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Will wBTC explode?
Summarized by AI
Original author: Encrypted KOL Small Cap Scientist
Original compilation: 0x214, BlockBeats
Over the last 24 I've been researching wBTC for hours. I recommend avoiding any "wrapped assets" for now. In this article, I will highlight the reasons for my concerns, and hope to eliminate some of your concerns about "wrapped asset custody and its liquidity".
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First of all, I am not a professional in wBTC or other wrapped assets, so please take this article with a grain of salt and don't believe it. Welcome to correct me.
While seeing the wBTC / BTC trading pair unpegged from 1:1 by 2% At that time, this kind of change on the chain caused my vigilance.
When browsing wBTC's official website and its over-collateralized asset certificate, no flaws were found, so where is the problem?
Asset custody
After researching wBTC, the following two main roles (Key Roles) are very important:
Custodian< /b>: holds the BTC used to support wBTC, and has the private key for casting Token
Merchants: send Or receive BTC to mint/burn wBTC
In this case BitGo acts as a custodian, while wBTC's 60+ partners are available as resellers.
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When browsing BitGo-related information, the latest news is BitGO CEO Mike Belshe's statement: BitGo has no exposure to Alameda or FTX, however, BitGo is now raising funds. I would have loved to private message either of them, but they both have private messages closed to the public.
My concern is: if BitGo really Insolvency, I don't think wBTC holders will be considered as BitGo's creditors. If the BTC held in custody by BitGo is worth billions of dollars, what happens when BitGo or its co-dealer files for bankruptcy?
Market Maker Risk
As you all know, some companies have filed for bankruptcy, and many other companies have Market rumors of imminent bankruptcy. Alameda is the only company to be removed from the list of partners.
Attention, these are only dealers who mint/destroy wBTC, not BTC custodians like BitGo. It means that the dealer has the authority to mint and destroy, but does not hold a large amount of BTC. So I think the problem is: once it files for bankruptcy, its assets may be confiscated.
Since the FTX incident, several publishers have been grappling with the burn/mint issue. In a healthy market, market makers are minting/burning fast enough to maintain the wBTC/BTC 1:1 peg. Obviously, this didn’t happen, and users couldn’t convert wBTC back into BTC.
Ideally, we would be able to verify: all 235,000 "escrowed" The BTC are all held in wallets controlled by BitGo. On-chain asset proofs would help, but we cannot tell if these will be tied to legal proceedings. On-chain analysts should take a closer look at its escrow wallet.
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My thought is, if Alameda issues these wBTCs and is in custody with BitGo, then these BTCs are ultimately held by the creditors of FTX US instead of backing the wBTCs?
That is to say, once these underlying BTCs are involved in the bankruptcy of Alameda, the final wBTC holding may be liable for these debts.
Ren Protocol in trouble
Another user also mentioned Ren Protocol and its REN Token as well as renBTC.
REN is a native BTC cross-chain bridge, which has been affected by the FTX crash recently, and there are constant turmoil.
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REN is also effectively owned by Alameda, so its development team is only funded enough to last until the end of the year. The team is currently raising funds while accelerating plans to roll out the Ren 2.0 bridge, Ren v1 will also be decommissioned in 30 days.
SOL backed by Alameda is losing support after the plunge. According to the official information of Ren Protocol, its assets have been properly mortgaged, and it is hoped that there will be no more crises.
If not within the next 30 days The internal Ren network will be destroyed, which will put a large number of assets on the chain at risk. The goal is to transition from Alameda and migrate to Ren 2.0, but only if they can raise funds to continue operations.
renBTC The liquidity is also a big problem, Because the address believed to be the "FTX hacker" has been exchanging ETH > wBTC > renBTC > BTC. This is draining renBTC's bridge assets, and the team says it won't be replenished.
The "hacker" still has more than 8 figures of funds , and is trying to move assets onto the bridge without liquidity. If the "FTX hackers" were FTX insiders, would they have further enforced the liquidity crunch knowing that wrapped assets would be affected?
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From REN's perspective, I think bridging liquidity and FTX hacking are the two main risk factors. I haven't used Ren Protocol before, and everyone is welcome to add it.
Many are shorting ETH as they feel the "FTX hacker" may be taking further action. However, due to liquidity constraints, the ETH in the hands of "hackers" may not be sold. This could cause other problems with wrapped assets as the “hacker” continues to find ways to convert the asset into BTC.
If the user cannot exchange wBTC, it is recommended to use THOR or Kraken to exchange it for native BTC to ensure Safety.
This is actually very troublesome, because once there is a problem with wBTC, then the centralized exchange and the prediction All machines will be affected, and the wBTC held by users may become a bad debt.
If these assets are severely decoupled from 1:1 exchange, then DeFi protocols that store wrapped assets Might be unlucky too. Therefore, in this market, please be cautious at all times. There is a large amount of DeFi liquidity in wrapped Token, please pay attention to the security of these protocols.
Looks like Aave has seen a huge spike in wBTC usage lately. This could be due to Avraham Eisenberg shorting CRV or possibly a user shorting wBTC. So far, this has largely felt like a failure for the market makers, which is why wBTC prices are consistently at a negative premium of around 1%, rather than a full 1:1 exchange.
Remember, in any case, without a private key, there is no asset! Please pay attention to the safety of assets, and once again ask the third party: asset transparency.
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