[RFC] Onboard tBTC as a Capital Pool Asset

Governance Discussions
1

Summary

This proposal recommends onboarding Threshold Network’s tBTC as a Capital Pool asset for Nexus Mutual. Integrating tBTC offers a strategic opportunity to enhance the safety and resilience of the Capital Pool by diversifying beyond the current cbBTC, which, while advantageous in its own right, relies on centralized custody and introduces potential points of attention. In contrast, tBTC—fully backed one-to-one by native Bitcoin—brings a unique combination of permissionless access, robust decentralization, and cutting-edge security that aligns seamlessly with Nexus Mutual’s trustless ethos.

Unlike cbBTC, tBTC operates as a fully permissionless system, enabling anyone to mint or redeem it without intermediaries or gatekeepers. Built on the Threshold Network, tBTC decentralizes custody across a rotating group of independent node operators, eliminating single points of failure and mirroring Nexus Mutual’s community-driven governance model.

The security of tBTC is further reinforced by threshold cryptography, requiring a majority consensus among operators (e.g., 51 out of 100) to manage the underlying Bitcoin via a multisig-like mechanism. By adopting tBTC, Nexus Mutual not only diversifies its Capital Pool with a premier store of value but also strengthens its foundation with an asset that embodies decentralization and resilience.

  • Stage 1: Onboard tBTC as an asset in the Capital Pool
  • Stage 2: Swap part of cbBTC to tBTC (initial amount of 25%)
  • Stage 3: Swap part of cbBTC to tBTC (second amount of 25% reaching 50%)
  • Stage 4: Swap ETH for tBTC (amount of $500k – half of NMIPIP 239 proposed)

Motivation/Background

tBTC is Threshold’s decentralized and permissionless bridge that brings BTC to Ethereum, Arbitrum, Base, Polygon, Optimism, Solana and other chains. Users wishing to utilize their Bitcoin on Ethereum and other chains can use the tBTC decentralized bridge to deposit their native Bitcoin into the system and get a minted tBTC token in their EVM wallet.

tBTC enables users to have access a bridged Bitcoin, which can be permissionlessly minted and redeemed, where the BTC that backs it is not held by a central intermediary, but is instead held by a decentralized network of nodes using threshold cryptography. This implies a fully decentralized and permissionless experience for BTC.

tBTC is present on other markets such as AAVE Ethereum and Arbitrum market and following its approval, tBTC’s initial supply cap was reached within 72 hours, prompting an increase to meet the overwhelming demand. This rapid adoption underscores the market’s appetite for trust-minimized BTC solutions in DeFi. It is also available on Compound platform.

tBTC on Ethereum has a current supply of 4.252 BTC worth $336M at current price.

Benefits for Nexus Mutual

  • Further decentralization and trust minimization for Nexus Mutual funds.
  • A range of options for those who wish to diversify on a decentralized option of wrapped BTC.
  • High User Demand, since its initial deployment on Aave’s Ethereum market, tBTC reached its initial 500 BTC supply cap within the first week. The cap has been increased multiple times, now sitting at 2200 BTC, highlighting strong user interest.
  • Preferable yields on tBTC through active incentive participation, boosting Venus protocol use and TVL.

Rationale for onboard tBTC
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On NMPIP 239, Nexus Mutual onboarded cbBTC as a Capital Pool asset, a preferable choice over other options—especially WBTC—due to concerns stemming from BitGo’s August announcement and subsequent ownership changes. Although no issues have arisen since then, it remains premature to fully trust cbBTC as a Capital Pool asset given uncertainties about its management and the potential ripple effects of its significant market cap. While cbBTC is centralized and managed by a single entity, Coinbase has demonstrated a strong reputation in custody, serving both itself and third parties, including Strategy and several ETFs. Additionally, Coinbase recently published its Proof of Reserves for cbBTC, a positive step toward transparency.

However, despite this effort to minimize trust concerns, the centralized nature of cbBTC remains a factor to consider. It is prudent for Nexus Mutual to diversify its funds into secure, fully decentralized alternatives like tBTC. This approach ensures that institutional shifts, mismanagement, hacks, or even government interventions cannot compromise or seize Nexus Mutual’s funds, which are custodied on-chain, including the native Bitcoin backing tBTC. The Threshold Network publicly lists all wallets holding the Bitcoin that backs tBTC accessible at tBTC v2 Systems - Decentralized Bitcoin on Ethereum and every tBTC can be redeemed for BTC at any time, permissionlessly, without reliance on a centralized institution.

