As we continue to prioritize decentralization and security within the Moonwell ecosystem, I would like to propose the integration of iBTC from Interlay as an alternative to wBTC. iBTC offers unique advantages that align closely with our community’s values and the broader goals of decentralization.
Why iBTC?
Decentralization: Unlike wBTC, which relies on centralized custodians, iBTC is fully decentralized. It is minted through a decentralized network of vaults, ensuring that no single entity controls the collateral or minting process.
Overcollateralization: iBTC is overcollateralized, which enhances the security and stability of the asset. This design reduces the risk of under-collateralization and potential losses, safeguarding the Moonwell ecosystem.
Trustless Nature: iBTC leverages Bitcoin’s native security by using trustless Bitcoin to Polkadot bridges. This means users can mint and redeem iBTC without relying on intermediaries, increasing the overall trust in the system.
Potential Benefits for Moonwell
Enhanced Security: By integrating a fully decentralized and overcollateralized asset like iBTC, Moonwell can reduce exposure to centralized risks and improve the security of the platform.
Alignment with Core Values: Using iBTC reinforces our commitment to decentralization, which is at the heart of Moonwell’s mission.
Diversification: Introducing iBTC offers users more options for Bitcoin-backed assets, promoting competition and potentially leading to better rates and services within the ecosystem.
While I agree to have a more decentralized alternative present on Moonwell, iBTC lacks liquidity and its 24HR volume is around $40,000 (just using a quick search on CoinMarketCap). Also iBTC depends on Polkadot , no? While Polkadot has been around for a long time and is battle tested, it’s fallen on some more difficult times recently, and this could possibly be a security risk in itself. It might make more sense for other forms like tBTC, etc. I know there’s been some discussion on social media about integrating cbBTC if there’s the option (granted, that is most certainly permissioned and I’d still like to see a decentralized solution as well).
I agree with all these concerns. Unfortunately, iBTC has not yet achieved sufficient liquidity and volume to be safely listed as collateral on a lending protocol. A more likely decentralized offering would be tBTC on Base, but they still have challenges in building enough DEX liquidity to safely process liquidations of underwater loans.
I think we’d love to encourage decentralized Bitcoin derivatives, but it takes quite some time for these to mature as much as the Ethereum derivatives have (for example, stETH, cbETH, rETH, etc), and building DEX liquidity requires a significant investment from the projects themselves.
Agreed, I do think there will be some promising decentralized alternatives soon, I see that there’s already a team building an EigenLayer secured BTC “eigenBTC”.