Justin Sun’s New Ventures in the Crypto Space: SunPump and WBTC Custody

Tron Founder Justin Sun Makes Waves with New Ventures

Justin Sun, the founder of Tron, has recently made headlines not just for his controversial reputation but also for his strategic moves in the crypto space. Described in a recent podcast episode as a “shameless” yet “shrewd” individual and “one of the smartest on-chain users, period,” Sun’s activities are generating significant attention. This week, he launched a new memecoin platform named SunPump and took a pivotal role in the custody of the $9 billion-plus Wrapped Bitcoin (WBTC) project alongside BitGo. This development is stirring interest in the competitive landscape of tokenizing Bitcoin for use in decentralized finance (DeFi) protocols on Ethereum and other blockchain networks.

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The supply of Wrapped Bitcoin (orange) has fluctuated, alongside its market capitalization, as the price of the WBTC token closely tracks the notoriously volatile Bitcoin (Dune Analytics).

WRAPPERS DELIGHT: A significant shift is occurring in the business of tokenizing Bitcoin for the Ethereum blockchain. In 2019, the crypto custodian BitGo, in collaboration with two partner firms, introduced “Wrapped Bitcoin” – a mechanism for locking up Bitcoin and minting an equivalent token, WBTC, that could be utilized on Ethereum, a key destination for many crypto traders due to its status as the home of the largest decentralized finance (DeFi) protocols.

The WBTC project experienced rapid adoption, with its market capitalization soaring to approximately $16 billion by late 2021. However, it has since settled back to around $9 billion, still placing it among the top 20 cryptocurrencies. Notably, BitGo had been the sole custodian for the locked Bitcoin, raising concerns about potential risks associated with its centralized control.

In response to these concerns, BitGo announced last week its plan to transition WBTC to “multi-jurisdictional custody,” expanding operations into Hong Kong and Singapore. However, this move has prompted some industry observers to express apprehension about Justin Sun’s involvement in BiT Global, the custody firm now overseeing the locked Bitcoin. As noted by Nydig research head Greg Cipolaro, “The partnership has raised eyebrows among industry observers.”

In a tweet, Sun acknowledged the community’s concerns regarding his various projects, including WBTC, but asserted that his involvement is purely strategic. He emphasized that he does not control the private keys to the WBTC reserves and cannot access or move any Bitcoin reserves. BitGo CEO Mike Belshe reiterated this point during an X Spaces session, stating, “There is no single party that has the ability to mint or steal from the underlying treasury.”

Despite these reassurances, the decentralized stablecoin issuer MakerDAO, following a heated discussion on its forum, passed a motion on August 14 to eliminate its exposure to WBTC. The motion cited concerns that the new arrangement could “centralize too much control with BiT Global,” as reported by CoinDesk’s Sam Reynolds. Meanwhile, the DeFi protocol Aave has opted to continue using WBTC, according to CoinMetrics, but this transition has highlighted custodial and operational risks, leading to increased interest in permissionless alternatives.

• Potential alternatives include Threshold’s tBTC and a new option called dlcBTC, both of which have been prominent topics on the podcast circuit this past week.
• The U.S. crypto exchange Coinbase has hinted at the upcoming release of “cbBTC.”
• Crypto influencers on X have been promoting FBTC, another wrapped Bitcoin alternative that launched last month with support from the Mantle Network, as a viable solution to WBTC’s “centralization risks.”

Such developments indicate a rush to create alternative (and potentially decentralized) versions of wrapped Bitcoin, as highlighted by Galaxy Digital’s Gabe Parker in a newsletter. Tarun Chitra from Gauntlet noted on the Chopping Block podcast, “There’s going to be this mad rush to try to fill the gap.”

A broader perspective from Presto Research suggests that “Regardless of one’s view on Sun’s involvement, the attempt to decentralize a key piece of the DeFi infrastructure is likely a step in the right direction, despite its challenges.”

