WBTC Collateral Assets Review

OpenZeppelin reviewed the following collateral assets provided by the WOOF team for use in the WBTC market:

Our review focused on assessing the risks associated with using these assets as collateral in the protocol. The analysis included factors such as the asset’s capitalization, market liquidity, implemented custom functionalities (e.g., pause mechanisms and fees), prior audits, and the potential for price manipulation.

Additionally, WOOF requested OpenZeppelin’s recommendations for appropriate price feeds for these assets as Chainlink data feeds may not support all the assets under consideration.

Assets Review

uniBTC

Deployed 13 April 2024, uniBTC is a restaking token that allows users to deposit WBTC which can then be staked in different protocols on the Babylon network. Therefore, the value of the token depends on the behavior and correctness of the Babylon network. The uniBTC codebase could be documented better. For example, the uniBTC contract itself is not the entry point for users. Instead, there is a vault contract and this fact is not easily found in the system documentation.

Key Risks and Trust Assumptions:

  • Relatively Undocumented: The system architecture could be better documented.
  • Withdrawal Constraints: Unstaking (receiving WBTC for your uniBTC) is currently disabled but when enabled it can only occur in denominations of 1 WBTC, will accrue a 0.5% fee, and will take 30 days.
  • Babylon Network: We found no evidence that Babylon Network has been audited and would want to set time aside to consider their network if this collateral token were to move forward.

Status: Not recommended at present due to the reasons discussed above.

swBTC

Deployed 12 August 2024, Swell Restake BTC (“swBTC”) tokens represent ERC-4626 shares in a strategy that invests user-deposited WBTC in other restaking protocols like EigenLayer, Symbiotic, or Karak.

Key Risks and Trust Assumptions:

  • Small track record and market cap: Deployed in Aug 2024, the total supply of swBTC today is roughly 300 tokens representing a market cap of not even $30MM. It is held by less than 300 addresses on the mainnet with at least 67% of the supply held by a Layer Zero endpoint (i.e., bridged away), thereby further concentrating the mainnet supply.
  • Strategy is actively managed: Different roles within the system actively manage the strategy underlying the tokens. However, there is no prospectus to explain the management philosophy and goals.

Status: Not recommended at present due to the reasons given above.

LBTC

Deployed 17 May 2024, LBTC is presented as the Universal Liquid Bitcoin Standard, offering yield-bearing, cross-chain capabilities and being backed 1:1 by BTC. It enables BTC holders to engage in various DeFi activities, including staking, borrowing, and trading. Withdrawals require a 9-day process to unstake and unbond BTC.

Status: Adding this asset as collateral would not present new risks beyond currently manageable and acceptable.

solvBTC

Deployed 27 Jun 2024, solvBTC is part of the Bitcoin Reserve initiative, designed to unlock the potential of Bitcoin through a transparent Proof-of-Reserve model and seamless liquidity market integration. It serves as a gateway to BTCFi and aims to attract traditional funds to the crypto space.

Status: Adding this asset as collateral would not present new risks beyond currently manageable and acceptable.

eBTC

Deployed 14 Aug 2024, eBTC is a dual-yielding, Bitcoin-backed token created to meet the needs of restaking collateral. It supports staking and restaking services through partnerships with Lombard and Babylon. The asset interacts with a hook contract that enforces blacklists and lock periods.

Key Risks and Trust Assumptions:

  • Blacklist and Lock Period: Transactions can be reverted if addresses are on the blacklist, potentially disrupting protocol operations such as liquidations.
  • Trust Assumptions: Blacklist and lock controls rely on trusted accounts, and changes in lock period settings could introduce operational risks.

Status: Not recommended for use as collateral due to identified risks, reliance on trust assumptions, and the lack of a dedicated price feed.

FBTC

Deployed 30 May 2024, FBTC is a 1:1 Bitcoin-backed, cross-chain liquid Bitcoin designed for staking, borrowing, and yield farming in DeFi ecosystems. Its minting and burning is managed by a custodian, introducing centralized elements.

Key Concerns:

  • Low market capitalization and limited holders.
  • Centralization risk, with approximately 50% of tokens held by two EOAs.
  • Blacklist functionality poses a potential threat if Compound is ever blacklisted.

Status: Not recommended for use as collateral due to the above risks.

tBTC

Deployed 17 August 2021, tBTC is a decentralized Bitcoin wrapper backed 1:1 by Bitcoin. It uses threshold cryptography to eliminate the need for a centralized custodian, making it trust-minimized and redeemable for Bitcoin.

Status: Adding this asset as collateral would not present new risks beyond currently manageable and acceptable.

pumpBTC

Deployed 30 June 2024, PumpBTC provides a liquid restaking solution for BTC through Babylon. It enables yield generation and facilitates seamless staking integration. Minting and burning are managed by a multisig wallet.

Key Risks:

  • Minting and burning are unrestricted, relying on trusted multisig accounts.

Status: Adding this asset as collateral would not present new risks beyond currently manageable and acceptable.

Price Feeds

For price feeds, the following recommendations are made: