tBTC's Record Growth and the Great WBTC Unwinding

Threshold Time #25

Author

Mark Rizzn Hopkins
December 26, 2024

Welcome to Threshold Time — a digest of the most newsworthy and exciting developments of Threshold Network.
You are receiving this because you subscribed to email updates for Threshold.

NETWORK UPDATES

This month, Threshold is at the center of the action—from the unraveling of WBTC to record-breaking tBTC growth and intense debates on tokenomics and sustainable fees. Dive in to see how we’re shaping the future of decentralized Bitcoin and beyond.

Table of Contents

Tokenized BTC in Flux: Why Decentralization Matters More Than Ever

The tokenized Bitcoin ecosystem is at a turning point. As centralized solutions like WBTC face mounting controversies around reserve transparency and governance, the cracks in their foundations are becoming impossible to ignore. Coinbase’s delisting of WBTC and the growing distrust surrounding Justin Sun-advised protocols underscore an urgent need for alternatives that prioritize trust-minimization, decentralization, and on-chain verifiability.

Protos and Bitcoin News have been doing a great job of covering what’s being called the “Great Unwinding,” and the reaction across the space has been palpable. Our own Ashley summed up the sentiment pretty well on the news:

The WBTC Crisis: Centralization Cracks Showing

The delisting announcement on November 19 triggered a rapid drop in WBTC’s total supply. As Coinbase decided to pull the plug, citing a failure to meet its listing standards, WBTC in circulation shrank by more than 5% in under two weeks. That chart speaks for itself—the supply flatlined.

This didn’t happen in a vacuum. Wrapped Bitcoin has been under fire for months since BitGo brought Justin Sun and BiT Global into WBTC’s custody. Transparency issues have snowballed—from undisclosed redemptions at HTX to proof-of-reserves that mysteriously exclude key assets. When centralization runs this deep, the trust fractures fast.

And trust is everything. Especially when you’re tokenizing Bitcoin.

What It Means for the Ecosystem

The Coinbase-Bit Global lawsuit highlights the tension at the heart of the tokenized BTC space: innovation versus centralization. WBTC’s reliance on custodians has left it vulnerable to governance issues, opaque movements, and now, legal drama. It’s no wonder exchanges and communities are starting to rethink what we really need from tokenized assets.

For those of us who’ve been around, it’s clear: this isn’t just a story about WBTC or cbBTC. It’s about the future of trust-minimized systems. Bridges like Threshold’s tBTC are proving that Bitcoin can move across chains without relying on centralized actors to hold the keys—or pull the rug.

When trust breaks down, it’s the users who pay the price. We’ve shown there’s a better way.

tBTC: Transparent. Decentralized. Built for Bitcoin. The tokenized BTC landscape is changing. For builders, traders, and communities, now’s the time to prioritize systems that don’t just talk trust—they prove it.

MacLane’s Appearance on the BoB Twitter Spaces

Last week, MacLane Wilkinson and Alexei Zamyatin, the Co-founder of @build_on_bob and BitVM2 contributor, joined an X Spaces discussion to explore the state of Bitcoin bridges.

The conversation explored whether Bitcoin bridges are a "cure or a curse" for the Bitcoin ecosystem, kicking off with Alexei noting their potential to expand Bitcoin's utility in DeFi while also exposing it to new risks. MacLane Wilkinson, a key contributor to Threshold and co-creator of tBTC, emphasized that decentralization is the ultimate goal: "Ultimately, the goal is decentralized solutions where no one can make decisions on your behalf." But, as the discussion unfolded, it became clear that centralized models like WBTC and cbBTC still dominate due to their first-mover advantage and institutional trust.

The debate around WBTC and cbBTC got particularly spicy. WBTC has long been the most entrenched bridge asset, but its recent custodial changes have sparked controversy. MacLane explained: "BitGo expanded the custodians for WBTC, and some of them have a track record of doing strange things with collateral. That spooked a lot of people." 

Meanwhile, cbBTC from Coinbase is growing rapidly, partly because it leverages Coinbase’s reputation.

However, it introduces new risks: "Coinbase can blacklist specific addresses. They can reach in and freeze cbBTC, and we've seen how often innocent users end up as collateral damage when centralized entities exercise that kind of control."

