I’m very pro decentralization. And at first glance it might appear counter-intuitive to support this proposal given that it provides Bitgo more control and power over the protocol, including the ability to stake and take a large share of the stake.
But, we have to look at a bigger perspective here, namely what this buys us.
Currently there are 3374 tBTC outstanding. After the transfer is completed, there might be as much as 150 000 tBTC (then under WBTC token) outstanding.
The unprecedented increase in TVL will result in a very high degree of decentralization of tBTC holders, integrations and interest. To put this in perspective: if we look at onchain stats right now, we’re looking at going from a small community of a 1362 unique holders/addresses to 100000 holders/addresses. A 73x increase.
I would expect that with that kind of increase in TVL there will be a significant re-pricing of the work token (T). With that price appreciation there will be renewed interest in the project and a massive expansion of user base, contributors, developers, stakers, etc.
This is very good for decentralization.
We need more stakers, and a bigger more diverse group will become a highly decentralizating force for the project, much more so than pretty much anything I can think of.
Yes, one single actor with 15% is a lot, but as we are aware of, this is not new, as much as 20-25% might be under the control of one of the larger Korean exchanges. This situation does not change the fact that anyone is able to purchase obscene amounts of T from the market, and T needs to protect against that anyway.
I can further outline 7 main points for why this does not concern me:
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The council has veto powers against malicious proposals
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The suggested 15% is a large amount, but it’s hard to liquidate a position of that size quickly. That limits the power to abuse somewhat because bad decisions would have impact on the T price (their holdings). Generally, you would expect them to be aligned with the success of T since their bag depends on it.
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With newfound interest in T due to price appreciation I expect more people (normal users, small holders) to get involved, also in governance. More users = more noise. If there’s a bad proposal, it would get more attention. We have T delegations now that are quite large, and they could be further expanded with the increase in user base / T holders.
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On-boarding large WBTC whales: Especially interesting to draw in (as stakers) would be the larger holders of WBTC today, or the entities supporting it. If you look at the list of top holders of WBTC you can see the largest are DeFi projects such as AAVE, Arbitrum, Compound, Polygon, Maker and other powerhouses:
If tBTC were to take custody of their BTC you can bet they’ll be looking closer into how Threshold Network works, and I would expect some of these large holders/entities to participate once they realize that it would be in their own self-interest to participate as a staker in T (to be part of the signatures securing their underlying BTC). The more WBTC they hold in fact, the more incentive they will have. So we’re talking about potentially very wealthy entities or users who get into the staking game. That will increase the T competing, not just in stake, but during governance votes. As a side-note, there might even be a consideration here to delegate T to some of these entities if they are willing to step in as stakers to bring about more decentralization. -
Increase in TVL from $200M to $9000M makes T unrecognizable after. All bets are off. We’re not going to find a better deal.
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I am a large holder of T, I can sway votes. Not all my T’s are staked. If they try something, I have the option to deploy. If the vote is important enough a lot of people will vote. I’m certain we can break the current record of 1.72B T. I know that anyone can purchase 15% of T on the market, the situation here does not significantly change that fact.
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WBTC is the golden goose and we should save it, not kill it. The fees that T will rake in from mint/unmints after will be colossal. Why? WBTC is permissioned, tBTC is not. Yes, WBTC has not been a great model, but it’s friction. tBTC removes the friction and let the market be free. I expect the income to be much higher for a decentralized model than a permissioned, kyc’ed model. Anyone can mint/unmint tBTC. WBTC is only allowing a small group to do so.
tBTC has the very real shot at becoming the gold standard of wrapped bitcoin. Realize what is at stake here: WBTC could never fully be that because of its centralized nature. The chains holding WBTC back will be removed. tBTC is already winning in the decentralized realm, but if there is any doubt, with that kind of TVL, there’s no going back. The accompanying attention will furthermore pave the way for tBTC to rule on all chains.
If this proposal goes through, it will be biblical.