Migrating a portion of current cbBTC holdings to tBTC preserves value while enhancing trust in Nexus Mutual’s funds, reducing long-term risk. We propose that Nexus Mutual exchange 50% of its current cbBTC holdings for tBTC, with the transition executed gradually by the Advisory Board, beginning with an initial shift of 25%.

I also propose grant the Advisory Board the power to conduct the swap of ETH for tBTC (initial amount of $500k) half of what initially proposed for cbBTC on NMIP 239.

tBTC Liquidity and Market Risk Assessment

tBTC has current a supply of 4,252 BTC worth $366M at Ethereum ecosystem and is present on several DEXes, Lending and Yield platforms which have a fair amount of liquidity provided and interesting options for liquidity providers, lenders and borrowers which allows Nexus Mutual to swap it for whatever other main asset needed.

Moreover, tBTC can always be redeemed 1:1 for Bitcoin permissionlessly, ensuring flexibility and trustless access to native BTC at any time.

More can be found at https://defillama.com/yields?token=TBTC

Dashboard on Decentralized LP liquidity: https://dune.com/sensecapital/tbtc-liquidity

List of main DEXes where tBTC is listed and its approximate pool TVL

UniSwap - $8.64M in USD
Curve - $21.10M in USD
Aerodrome - $6.38M in USD
Velodrome - $3.34M in USD
Balancer - $1.1M in USD
PanckakeSwap - $60,242 in USD

List of main Lending and Yield Platforms where tBTC is listed and its approximate supply

AAVE - $77.50M in USD
Compound - $26.12M in USD
Morpho - $5.75M in USD
Merkl - $5.75M in USD
Convex Finance - $7.21M in USD

List of main Risk Assessments by independent services

AAVE Onboard of tBTC for Arbitrum market made by LlamaRisk (Feb, 2025)
AAVE Onbaord of tBTC for Arbitrum market made by ChaosLabs (Feb, 2025)
Venus Onboard of tBTC for Ethereum market made by ChaosLabs (Feb, 2025)
Compound Onboard of tBTC for Ethereum market made by Gauntlet (Jul, 2024)
AAVE Onboard of tBTC for Ethereum market made by ChaosLabs (May, 2024)
AAVE Onboard of tBTC for Ethereum market made by LlamaRisk (May, 2024)
Collateral Risk Assessment: Threshold BTC (tBTC) made by Llama Risk (Dec, 6th 2023)

Liquidity simulation with no significant price impact

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Specification

Ticker: tBTC

Contract Address:
Ethereum: 0x18084fbA666a33d37592fA2633fD49a74DD93a88

Useful Links:

Project: https://www.threshold.network/
Minting Dashboard: https://dashboard.threshold.network/tBTC/mint
Bridge to other Chains: Portal tBTC Bridge
GitHub: GitHub - keep-network/tbtc-v2: Trustlessly tokenized Bitcoin everywhere, version 2
Docs: tBTC Bitcoin Bridge | Threshold Docs
Audit: About
Immunfi Bug Bounty: https://immunefi.com/bounty/thresholdnetwork/
Llama Risk Report: Collateral Risk Assessment: Threshold BTC (tBTC) - HackMD
Twitter: https://twitter.com/thetnetwork
Discord: Threshold Network ✜
Dune: https://dune.com/threshold/tbtc
https://dune.com/sensecapital/tbtc-liquidity

Extra information about tBTC

Emission schedule

tBTC is one-to-one backed with real Bitcoin, meaning that there isn’t an emissions schedule, but a mint and redeem function that adjusts the supply of tBTC based on native BTC coming into and out of the system.

High-level overview of the project and the token.

tBTC is a decentralized wrapped Bitcoin that is 1:1 backed by native BTC. Unlike other wrapped Bitcoins, the BTC that backs tBTC is not held by a central intermediary, but is instead held by a decentralized network of nodes using threshold cryptography.

tBTC is trust minimized and redeemable for native BTC without a centralized custodian. It can be used across the entire DeFi ecosystem.

tBTC can be used as collateral, liquidity, a store of value, and can be integrated with DeFi apps across all supported blockchains.

As with other BTC wrappers, tBTC provides cryptocurrency traders and general users with a BTC-pegged token that can be used to generate yield whilst holding native BTC.

History of the project and the different components: DAO and products.

tBTC v1 was launched in May 2020 as a decentralized Bitcoin bridge on Ethereum by an effort of contributors. It was developed initially by Keep Network in collaboration with Summa and was designed to use a system of bonded operators to secure BTC deposits via a random beacon and threshold cryptography.

tBTC v1 had an initial surge of interest, but its growth was limited due to architectural constraints. It was listed on Uniswap, Curve, and other DeFi platforms, competing with WBTC, renBTC, sBTC and others.

tBTC v2 was then created and developed under the Threshold Network DAO and aimed to fix tBTC v1’s limitations. It extensively utilises the Threshold Network’s threshold cryptography to create a secure BTC asset. tBTC is a product launched on Threshold Network, on which many other decentralized applications are being built.