The group touched on other topics, including the promise of BitVM and the innovation driven by fragmentation in Bitcoin wrappers.

While fragmentation creates liquidity challenges, MacLane pointed out that it fosters innovation: "We need more experiments and more attempts... there’s room for a lot of winners." 

Ultimately, the consensus was that bridges are currently a "cure," driving more Bitcoin into DeFi, but over-fragmentation and misrepresentation could turn them into a "curse" if users aren’t careful.

As Alexei put it, "The monopoly of WBTC is over," but it’ll take time to see if decentralized models like tBTC and future BitVM designs can claim the mantle.

New tBTC Velocity Records Set

tBTC has been on a tear this year, with activity surging dramatically since August. This growth coincides with heightened concerns over WBTC custody changes, driving a wave of new mints and redemptions as users seek trust-minimized alternatives.

Let’s break down the numbers:

  • tBTC v2 Growth: Since its launch, over 20,131 BTC has crossed the bridge, with 11,715 BTC minted and 8,416 BTC redeemed.

  • August Boom: The cumulative BTC flow nearly doubled in just four months, jumping from 10,720 BTC in August to today’s total.

  • Momentum Continues: Nearly 16,000 BTC has been minted across both v1 and v2, with more than 11,000 BTC redeemed.

The trend is clear—tBTC is rapidly becoming the go-to option for users seeking decentralized and transparent BTC bridging solutions. A direct minting option for Base is also in the works, adding yet another layer of accessibility for our growing ecosystem.

$150K tBTC Migration Prize Pool Rewards are Claimable on Merkl

In October, Threshold DAO launched a $150,000 prize pool to incentivize WBTC holders to migrate to tBTC via wbtc.party. All rewards, slippage, and gas reimbursements are now claimable for participants who migrated their WBTC, signed the #saveWBTC pledge, and held their tBTC for the required one-month period.

The original $150K prize pool has grown significantly, thanks to Bitcoin’s price increase since September 30th. A total of 2.453 tBTC in rewards and reimbursements is now available to claim on Merkl.

Find step-by-step instructions to claim rewards and read more about the initiative in our latest blog: Bitcoin Party Migration Rewards.

AROUND THE DAO

TIP-92 debate on inflation, difference between tBTC & TACo needs, etc. - great one for people to participate in (or at least understand).

TIP-092, “Make T Great Again, Part 1,” proposes eliminating Threshold Network’s inflationary token model by replacing it with a streamlined, fixed-cost Beta Staker program. Post inception, Threshold has minted an average of 365 million T per year to sustain the 15% yield for stakers who authorize all 3 applications and earn full rewards. This proposal scraps inflation-based rewards in favor of paying 21 Beta Staker operators directly, costing the DAO just $500,000 annually. By relying on minting and redemption fees for revenue, the network could achieve profitability while potentially making T deflationary.

The plan also allows non-Beta Stakers to unstake immediately and consolidates Beta Staker nodes to one per operator, freeing 90M T from DAO delegations for other uses. As the program sunsets with the transition to permissionless signing via BitVM2 vaults, this proposal offers a pragmatic step forward—cutting inflation, sustaining operations, and positioning T for long-term value growth.

The debate has been intense. Critics warn this could damage the community and decentralization by excluding smaller stakers and consolidating influence within a smaller set of operators. Others question whether reducing inflation truly boosts token value, pointing to mixed results from similar moves in other networks. Concerns were also raised about the impact on the Threshold community, with some suggesting partial reductions in emissions as a less disruptive alternative.

Proponents counter that inflationary rewards are Threshold’s largest expense without directly improving tBTC’s security or demand. By eliminating inflation now, they argue, the network can achieve a stronger foundation for long-term growth while working on Part 2 proposals to address demand-side tokenomics. However, even supporters caution that maintaining decentralization in TACo and avoiding disincentives for stakers are critical to preserving Threshold’s unique value proposition.

