A rational view of the community autonomy proposal: the proposal is only the beginning of community autonomy, and Aave has no plans to divest wBTC
In the latest market dynamics, there have been many rumors surrounding Wrapped Bitcoin (wBTC) in the Aave protocol, especially about its possible divestiture. These false rumors have attracted widespread attention and discussion, however, rumors cannot stand up to scrutiny. According to the Aave forum, the proposal is currently only in the preliminary discussion stage and was proposed by Aave's risk team LlamaRisk. The actual content is to restrict the WBTC market rather than divestiture. In addition, judging from the forum feedback, the proposal has not received community support. Some community representatives, including ACI founder Zeller, have expressed opposition to this radical proposal. Zeller even made it clear in the forum: "Unless there are sufficient and sufficient reasons, wBTC users have a legitimate right to use the Aave protocol, and ACI will not approve of this proposal."
The proposal aims to prevent risks and does not believe that wBTC faces direct threats
It should be made clear that the proposed measures are not to withdraw wBTC from the Aave platform, but to set stricter restrictions on the use of the asset on the platform to reduce potential risks. Even as the initiator of the proposal, LlamaRisk also stated that although there are uncertainties, it does not believe that wBTC faces a direct threat, and it is recommended to take gradual and measured measures to mitigate risks rather than a complete withdrawal.
Specifically, the loan-to-value ratio (LTV) of wBTC is reduced to 0: this means that users can no longer borrow more funds using wBTC as collateral. This measure does not mean that wBTC will be excluded, but it will suspend its function as a lending collateral to reduce potential risks.
Lowering supply and borrowing caps: This move aims to limit the total supply and borrowable amount of wBTC on the platform to reduce the risk of new custody arrangements. This approach is intended to protect the platform and users from potential losses caused by custody issues.
These measures were implemented during the BitGo custody wBTC transfer to maintain platform stability and give the Aave team more time to evaluate the reliability of the new custodian. Aave co-founder Stani Kulechov made it clear that this proposal does not mean that Aave will completely eliminate wBTC, but is based on risk management considerations.
It is worth mentioning that wBTC’s new operating model ensures that wBTC will not be affected by BitGo alone. This change provides additional protection for the long-term stability and trust of wBTC and should be fully considered when evaluating proposals.
Only a few people follow the trend, and most members of the community are opposed to it
Although the proposal has been supported by some Aave community members, most people are opposed to it. Some members and stakeholders advocate a more cautious and balanced approach to deal with the current uncertainty. Marc Zeller, founder of the Aave Chan Initiative (ACI), also emphasized that wBTC users are an important asset of the Aave protocol and do not support any plan that may harm the interests of users unless absolutely necessary.
Market impact considerations are also an important topic. Aave governance representative EzR 3a L pointed out that setting LTV to zero could have an adverse impact on users when the market falls, indicating that such extreme measures may not be the best way to deal with it. Similarly, PaperImperium of Web3 R&D company GFX Labs also questioned why wBTC was targeted alone instead of other assets, arguing that wBTC's risk profile is no higher than other asset-backed tokens on Aave.
Based on the community's call, the initiator of the proposal, LlamaRisk, made concessions and proposed a subsequent reversal plan, saying that if trust can be established in the new joint venture, Aave can reverse any current restrictions on wBTC, but even so, it has not received community support. Some community members said that concerns about wBTC are beyond the normal range. The asset has been in good operating condition for a long time and is an important part of the Aave community. It is necessary for the relevant parties to obtain the highest level of respect. He particularly pointed out that the treatment of wBTC custodians in other communities is completely unreasonable.
Blindly looking for alternatives is not advisable. The community should improve the discernment of proposals.
Although there are other alternatives on the market such as Threshold BTC (tBTC) and cbBTC launched by Coinbase, these solutions also have their own problems.
tBTC is a decentralized BTC wrapper that is implemented through smart contracts and allows users to tokenize BTC on Ethereum. However, the main issues facing tBTC include its relatively complex user flow and low user adoption. Users need to go through multiple steps when converting BTC to tBTC, including the signing and verification process, which may be a barrier for some less technical users. In addition, due to its smaller user base, tBTC is also less liquid than wBTC, which may affect its practicality in DeFi protocols.
cbBTC, launched by Coinbase, is another centralized BTC wrapper that is hosted and guaranteed by Coinbase. Although cbBTC benefits from the strong brand and trust of Coinbase, it also faces the risks of centralization. Since cbBTC is completely controlled by Coinbase, users may be wary of its centralized nature, especially in the context of the growing attention paid to decentralized finance. The risks of centralization may include single points of failure, censorship risks, and potential asset freezing issues.
In this rapidly developing DeFi field, we call on the industry and the outside world to rationally view the role and impact of DAO proposals. Admittedly, the wBTC-related proposals on Aave show the good operation of decentralized governance, but it does not mean that all proposals are correct. Decentralized finance aims to provide open, transparent and secure financial services. In the face of market uncertainty, we should adhere to this concept and protect user interests through reasonable risk management measures, rather than blindly and unilaterally withdrawing assets. We look forward to all stakeholders working together to respond to current challenges with a rational attitude and jointly promote the development of the decentralized financial ecosystem.