Threshold Network DAO was born out of the first on-chain merger between two decentralized protocols, Keep Network and NuCypher early in 2022. The DAO has successfully operated since that time, and supports an active community of contributors that work towards building tBTC liquidity and usability.

How is tBTC currently used?

tBTC is used across a variety of chains and use cases. Some key utilities include Aave, Compound, GMX, EigenLayer, Synthetix, Morpho, Symbiotic, collateral asset for crvUSD, thUSD and solvBTC.

A comprehensible list can be found here:

https://defillama.com/yields?token=TBTC 4 & https://linktr.ee/earnyield

Token & Protocol) permissions (minting) and upgradability, multisig?and signers?

For tBTC, wallets are created periodically based on governance. In order for the wallet to move funds, it produces signatures using a Threshold Elliptic Curve Digital Signature Algorithm, requiring 51-of-100 Signers to cooperate. The 100 signers on each wallet are chosen with our Sortition Pool, and the randomness is provided by the Random Beacon. More can be found here - Wallet Generation | Threshold Docs

The Threshold Council multisig is a 6/9 Gnosis Safe multisig with 9 unique signers that form the Threshold Network Council. The Council has limited upgrade privileges over the smart contracts. However, those privileges do not include any custodial power over deposited BTC:

Council Multisig Ethereum Address: 0x9F6e831c8F8939DC0C830C6e492e7cEf4f9C2F5f

Social channels data (size of communities and activity)

Discord: 10,175
Twitter: 38,400
Github: 4,596 commits
Date of Deployment: August 2021
Number of transactions: 2.393.648 (across all chains)
Number of token holders: 15.918 (across all chains)

Observation

At this time it is not proposed to enable tBTC-denominated cover buys at user interface (UI) level, but opened to discussion.

2 Likes
2

very well written imo and great proposal. having only cbbtc stacks a lot of risk on the left side should something ever happen to coinbase (not to mention the censorship potential) almost to the point where a large cbbtc position should be hedged with a short on COIN stocks.

3

Thanks for the detailed proposal, @FREDY. While I think tBTC offers a decentralized alternative for users who want to hold BTC on Ethereum, I’m not sure there’s sufficient demand for tBTC-backed coverage within Nexus Mutual.

When the Product & Risk team conducted an assessment of potential BTC deriviatives that could be held in the Capital Pool and offered as a cover demonination option, we conducted an internal poll among our frequent cover buyers. Based on their feedback, the Product & Risk team put forward a proposal to onboard cbBTC as an asset within the Capital Pool. Shortly afterwards, cbBTC was offered as an option for users to denominate their cover in. To date, we’ve seen uptake in cbBTC cover buys, with the 207 cbBTC cover buy for Derive Protocol Cover as the standout so far.

I’m hesitant to add tBTC to the Capital Pool for a couple reasons.

1) Market Cap and Liquidity Levels

When we consider adding a new asset to the Capital Pool, we need to ensure there’s enough onchain liquidity available. Because the Capital Pool is limited in what actions it can take, we’re limited to adding assets with sufficient onchain liquidity to swap into should a claim event arise.

Assets in the Capital Pool cannot be directly redeemed because the Capital Pool is not a generalized smart contract, so direct redemptions are not possible.

Right now, Uniswap v3 on Ethereum is the main source of onchain liquidity for cbBTC with $25.3M in cbBTC TVL.

On Ethereum, tBTC has:

Total available liquidity on Ethereum for tBTC is $21.85M across several DEXes, while Uniswap v3 has $25.3M in cbBTC with ample liquidity to process a high volume of trade. The wBTC/cbBTC 0.01% fee-tier pool has $44M in TVL, with $23.31M in cbBTC available alone.

Comparing cbBTC’s market cap ($2.48B) vs. tBTC’s market cap ($342.68M), I’d also note there’s a greater available market of cbBTC holders. A larger market cap is indicative of the demand we’d see for an asset that members want to denominate their coverage in. This also matches with the feedback we received from large cover buyers when NMPIP 239 was in the RFC stage.

2) Added Gas Costs for Multiple BTC Deriviatives Held in the Capital Pool

Because the NXM token is backed by all of the assets held in the Capital Pool, NXM’s value needs to be calcuated during certain functions within the protocol (e.g., generating a cover quote).

