BitGo, BitGlobal, and Community Address WBTC Custody Model Concerns

The world of Wrapped Bitcoin (WBTC) experienced a whirlwind of discussion recently, following BitGo’s announcement of changes to its custody model. The proposed changes, involving multiple parties and jurisdictions, sparked debate within the crypto community, particularly concerning the involvement of Tron founder Justin Sun. To address these concerns head-on, BitGo CEO Mike Belshe, Justin Sun, and representatives from BitGlobal engaged in a public forum hosted by Jupiter co-founder Meow. Let’s delve into the key takeaways from this discussion and the revised custody model.

Addressing BTC Usage Concerns

A primary concern raised by the crypto community revolved around the utilization of the Bitcoin backing WBTC. Would it be rehypothecated, lent out, or otherwise used in ways that could compromise its security? Meow voiced these concerns directly to BitGo CEO Mike Belshe.

Belshe reassured the audience, emphasizing the legal and fiduciary responsibilities associated with holding Bitcoin within a trust company. He stated emphatically that the Bitcoin backing WBTC would not be hypothecated, rehypothecated, lent out, or used in any way that could jeopardize its integrity. He further clarified that regulatory constraints make such actions illegal.

Transfer of Trust: A Decentralized Approach?

The collaboration between BitGo and BitGlobal involves distributing multi-signature keys across several companies. While this aims to enhance decentralization and security, some community members expressed reservations about BitGlobal’s involvement, given its relative newness to the crypto space.

Meow raised the point that transferring trust to a new entity could be a challenge for the community. Belshe responded by clarifying that BitGo wasn’t asking the community to simply transfer their existing trust in BitGo to another party. He reiterated that decentralization itself is a powerful security measure, posing the question of whether it’s more secure to have multiple independent parties holding keys or a single entity.

The Justin Sun Factor: Calming the Waters

The involvement of Justin Sun has undoubtedly been the most contentious aspect of the custody changes. Some protocols, like MakerDAO, have even cited Sun’s involvement as an “unacceptable level of risk,” leading them to consider reducing their WBTC exposure.

During the forum, Sun downplayed his role, emphasizing that the core mechanisms of WBTC – minting, burning, transparency, and procedures – would remain unchanged. He stated that the primary difference is the relocation of some keys outside of the United States.

Sun also shared his vision for the future of WBTC, suggesting a focus on expanding its market capitalization, Total Value Locked (TVL), and presence across multiple blockchains. He emphasized that not all actions are solely driven by profit motives.

What’s the Final Verdict? Key Changes to the WBTC Custody Model

Based on the community feedback from the forum, BitGo has implemented key revisions to the custody model. Here’s a breakdown:

• BitGo Singapore: A new arm of the company, BitGo Singapore Ltd, will be included in the custody arrangement.
• Multi-Signature Keys: One cold-storage multi-signature key will be held jointly by BitGo Inc, BitGo Singapore Ltd, and BitGlobal.
• Master Key Locations: Master keys will be held in the United States, Hong Kong, and Singapore.

This revised multi-jurisdictional and multi-institutional arrangement aims to further decentralize WBTC custody while maintaining the security mechanisms that have been in place.

A Win for Community-Driven Development

The open discussion and subsequent adjustments to the WBTC custody model highlight the importance of community involvement in the crypto space. By openly addressing concerns and adapting procedures based on feedback, BitGo and its partners have demonstrated a commitment to aligning with the goals of the broader community. This event underscores the value of transparency and collaboration in fostering trust and ensuring the continued success of decentralized finance initiatives.