MakerDAO – the issuer of the decentralized stablecoin DAI – unanimously passed a proposal this week to remove renBTC as a form of reserve collateral.
The Bitcoin-pegged token was deemed too risky to hold exposure to in light of its connections to the now-bankrupt trading desk Alameda Research.
Alameda and Ren
As announced by MakerDAO over Twitter on Thursday, Maker’s governance voted to offboard the RENBTC-A Vault type in a governance poll that opened on Monday.
Nearly 75,000 votes were in favor of the motion, with 0 abstaining or objecting.
“Considering the acquisition of the Ren project by Alameda Research and the recent bankruptcy of the latter, the Ren development team disabled the Ren network mints,” said Maker. Ren 1.0 network, it said, will shut down within 30 days after November 18th.
Ren is a bridge protocol for transferring digital assets to other blockchains (ex. transferring BTC to Ethereum). Facilitating such bridges requires a trusted third party to hold organic BTC in reserves, such that the bridge token (renBTC) is always redeemable with BTC 1:1. This allows the price of the bridge token to consistently track that of the base asset.
Stablecoins work in much the same way, with organizations like Tether and Circle holding billions in cash and U.S. Treasuries to back their dollar equivalent tokens. Both organizations release periodic attestations affirming the status of their reserves.
By contrast, MakerDAO backs its DAI stablecoin through a basket of cryptocurrencies like USDC, ETH, renBTC, and others.
Ren was acquired by Alameda Research earlier this year and has since received quarterly funding from the firm. After the trading desk filed for bankruptcy, Ren announced last week that it would disable its previous Ren 1.0 tokenized Bitcoin offering in favor of a new, community-controlled “Ren 2.0” faster than previously planned.
The team clarified that Ren 1.0 “remained and still remains fully safe and operational.” According to CoinGecko, the asset is still price pegged to BTC, trading at $16,600 at writing time.
“Marking this event as the end of Alameda’s involvement in the project by sunsetting Ren 1.0, safeguards the reputation, integrity, and hence long-term prospects of the Ren ecosystem,” said Ren in its statement last Friday.
Risks to Ren?
Despite renBTC’s current stability, Maker’s Risk Core Unit stated that the DAO’s offboarding of the asset could itself cause it to de-peg from Bitcoin. “Disabling burns means that Maker has a limited time frame to offboard the collateral to minimize potential future complications,” explained Maker.
The organization added that its offboarding from RENBTC-A “doesn’t represent any threat or deficiency to the Maker Protocol’s financial health, nor to its solvency.”
Another FTX-linked Bitcoin asset – soBTC – has already dropped 90% in value after FTX disabled withdrawals earlier this month. The exchange was responsible for holding the Bitcoin backing those tokens, but was exposed as having zero Bitcoin on its balance sheet as of November 10th.
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