Each new asset we onboard to the Capital Pool increases the gas cost for certain functions within the Mutual. We’d need to have an indication that there’s demand for cover buyers to have tBTC as an option for their cover denomination to justify the increased gas cost.

3) Exposure to cbBTC in the Capital Pool is Low

At present, there’s only 0.6359677 cbBTC ($52k) held in the Capital Pool contract. We did outline an initial amount of cbBTC the AB has the ability to swap into, but that has not been executed. The exposure we currently have comes from cbBTC-denominated premiums paid for coverage.

Conclusion

Unless you can come with external validation that there’s signficant demand for tBTC-denominated coverage, I can’t see supporting this proposal. The increased gas costs don’t match with the potential demand I imagine we’d see if we were to offer tBTC as an option to denominate cover in.

3 Likes
4

I’d argue the current market caps of tBTC and cbBTC don’t necessarily reflect the appetite for them as backing for insurance. People (and the market) tend to underestimate risk and therefore undervalue insurance. Coinbase has a much larger market cap yes but that goes along with a large custodian (counterparty risk) with partnerships, marketing, and more money to throw at increasing market share than Bezos taking out a diaper seller. I think users’ lack of awareness of tBTC had more impact on any choosing of cbBTC than considerations of security.

I understand the concerns regarding market cap, liquidity, and gas costs, but I believe we’re underestimating the demand for tBTC-backed insurance, particularly in risk-off scenarios.

Risk and Insurance Demand: Current market caps don’t reflect the true appetite for secure insurance. People undervalue insurance, especially in stable markets. This changes drastically during black swan events, precisely when insurance is crucial.

Security is Paramount: tBTC’s decentralization and permissionless redemption are critical in extreme conditions. cbBTC’s centralization under Coinbase introduces counterparty risk, a major concern when trust is eroded. In insurance, security trumps short-term liquidity.

Liquidity and Diversification: While tBTC’s liquidity is lower, it’s spread across multiple DEXes. The Capital Pool shouldn’t rely solely on the most liquid asset. Diversification is key to mitigating risks. Regardless, Threshold is exploring deeper tBTC liquidity.

Gas Costs vs. Security: The marginal gas cost increase is a worthwhile investment in long-term security. Robustness during extreme conditions is paramount. Is it not possible to optimize gas costs through smart contract improvements?

Potential Demand: Current cbBTC uptake doesn’t negate tBTC demand. NM should validate this through surveys or pilot programs, especially among users prioritizing decentralization.

In essence, focusing solely on current market metrics overlooks tBTC’s vital role in secure insurance during high-risk periods. Prioritizing long-term resilience over short-term liquidity is crucial for Nexus Mutual’s integrity.

5

From my perspective, we have validated cbBTC as a Capital Pool asset and we’ve validated demand for cbBTC-denominated coverage. We conducted a poll among our largest cover buyers, as I noted in my response. We’ve also seen update in cbBTC-denominated covers to date since launching cbBTC-denominated coverage in 2024.

As the propers and advocates for this proposal, I’d ask that @FREDY and you do some initial work to validate that there’s sizable demand for tBTC-backed coverage. This shouldn’t fall on the Product & Risk team–if there is ample demand, I’d be open to considering this proposal. I assume other members would feel the same, but we need data to reach this conclusion.

The arguments presented so far:

These protocols would be the same ones our members are purchasing cover for. If 10% of the tBTC positions in these markets were covered with Protocol Cover, this would result in $12.23M in tBTC-denominated cover.

Comparing this to the major cbBTC lending markets, which have:

  • 9.89k cbBTC ($819.05M) on Aave v3 Core
  • 1.46k cbBTC ($120.94M) on Aave v3 Base
  • 246.05 cbBTC ($204.08M) on Morpho Ethereum

The same 10% covered assumption would result in $114.41M in cbBTC-denominated cover. Because the market cap is larger, there’s greater TAM for cbBTC-backed coverage. When we polled cover buyers, this is the same result we saw in their responses.

If tBTC-backed coverage was in demand, I believe we would have seen requests for tBTC as an asset in the Capital Pool. This proposal is the first mention of tBTC as a Capital Pool asset and choice to denominate coverage in.

I agree here that custodial risk brings counterparty risk. However, Coinbase is a regulated custodian and, as a public company and one that custodies assets for BTC and ETH ETFs, is under considerable scrunity. Looking at CDS rates for Coinbase, the general consensus is that the risk of Coinbase custodial failure is low.

I’d argue that bridge risk is comparable to counterparty risk, and bridge risk is a major concern for our members.

Both assets bring some level of risk. In our original assessment, which echoed much of what LlamaRisk and Chaos Labs have published about cbBTC, the risk seems acceptable and our members provided feedback and validated the choice to onboard cbBTC to the Capital Pool in NMPIP 239.

