With Bitcoin being the proven first use case for blockchain technology, and containing ~70% on the total crypto market capitalization, I would like the group to discuss risks and requirements to meet risk mitigation tolerances to add WBTC and TBTC (when released) to multi collateral Dai. Since we are in the infancy of placing BTC on the Ethereum blockchain, I believe it is important to help cross chain projects for Ethereum and incubate until ready for MCD.
The initial risks I see with WBTC:
- Trust. Uses a centralized custodian framework requiring the trust of third parties (Bitgo) and merchants (kyber, republic).
- Market capitalization. WBTC also has a relatively small market cap of 569 BTC ($5,700;000) with Compound being the largest holder of WBTC at 96.
- Liquidity. Only 0.9 BTC traded on-chain in the last 24 hours.
Risk mitigation of WBTC:
- Performs quarterly audits of reserves to ensure 1:1 backing.
Benefits of TBTC compared to WBTC:
- Trust. Reduces requirement to trust third parties by locking BTC in a smart contract instead of being held by a custodian.
Risks of TBTC:
- Unreleased project that could have smart contract errors.
- When released, will have low market capitalization and liquidity.