Signal Request: Increase WBTC Debt Ceiling

Pros

  • More DAI which will help bring the peg down.

Cons

  • WBTC is a custodial implementation of BTC on Ethereum and so comes with extra risk. If the multi-sig that secures the BTC that backs WBTC was compromised or a bug was found, WBTC could face dire consequences in value. Further increasing the DC for WBTC increases our exposure to these unlikely but very possible risks.

Should we increase the WBTC Debt Ceiling

  • Yes
  • No
  • Abstain

0 voters

If Yes, how much should we increase it by?

  • 10 Million (90M DC)
  • 20 Million (100M DC)
  • 30 Million (110M DC)
  • 40 Million (120M DC)
  • MORE

0 voters

Polling will run from 2020-08-18T04:00:00Z2020-08-26T01:30:00Z

3 Likes

As long as WBTC is going to help the ecosystem grow in an innovative and useful way–I’m all for it. But if it’s going to be used for stupid Vegetable Farming and zero-sum results, than no–what’s the point. These dumb ideas are only hampering the growth of Ethereum. We need to get back to building boring useful products. Please innovate. There’s nothing wrong with building products that will help humanity.

3 Likes

Maybe it should be coupled with a reduction in USDC-A debt ceiling decrease.
This could offset much of the systemic risk of raising WBTC-A, without hampering Dai creation.

Bitgo claims to be insured up to 100 million USD

https://www.bitgo.com/resources/digital-asset-insurance

I think that’s an important data point to consider regarding the WBTC debt ceiling

4 Likes

Normally I am probably one of the worst collateral-sluts in the whole community - voting for every debt ceiling increase I can click on, but in this case I am against a debt ceiling increase.

Why? Because WBTC already has the highest debt_ceiling/market_cap and the highest by far debt_ceiling/daily_volume rations for any of the collateral types that we have onboarded.
And on top of that it is centralized (!)

I would much prefer leave WBTC as is and rather concentrate on onboarding the various decentralized versions of BTC such as tBTC, renBTC and whatnotelse. There is a whole bunch of them. WBTC has already gotten way much love already. If ETH was given the same debt/market_cap ratio as WBTC the EHT debt ceiling would be USD 11 billion.

1 Like

So the curve pool has grown a lot recently. It now has $178m in reserves. Very liquid bridge to renBTC and sBTC.

Can also convert WBTC on FTX for less than 15 basis points.

2 Likes

@Planet_X your argument is fine, but then I would recommend that you post that as well in RWA thread. You are discarding any possibility of onboarding RWA I think.

The only interest of having BTC on ethereum is to be used as collateral in DeFi. The debt_ceiling/market_cap is getting lower and lower. But the debt_ceiling/ BTC market_cap remains insignificant and BTC is a liquid market. Both renBTC and tBTC will not be onboarded in the near future it seems.

I should also add that WBTC is the only non-ETH collateral that matters currently.

2 Likes

Not that I need to remind anyone this… but there are very clear risks of increasing the WBTC ceiling, which should be balanced by risk premiums. Since CRV launched, the PEG has drastically improved, and increasing the WBTC risk premium will not lead to upward PEG pressure in this yield farming environment

@Jtathmann RP on WBTC-A is already at 4%. [EDIT: It’s at 2% but there’s a governance poll to change it to 4%]

I even think WBTC vaults are a bit rate sensitive, compared to ETH vaults.

MKR holders can choose to increase the base rate if they want to.

1 Like

Agreed. We should increase the base rate to adequately represent the WBTC risk :slight_smile:

2 Likes

I think Kiarash said bitgo has $100M cover per occurrence/per wallet, so this shouldn’t be a hard limit for maker assuming they have good custody practices.

2 Likes

I know for many of us this sort of description is sufficient for this issue. But please try to consider that there are others with less familiarity and we want to encourage them to participate as much as possible. Maybe provide a link to further discussion on the topic at least.

1 Like

Ugh, I hate when you’re right. I feel like I’m getting scolded by my dad.

3 Likes

But a very kind & polite one :wink:

Hah, I have no idea how to respond to that.

In the longer term I’d like to have a bunch of documentation somewhere that describes each parameter in the protocol and the issues to consider when adjusting it. We could then link people to the general article written about the parameter(s) being debated in any given signal. That could be used as an educational tool for governance as well as a handy reference when voting.

I added a little colour just for you.

2 Likes

Peg at 1.02. I voted for 120m. Though the poll result probably won’t swing directions.

I think that level of increase is fine, there’s lot’s of liquidity bridges for WBTC to be able to tap into the very liquid BTC market.

1 Like

USDC and WBTC are each separate risks. I think it is dangerous to think of them in a combo. Personally, I think wBTC is a much higher risk since if that BTC is hacked, its just gone and never coming back. Bad things happening to the USD in Coinbase’s bank account would be subject to the courts and is more likely to end up in a partial loss.

I believe Rune stated that they are insured up to 100m, anyhow I support an increase in the DC of WBTC, there is much more liquidity now than when it was first implemented

These polls have now closed! It was neck and neck but 120 Million DC won in the end. I’ll be adding a PR for this result to github so it can be added to Monday’s governance poll. Thank you all for participating!

5 Likes