#saveWBTC - a merger with Threshold's tBTC

Proposals
22

Ok, I put their data into a spreadsheet. I noticed there’s a ton of repeating values, and the total comes out a bit lower than the total they list. The difference in the total could be from rounding. Still with a bunch of addresses having the same value we need to double check that they’re not double counting anything.

We also need to check the liability side of their balance sheet. Even if they’re assets are all correct they could have a bunch of debt collateralized by that Bitcoin, which we don’t want the DAO being burdened by. No matter what we need to do a thorough audit of their books to make sure there is nothing sketchy going on.

WBTC addresses to audit.

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23

This is an excellent proposal and I’m pleased that it’s being taken seriously by the community.

Some questions @maclane

  • why 15% rather than 10% or 20%? Is this just a placeholder or is there a reason for this specific value?

  • what vesting schedule are you proposing. Several people have already commented that they’re worried about the Governance power this will give GitGo. A slow vesting schedule will help to mitigate this concern.

  • would we link the vesting schedule with the WBTC TVL migration? ie. for every 100 BTC that is migrated a certain amount of T becomes available to BitGo

  • what are the costs of doing this and who will be responsible for them?

  • instead of giving BitGo the full proposed 15%, could we give them 10% and use the remaining 5% to cover the costs of the migration and to fund any required development work

There’s a really big opportunity here to become the biggest player in the BTC bridge world. It would be a really bold move and I’m completely in favour of it.

There’s always going to be risk involved with an opportunity like this - I’d like us to be open about those risks and do everything we can to mitigate them.

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24

There is not a single repeating bitcoin address (I just checked).

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26

I think what was meant was the value of BTC was repeating, not the addresses.

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27

Still need to audit it. We need an accountant to double check they’re not pulling any accounting tricks with their assets and liabilities. They do not list their liabilities on that page.

We do need to make sure they’re not shifting the same balances back and forth between multiple addresses. I don’t know if there’s any means of having different addresses refer to the same coins on Bitcoin, like Cardano as well.

It’s just a terrible idea to do significant dilution, while not auditing their balance sheet thoroughly.

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28

I would also love to hear from the AAVE community, Compound, and even Maker DAO about this. We are beginning to gain exciting traction throughout DeFi. Sometimes it feels like things can not happen fast enough but we may be eager for too quick of an adoption timeline here and make some missteps in the eyes of our other hopeful future partners.

Are we sure that we are winning out if this were to occur? At present, we hold a lot of the cards and can determine the future of our community (perhaps at a more midling pace but in spite of this, we are seeing interest and adoption). These terms seem like a huge life vest for BitGo. Its our responsibility to ensure that as we real them back to shore/viability, they don’t pull us in. I fear with the currently proposed T grant, and with our eyes focussed on adoption, DeFi integration timelines, and upside, we may miss the mark and instead of acquiring the market position and TVL of WBTC, we may lose Threshold DAO to BitGo.

How do the other groups that are imminently evaluating large integration advances with tBTC feel about the possibility of Threshold becoming substantially integrated with BitGo?

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29

By all means, do an audit. I’m just saying that none of these specific concerns you brought up have any merits or plausibility.

The exception is liabilities that are not visible to the public. Technically that would be Bitgo’s liability, and the TVL from WBTC being transferred into tBTC’s MPC would not transfer any liabilities. If Bitgo is insolvent then that is their problem, not the problem of T DAO. This is not an acquisition of Bitgo the company, only WBTC TVL.

There are however clauses such as clawbacks that could complicate things, and depending on how this deal is performed (any legal entities involved?) it could result in legal culpability to some parties.

From that perspective it might be relevant. For the other perspective it might be relevant insofar as an already embezzling entity could steal the minted T as well.

Please note though, that the current public audit appears to have all outstanding WBTC accounted for and backed 1:1. The existence of repeating amounts across bitcoin addresses is irrelevant, and there’s no linking of the same account to multiple bitcoin addresses.

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30

This is a good question and I’m eager to hear how these other daos/groups feel about this proposal.

31

Do you have any concerns about a BitGo takeover of the threshold DAO given the potential voting weight they could pull with the 15% T mint?

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32

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:

  1. The council has veto powers against malicious proposals

  2. 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.

  3. 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.

  4. 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:

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    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.

  5. Increase in TVL from $200M to $9000M makes T unrecognizable after. All bets are off. We’re not going to find a better deal.

  6. 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.

  7. 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.

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33

Thanks for sharing your thoughts.

The more I read the more in favor I am of this path forward.
This looks like Threshold’s opportunity to seize the moment.
Go big or go home.

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34

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35

This is all great. This is a huge opportunity and there are certainly ways to bound the risks that it poses.

As we hone the specifics, drilling down on this 15% figure is important. I am not sure if there is specific justification behind this value. 12% T grant would be much more reasonable as it more closely approaches current community governance participation; if money is an issue, our Treasury may consider creative ways to shore up the offering price with non-T assets.

As mentioned by others, a long vesting schedule with clear tranches seem like critical stipulations. The long schedule allows for the community response and participation that Agoristen mentioned. This may allow us time to shore up the health of our community governance participation before such a large single entrant (to respond briefly to the Korean exchanges having 20-25% of T; those entities presumably have a business model that involves alternative revenue streams [trading fees, liquidity, lending]; for BitGo, these assets and their custodial service are their entire game - they may be much more interested in directing DAO decision making than other large holders). Allowing time for us to shore up/expand community engagement with a long vesting schedule seems particularly protective against a takeover.

Clear tranches are mainly in response to a history of their organization lacking corporate diligence. Forgive me, but we need to be assured that TVL expands at least at the rate of the vesting schedule.

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36

Nu and Keep have always been very transparent. Ive been with you guys since the beggining of public involvement. Are you just saying the logistics should be private or the whole process?

37

I think discussions with BitGo would be better done in private than in public, then ratified by the community. Clearly we don’t all agree there :sweat:

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38

We still need to do proper due diligence of their books, and research operational risk, like Maker mentions. At the end of the day we still do not know the state of their books, debt, or how different jurisdictions impact the BTC under their control.

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39

I don’t have much voting power, but I would most likely support this or some modified version of the proposal. The team has gained my trust through other ventures that were new and risky (Nu worklock, Keanu merger, etc.). I generally dont vote in the snapshots because there havent been that many that have seemed close enough to sway. Types like me could be a problem I suppose if bitgo had 15% of the Dao, but like @Agoristen has said, any 3rd party player could theoretically buy a sizeable chunk at some point and if widescale adoption is to happen isnt that at some point necessary? No expert here, and not pretending to be, but it sure does seem like an opportunity is here now.

Questions I have seen that I wonder also:

  1. Reason for 15% and not another number?
  2. Timeframe: do we have a timeconstraint before other players come in? (Reasonable to assume this needs to be balanced with risk)
  3. Does this expose the network to technical vulnerability? (Im assuming not as it seems more akin to a migration)

As always, thank you all for the hard work you do and making this community a good one.

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40

Go go go, It’s time to make changed.

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41

Happy to see your support but what is your take sir – what are the odds they might accept the proposal realistically?

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I’m probably not the right person to ask about that, there are others closer to Bitgo. My gut feeling says it’s unlikely, but worth a shot.

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