BitGo and BitGlobal Revise WBTC Custody Model After Community Input: Key Takeaways

Holding an open discussion on 𝕏, BitGo’s Mike Belshe joined Justin Sun and original WBTC contributor Meow to address concerns about WBTC custody changes.

Finn Miller

Published: Aug 16, 2024 at 16:45
Edited: Aug 19, 2024 at 11:46

Earlier this week, BitGo announced changes to WBTC’s existing custody model that included distributing influence across several parties and geographic jurisdictions.

The move drew a wrath of criticism from the cryptocurrency community, notably due to the involvement of Tron founder Justin Sun.

Seeking to clear the air, Jupiter co-founder and original WBTC contributor Meow welcomed BitGO CEO Mike Belshe, Justin Sun, and BitGlobal representatives to a public forum to shed some light on the situation.

Mike Belshe Puts BTC Usage Concerns to Rest

One of the key concerns outlined by the crypto community following BitGo’s original announcement was what the Bitcoin used to back WBTC would be used for. Acting as a voice for the crypto community at large, Meow posed the question of BTC utilization to BitGo CEO Mike Belshe.

Assuring over 5,000 captivated listeners, Belshe put their nervous minds to rest, highlighting that “when you put [Bitcoin] inside of a trust company you’ve got it wrapped in a mechanism which has got a fiduciary responsibility in a very legal way.”

Reinforcing his statement with additional context, Belshe acknowledged that people’s “number one question” was that “the bitcoin behind [WBTC] is not gonna get hypothecated, rehypothecated, lent out, used, taken, put somewhere else.”

Highlighting the legal constraints of BitGo’s position, Belshe assured listeners “The regulatory construct that we have makes it so that it’s actually illegal to do that.”

A Transfer of Trust?

Part of the BitGo X GitGlobal collaboration means that multi-signature keys with access to custodied assets will be distributed across several companies. While on paper this aids in decentralization and security, Meow and the community raised concerns regarding the involvement of BitGlobal, a relatively new and unknown entity in the space.

By transferring ownership of keys, Meow theorized that the “transfer of trust will take a long time” arguing it could be “quite a hard pill for the community to swallow”.

Responding to Meow’s claims, Belshe asserted “BitGo is not asking you to take the same trust that you had in BitGo and just give it to somebody else.”

Hammering his point home, Belshe contended that decentralization remains one of the strongest security measures available. Posing the rhetoric, Belshe asked “Is it more secure to have the two parties, or is it more secure to have BitGo hold two keys?”

The Justin Sun Factor

The announcement of Justin Sun’s involvement in the arrangement has been one of the collaboration’s biggest items of contention. Some long-standing crypto protocols like MakerDAO have argued that Justin Sun’s involvement adds an “unacceptable level of risk” to WBTC, proposing to reduce their WBTC exposure to 0.

Justin Sun’s commentary during the forum was admittedly brief. Downplaying his role and involvement, the controversial figure noted “the protocol, how to mint, how to burn and also the transparency and all the procedures remain the same.”

Adding further clarity, Sun contended “other than some of the keys being moved out of the U.S., I don’t really think there is much difference.”

Beyond assuring listeners that nothing had changed, Sun revealed his vision for the future of WBTC. Positing that “not everything we do is purely to make money” Sun believes the team should focus on expanding WBTC market cap, TVL, and helping the asset establish a presence of more blockchains.

What’s Changing?

As a result of the discussion, BitGo has taken the community’s feedback on board and implemented new changes to the collaboration’s custody model.

The new model proposes to include BitGo Singapore, a new arm of the company, into the custody equation. One cold-storage multi-signature key will be held by BitGo Inc, BitGo Singapore Ltd, and BitGlobal, with master keys held in the United States, Hong Kong, and Singapore.

The new multi-jurisdictional and multi-institutional arrangement aims to further decentralize WBTC custody, while maintaining the same existing mechanisms that have ensured WBTC’s security thus far.

All things considered, the event demonstrates one of the key values of the crypto industry. By having an open, transparent discourse about the concerns shared by the wider community, institutional teams were able to adapt their procedures and find a solution that is better aligned with the goals of all involved parties.