Wrapped Bitcoin (wBTC), one of the most widely used Bitcoin derivatives across the Ethereum ecosystem, has announced security measures amid ongoing DeFi contagion fears.
On Thursday, the project said it is upgrading its cross-chain DVN configurations, which would be done by Sunday, 26 April. It added, “These updates are precautionary and reflect our ongoing approach to maintaining robust security standards across integrations.”
For perspective, DVN (decentralized verification network) is the system that the attacker exploited on LayerZero, exposing the Kelp DAO protocol to lose $293 million.
However, the KelpDAO had a simplified DVN set-up that needed only a single verifier. This made it easier for the attacker to exploit the flaw.
As such, the wBTC team may be upgrading to a multi-signature system that needs more than two verifiers before assets move across chains.
Beyond hardening security systems, the project also placed a temporary pause on transfers across LayerZero.
WBTC OFT service via LayerZero will be temporarily paused. Service will resume once the root cause is identified and it is confirmed safe to proceed.
Why a secure wBTC is crucial
For clarity, the KelpDAO exploit leveraged rsETH, a low-quality collateral, and swapped it for other higher-quality assets. Despite targeting a low-quality asset that is not widely used, the impact has been significant.
KelpDAO lost $293 million while contagion fears across lending markets triggered over $15 billion outflows from Aave. Before the attack, KelpDAO restaked ETH (rsETH) had a market cap of $1.6B and 22.8K holders.
On the other hand, WBTC has 180K holders, including major tier-1 exchanges like Binance. It has a market supply of $9.2 billion. Besides, it is the most liquid and widely used in DeFi platforms across Ethereum and Solana DeFi ecosystems, commanding a 44% market share.
Coinbase’s wrapped Bitcoin [cbBTC] comes in second with about 28% market share.
Over 70% of wBTC supply is locked in lending protocols and standalone buy-and-hold. In other words, a similar exploit would trigger a deeper DeFi run, noted analyst Ignas.
Got chills down my spine thinking if wBTC got hit with DVN attack. That would’ve touched every DeFi protocol as well as multiple CEXs who store wBTC.
That said, wBTC only saw about $400 million in outflows in the first two days after the KelpDAO exploit. Since 21 April, Tuesday, it has seen net inflows, underscoring resilience.
Final Summary
- Wrapped Bitcoin (wBTC) continues to harden its security systems to minimize the risk that exploited KelpDAO.
- The product has been relatively resilient despite broader DeFi outflows led by Aave’s $15B bleed out.