TIP-93: Structuring Sustainable Fees for tBTC

TIP-93 laid out a clear path to tackle the tBTC mint and redeem fees with a structured, multi-part governance process that balanced financial sustainability with user flexibility. Governance participants decided to retain the current fees of 0% for minting and 0.2% for redeeming, to rely on standard governance for any future fee modifications, and to mandate a 30-day delay for the implementation of any approved changes.

Here’s the breakdown: Part 1 focused on reinstating a mint fee (proposed at 0.1%), while Part 2 suggested raising the redeem fee to 0.25%. Parts 3 and 4 addressed the operational mechanics—giving the TGC authority to adjust fees within set ranges and introducing a 30-day implementation delay for any changes. This delay ensured the market had time to adapt, preventing shocks to the system.

Ultimately, this proposal offered a thoughtful way to balance revenue generation and protocol adoption while letting the DAO retain control over tBTC’s competitiveness in a crowded market. Through voting, the community shaped how Threshold’s long-term success would be supported.

The comments on TIP-93 reflected a spirited and constructive discussion about how to balance tBTC's growth with the protocol’s financial sustainability. Many community members supported modest fees to offset treasury expenses and maintain operational resources, while others emphasized the competitive advantage of a fee-free minting process to drive TVL growth.

Suggestions included experimenting with lower mint and redeem fees, extending the mint fee holiday, or granting the Treasury Guild Committee flexibility to adjust fees within set ranges. Integration partners like Ultrade highlighted how fees could impact adoption in specific use cases, sparking ideas for alternative revenue-sharing models.

The TIP-93 vote covered four critical aspects of tBTC fee structure and governance. Part 1, addressing the mint fee, resulted in maintaining a 0% fee with 75% support. Part 2 focused on the redeem fee, keeping it at 0.2% with 77% of votes. Part 3 proposed granting the Treasury Guild Committee six months of discretion to adjust fees, which was rejected with 69% voting "No." Finally, Part 4 passed unanimously, mandating a 30-day delay for any fee changes to ensure smooth implementation and market adaptability. The results reflected a balance between maintaining user accessibility and reinforcing DAO-controlled governance.

TIP-94: Short-term staking rewards authorization

TIP-94 is all about minting 120 million Threshold work tokens (T) to cover staking rewards for the three-month period from December 1, 2024, through February 28, 2025. Unlike previous mints, this one’s limited to three months to leave room for ongoing discussions about reducing or even eliminating T emissions, as proposed in TIP-92. The rewards follow the DAO’s Stable Yield Mechanism, targeting a solid 15% annualized yield for stakers running TACo and tBTC nodes.

The minting math is based on a staking rate of ~28.2%, and any excess tokens will stay locked in the Future Rewards contract if staking slows down. After this mint, the total T supply would hit 11.155 billion, and we’d likely need another mint proposal in three months if emissions stay unchanged. This proposal tries to balance keeping stakers rewarded while keeping the door open for bigger conversations about inflation and tokenomics.

The TIP-94 discussion showed the community’s commitment to both transparency and being strategic. A big question was what happens to any extra tokens if TIP-92 succeeds in nixing emissions. Ideas ranged from keeping the tokens locked in the Future Rewards contract to sending them back to Governor Bravo for future use. The Threshold Foundation also clarified its multisig role in managing these contracts to keep things on track.

INTERACT WITH THRESHOLDERS

All are meetings are accessible via Discord (except as noted): go to Voice Channels and click on Cryptogarden.

Meeting times can change, so always good to confirm in Events (at the very top of the Discord server’s left navigation).

Marketing Guild weekly call: Tuesdays at 9am EST
Integration Guild weekly call: Tuesdays at 11am EST
Treasury Guild weekly call: Wednesdays at 8am EST
thUSD Steering Committee call: Thursdays at 12pm EST

ADDITIONAL RESOURCES

WHAT DO YOU THINK?

Got thoughts or feedback on the newsletter? Let us know! Take a quick minute to fill out our survey — your insights are invaluable.

Want to dive deeper? Join us on the Threshold Network discord . To become part of the Threshold Marketing Guild, head over to the #claim-a-role channel, click the emoji, and you’ll unlock access to our guild channels. Check out the Integrations and Treasury guilds while you're there!

Feel free to share your ideas, questions, or just say hi—we're all ears!