TIP-064: Sunsetting explicit tBTC coverage pool contracts
AI summary
This proposal suggests discontinuing the current dedicated 'coverage pool' smart contracts for tBTC, which are designed to act as insurance against Bitcoin collateral losses. Instead, it proposes moving to an 'implicit coverage pool' model where the entire Threshold DAO treasury, consisting of various assets like T, ETH, wBTC, and stablecoins, would serve as the backstop. The DAO's treasury assets are currently held across several multisig wallets and a timelock controller.
If passed, the explicit coverage pool contracts will be retired. The DAO's treasury assets will be used more flexibly, potentially earning yield in DeFi strategies, but will also bear the direct responsibility for covering any tBTC collateral losses. This could benefit the DAO by optimizing asset utilization, but it centralizes the risk management to the Treasury Guild and the overall DAO treasury.
Voting results
🐳 Whale votes
0 votes > 5% VPFull proposal
Threshold’s coverage pool contracts are designed to provide an insurance backstop against potential losses in the Bitcoin collateral backing tBTC. However, it’s clear that T-only coverage pools are a sub-optimal solution given the inherent relationship between tBTC and T. In case of a BTC collateral loss event, it’s likely that T would experience a significant price impact, reducing it’s effectiveness as an insurance backstop.
Far better are coverage pools with exogenous assets that are not correlated with tBTC (i.e. ETH, ETH LSTs, BTC).
However, naively deploying coverage pools with exogeno…