This move has led to concerns about how wBTC’s collateral might be managed.
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
While we’ve launched this program to meet the needs of our users, our team has adjusted wBTC’s risk profile internally. We no longer treat wBTC as equivalent to native BTC due to concerns about its governance and collateral transparency. Our goal is to empower users with options while ensuring they are informed about potential 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?
If you understand the risks and still wish to participate, here’s how BitcoinVN’s wBTC staking program works:
- Rewards: Earn 0.1% of the exchange swap volume from all wBTC transactions on the platform.
- Vault Cap: The initial vault size is capped at 1 wBTC, reflecting current swap demand.
- Participation: By staking wBTC, you contribute to the platform’s liquidity while earning passive rewards.
This staking opportunity is ideal for experienced users who are comfortable with the potential risks associated with wBTC.
Why Not Offer Native BTC Staking?
Native BTC serves as the primary reserve asset for BitcoinVN, meaning we do not require external liquidity provision for it. To learn more, read our detailed explanation here:
Why Is There No BTC Staking Option?