Elsewhere in the Crypto World

‘Wartime CEO’: Urbit’s Founder Returns in Shakeup at Moonshot Software Project

Urbit founder Curtis Yarvin (David Merfield/NASA, composite by Jesse Hamilton for CoinDesk)

In a surprising turn of events, Urbit, a unique and ambitious project aimed at reconstructing the entire internet computing stack, has reinstated its controversial founder Curtis Yarvin after a five-year absence. Although he holds no formal title, Yarvin is taking the lead on strategic decisions.

The board of the Urbit Foundation, which oversees core development, has terminated executive director Josh Lehman, with Christopher Colby stepping in as interim director while the board searches for a permanent replacement. The foundation faces financial challenges, leading to the abandonment of a fundraising proposal that aimed to create a new layer-2 blockchain on Ethereum. Instead, Yarvin’s strategy focuses on developing a utility token, potentially on Base, Coinbase’s layer-2 network.

Protocol Village

Top selections from the past week in our Protocol Village column, showcasing significant blockchain tech advancements and news.

• 1. GOAT Network: GOAT Network, branding itself as the “first Bitcoin layer 2 to share network ownership,” has released its economics beigepaper, outlining its approach to sustainable BTC yield. The executive summary states: “GOAT Network leverages decentralized sequencer, BitVM2, and zkVM technologies to create a platform that inherits the security of the BTC mainnet while catering to investors’ diverse financial needs.”
• 2. BitVM2: Robin Linus, the Bitcoin developer who made waves last year with a theoretical method for enhancing Bitcoin’s programmability, has introduced an improved version called “BitVM2.” This iteration boasts significant enhancements that could bring the concept closer to practical implementation, involving the use of cryptography to compress programs into sub-programs executable within Bitcoin transactions, according to a white paper published Thursday by Linus and five co-authors.
• 3. Linea: An EVM-equivalent layer-2 network developed by Ethereum creator Consensys, has partnered with Status, which positions itself as an “open-source decentralized communication super app.” Together, they plan to launch a parallel chain, with the Status team being the first contributors to utilize Linea’s code through new open-source repositories. This collaboration aims to enhance the entire ecosystem by ensuring client and prover diversity and supporting ongoing engineering efforts on Linea.
• 4. Babylon: The Bitcoin (BTC) staking platform Babylon, led by a Stanford University professor, is poised to enter the next phase of its development, with plans to launch the first phase of its main network on August 22. Babylon secured a $70 million funding round led by Paradigm earlier this year, and during this initial phase, BTC holders will be able to lock their tokens directly on the Bitcoin network.
• 5. Network3: Describing itself as a “protocol for decentralized, authenticated, anonymous, and reliable data transmission and computation,” has launched a physical dual mining machine called the N3 Edge, which supports both IoTeX and Network3 tokens.

Money Center

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Regulatory, Policy, and Legal Updates

Dark Pools Dominate Ethereum as Private Transactions Surge

The percentage of private transactions on Ethereum, measured by total gas used, has increased since September 2022. (Blocknative)

A growing number of sophisticated Ethereum users are opting for private transactions on the blockchain, utilizing so-called dark pools to evade trading bots designed to front-run transactions, albeit at the cost of transparency typically associated with decentralized public networks. This shift is outlined in new research compiled by Blocknative, a company focused on minimizing the impact of MEV, or “maximal extractable value.” This refers to profits that can be extracted by rapid software bots that swiftly enter trades to capitalize on transactions waiting to be processed in the network’s public queue.

Currently, private transactions, which are sent directly to validators or block proposers instead of public mempools, comprise about half of all Ethereum transactions in terms of total gas usage—indicative of the computational resources needed to process these transactions. This percentage was around 7% in September 2022, coinciding with Ethereum’s transition to a proof-of-stake network, but has surged this year, rising from approximately 15% since the start of 2024.

Blocknative CEO Matt Cutler commented on this trend, stating, “You have a small number of actors who can see the private flow. Certain individuals can access information that others cannot, creating opportunities and advantages.”

For the full article, click here to read more from Bradley Keoun.

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