Add WBTC Market to Moonwell on Base

Proposals Community Proposal
1

Moonwell Community,

I’m excited to present a proposal for a new addition to Moonwell’s Base deployment: the activation of a WBTC (Wrapped Bitcoin) market. WBTC went live on Base last week, which presents us with an opportunity to be the first lending application on the network to add support for this popular asset. Our history of seizing the “first mover advantage” with new asset listings for DAI, wstETH, and rETH positioned us well to attract liquidity to the protocol. By also embracing WBTC early, we aim to continue this tradition, enhancing not only liquidity, but the options available to Moonwell’s ever-expanding user base.

This proposal has been crafted in adherence with Gauntlet’s Moonwell Asset Listing Framework v2, ensuring comprehensive coverage of essential details required for a new asset listing. It’s important to note that WBTC, being a newly launched asset on Base, currently faces challenges with onchain liquidity and DEX support, making some of the required data points unobtainable (marked with “N/A” below).

Also in alignment with the processes put in place by the Moonwell Asset Listing Framework v2, I will submit this proposal for a Snapshot signal vote in the coming days before proceeding with an onchain MIP. If this Snapshot vote is successful and following the delivery of Gauntlet’s initial parameter recommendations, I will request the assistance of Moonwell contributors familiar with the market deployment process to deploy the WBTC market smart contract before the onchain activation vote.

General Information

  • Asset Name: Wrapped Bitcoin (WBTC)
  • Token Contract Address: 0x1ceA84203673764244E05693e42E6Ace62bE9BA5
  • Project Description:
    • WBTC is a wrapped version of Bitcoin, allowing BTC to be used as an ERC-20 token, facilitating its use within the Ethereum / DeFi ecosystem.
    • WBTC is backed 1:1 by Bitcoin, with proof of reserves visible onchain. WBTC on Base is natively minted. WBTC on Base is the first version of the asset to be natively minted on an Ethereum L2.
    • New Wrapped BTC are minted when a merchant (Wintermute) sends Bitcoin to a custodian (BitGo) and Bitcoin is sent back to the merchant after the Wrapped BTC has been burned. The burned WBTC is deducted from the merchant’s onchain WBTC balance and the supply of WBTC is reduced in tandem.
  • Benefits to Moonwell Community:
    • Activating a new market for WBTC would add increased diversity to Moonwell’s range of offerings, potentially increasing user engagement and protocol liquidity.
    • If we act quickly to activate this market, Moonwell will be the first lending app on Base to support WBTC, increasing our odds of successfully attracting liquidity and new users.
    • Bitcoin is commonly used as a “store of wealth/value”. Adding support for WBTC on Moonwell will allow users to supply their WBTC to the protocol and eventually borrow against it once liquidity conditions improve.
  • Resources:
  • Proposal Author Contact Information:
  • Relationship with Token: I am a Moonwell community member and delegate with no direct affiliation with the WBTC DAO or BitGo.

Market Risk Assessment

  • Market Cap:
    • Total Market Cap on ETH Mainnet
      • $10,586,706,731.94
    • Market Cap on Base
      • $340.00
  • Total Supply:
    • Total Supply of WBTC on ETH Mainnet
      • 155,856.0537 WBTC
    • Total Supply of WBTC on Base
      • 0.004984 WBTC
  • Liquidity on Exchanges: Asset currently lacks DEX support on Base
  • Proof of Assets: Wrapped Bitcoin ( WBTC ) an ERC20 token backed 1:1 with Bitcoin
  • Volatility: [N/A]
  • Average Daily Trading Volume: [N/A]
  • Gini Coefficient and Herfindahl Index: [N/A]

Decentralization

Smart Contract Risks

Oracle Assessment

  • Chainlink Oracle Price Feed Address: [0xCCADC697c55bbB68dc5bCdf8d3CBe83CdD4E071E]

  • Wrapped or Synthetic Asset Details: Wrapped Asset [ERC-20]

  • How is the asset wrapped, staked, or otherwise created?:

    • WBTC is wrapped, where Bitcoin is held by the custodian (BitGo), and an equivalent amount of WBTC is minted on the destination blockchain (Base).
    • This process is overseen by a consortium of organizations that act as custodians, merchants, and users within the WBTC network. BitGo is the custodian responsible for WBTC on Base and Wintermute is the first merchant to be onboarded.

  • On what network does the underlying asset exist?:

    • Bitcoin

  • How can you verify that the amount of the asset that is minted is never more than the amount of the underlying asset that is locked, staked, or used as collateral?:

    • The amount of WBTC minted is always backed 1:1 by the amount of BTC locked/custodied. This is verifiable through the “Proof of Reserve” mechanism facilitated by Chainlink’s decentralized oracle network.
    • Chainlink oracles check the balances of BitGo’s WBTC custody wallets every 10 minutes (~Bitcoin block time) and update the onchain data accordingly.

  • Is there a way to verify proof of reserves (PoR) on the same network as the market?:

    • Proof of reserves for WBTC on Base can be viewed here.

  • Please provide an analysis of the price deviation from the underlying asset; ie. over the last 180+ days, how much has the price of the token on centralized or decentralized exchanges deviated from the price of the underlying asset?:

    • N/A

  • What specific events might cause the price to “depeg” or no longer be the same as the price of the underlying asset?:

    • Smart Contract Failures - Vulnerabilities or failures in the smart contracts managing WBTC, its reserves, and its burning/minting mechanisms.
    • Oracle Failure - Chainlink’s price feed for WBTC could go offline, failing to provide the Moonwell protocol with accurate and up to date price data.
    • Operational Failure - Issues with the merchants, custodians, or processes involved in managing the Bitcoin reserves or minting of WBTC.

Conclusion:

Activating a WBTC market on Moonwell’s Base deployment is a strategic step towards diversifying Moonwell’s product offerings and boosting protocol liquidity. BTC has historically been seen as a “store of value”, making WBTC a perfect candidate to add to Moonwell, as it will give users looking to do more with their Wrapped Bitcoin new options on Base.

I invite the Moonwell community to delve into this proposal, share insights, and help shape our collective future. Your feedback is invaluable as we weigh the benefits and considerations of activating a WBTC market on Moonwell. In the following days, I’ll move forward with an off-chain signal vote to help further gauge community sentiment.

7 Likes
2

Snapshot proposal is live → Snapshot

2 Likes
3

If the community votes to proceed with initializing the WBTC market, Gauntlet is prepared to provide risk parameters for this market.

3 Likes
4

Summary

We propose onboarding wBTC as collateral on Moonwell Base deployment conditional to the token being available on Base and significant liquidity being onboarded subsequently on DEXes. Due to the market demand and future growth of WBTC liquidity on Base we think it appropriate to list the asset.

Risk Parameter Recommendations

Parameters Values
CF 0
Supply Cap 0.00010001
Borrow Cap 0.00001
Protocol Seize Share 3%

IR Recommendations

IR Parameters Recommended
Base 0
Kink 0.45
Multiplier 0.04
Jump Multiplier 3.00
Reserve Factor 0.25

Supporting Data

IR Parameter Specifications

wBTC IR Curves

Screenshot 2024-02-12 at 2.46.20 PM
Screenshot 2024-02-12 at 2.46.20 PM760×605 32.6 KB

Utilization Borrow APR Supply APR
0% 0 0
45% 1.8% 0.6%
100% 166.8% 125.1%

Risk Parameter Specifications

Token Liquidity and Market Stats

Metrics wBTC
Market Cap $10.53B
24h Trading Volume $505M
2% Depth (DEX+CEX) $40.7M

Supply and Borrow Caps

Borrow and supply caps are the primary parameter recommendations we can make to mitigate protocol risk when listing new assets. Gauntlet recommends setting the borrow and supply caps strategically until wBTC is added to the BASE bridge and on-chain circulating supply begins to ramp up.

Asset Cap Recommendation
Supply Cap 0.00010001
Borrow Cap 0.00001

Utilizing the Supply and Borrow Cap Guardian, Moonwell gains the ability to swiftly adjust the caps to capture the wBTC market. This contrasts with the previous method of setting the CF to 0 and subsequently making adjustments after the listing, which would have be delayed via the governance process.

Gauntlet recommends the supply and borrow cap at 0.00010001 BTC and 0.00001 BTC respectively, facilitating the governance proposal’s ability to mint a minimal amount as a preventive measure against a Hundred Finance attack.

3 Likes
5

Big thank you to Gauntlet for initial recommendations on the WBTC market addition! We are near to making an onchain proposal to add WBTC to Moonwell; we are waiting to acquire a small amount of WBTC as a means to defend against the Hundred Finance exploit—Halborn’s breakdown is a good read.

Appreciate your patience and can’t wait to get this rolling for us all.

2 Likes