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Sky, a prominent decentralized finance (DeFi) protocol, has decided to gradually end its use of wrapped Bitcoin 
$104,377 (WBTC). This decision follows discussions involving Justin Sun, the founder of the Tron blockchain, and BiT Global, a crypto custody firm participating in the project. The WBTC project plays a crucial role in facilitating the use of Bitcoin across various blockchains, particularly in the crypto lending sector.
Changes in the Sky Ecosystem
This decision is based on a governance proposal made by the issuer of the DAI stablecoin. The proposal indicated that WBTC-backed loans would be phased out within the Sky Ecosystem. This change is considered significant in the digital asset space due to Sky’s existing $200 million in WBTC-collateralized loans.
BA Labs’ Warnings
BA Labs, a risk management firm consulting for the Sky Ecosystem, has raised concerns about potential risks associated with Justin Sun’s involvement in the WBTC project. The firm recommended a complete phased-out approach to WBTC and emphasized that each step should require a vote. Additionally, BA Labs suggested incorporating alternative cryptocurrencies as collateral for Sky.
Following these developments, BitGo announced it would become a minority stakeholder in the project, handing control over to Justin Sun and BiT Global. In response, Coinbase launched its wrapped Bitcoin product, Coinbase Wrapped BTC (cbBTC), which will operate as an equivalent to Bitcoin on its order book and be issued on Ethereum 
$2,666 and Base.
Sky has advised users to close their WBTC Legacy Vaults and SparkLend positions via social media platform X. The protocol confirmed it would no longer operate with wrapped Bitcoin and reiterated BA Labs’ suggestion to consider alternative cryptocurrencies as collateral.
Sky’s decision to cease WBTC usage is expected to have a significant impact on the digital asset ecosystem. The involvement of Justin Sun and BiT Global is becoming a key factor in Sky’s risk assessment. This development may encourage users to explore different cryptocurrencies and create new competitive dynamics within the sector, potentially accelerating changes in the crypto world and prompting a reevaluation of existing regulations.