Lower liquidity is an issue for the Mutual, as Capital Pool assets would need to be swapped into tBTC if a covered event were to occur and claims were filed. Any approved claims with a tBTC-denomination would need ample liquidity to allow the Mutual to swap into tBTC to match assets with liabilities. From my perspective, Uniswap v3 is battle-tested and can handle large trade volumes.

Again, this comes back to demand for tBTC-backed coverage. If there isn’t sufficient validation, then increased gas costs don’t make sense. Allocating engineering hours to modifying the existing contracts to make them more gas efficient to onboard an asset with a low market cap doesn’t make sense when we have a BTC derivative onboarded to the Capital Pool already.

2 Likes
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fair points made, I’m looking into a way to substantiate demand and will reply when that’s done

1 Like
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Thanks for putting this proposal together @FREDY

I’m in agreement with Brave here.

Unlike other protocols there is a material downside to adding new assets to the Nexus Mutual pool that impact all users via higher gas costs. This means we have to be more convinced that the benefits of doing so are worth it.

cbBTC is already included so users can purchase cover denominated in BTC terms. So the additional benefit here would be users wanting to purchase cover in tBTC over cbBTC because they prefer the asset for whatever reason.

I’m quite skeptical there is enough demand for this, but I’m open to be proven wrong on this point with sufficient data/research.

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Hi @BraveNewDeFi

Thanks for taking the time to review my proposal and share your thoughts. It’s great to get this kind of detailed feedback to refine the idea. I think there might be a bit of a misunderstanding about the scope of what I’m suggesting, so I’d like to clarify my intent and address your points. I’m really open to keeping this conversation going and finding common ground.

First off, I want to emphasize that my proposal isn’t about adding tBTC as a cover denomination option at the UI level, at least not at this stage. I completely agree that introducing tBTC for cover buys would need a separate discussion, likely with external validation of demand, as you mentioned. For now, my focus is solely on onboarding tBTC as a Capital Pool asset to diversify Nexus Mutual’s holdings and enhance safety, not to change how users interact with cover quotes.

The core idea here is to leverage tBTC as a store of value in the Capital Pool, alongside cbBTC, to reduce reliance on a single centralized BTC derivative. While cbBTC’s custodial model via Coinbase works well, tBTC’s decentralized nature (via Threshold Network) offers a complementary layer of safety and aligns with Nexus Mutual’s DeFi roots. Diversifying into tBTC could mitigate risks tied to centralized custody, which feels like a prudent step for the Capital Pool’s long-term resilience. I’m not suggesting we phase out cbBTC. Both can coexist, each bringing its strengths.

On liquidity, I hear your concern about tBTC’s $21.85M across DEXes (Uniswap v3, Curve, Balancer) versus cbBTC’s $25.3M on Uniswap v3 alone. However, I’d argue that tBTC’s liquidity is more than sufficient for the Capital Pool’s needs in this context. Since the proposal isn’t about tBTC-denominated cover at the UI, the pool would only need to swap tBTC in scenarios where BTC-based cover (e.g., cbBTC-denominated claims) requires payout. Given tBTC’s peg to BTC, it can be exchanged into cbBTC or other wrapped BTC with minimal price impact and low gas costs. Curve’s $16.32M TVL, for instance, is highly efficient for stable swaps. Even in a large claim event, this liquidity seems robust enough to handle conversions without disrupting the pool’s operations.

You also raised cbBTC’s higher market cap ($2.48B) versus tBTC’s ($342.68M), which makes sense if we’re talking about cover demand. But since this proposal is about diversification and value storage — not cover denomination — I don’t think market cap is the key metric here. What matters is tBTC’s ability to hold BTC value reliably, which it does as a 1:1 pegged asset. The goal isn’t to chase holder demand but to bolster the pool’s safety and variety. cbBTC stays untouched as a cover option and pool asset, so this is additive, not a replacement.

Regarding gas costs, I get that adding any new asset increases complexity for NXM value calculations. However, since tBTC wouldn’t be part of cover quotes or user-facing functions, the gas impact should be limited to internal pool management, similar to assets like stETH, which we hold for yield without UI integration. I’m proposing an initial allocation equal to the current cbBTC holding and whatever shall be converted from ETH by AB to keep it modest and assessable. This way, we test the waters without overcommitting, and we can revisit the balance later.

Finally, I appreciate the note on cbBTC’s exposure in the pool. That’s exactly why I think starting small with tBTC makes sense it mirrors cbBTC’s current scale, keeps risk low, and lets us build diversified BTC exposure incrementally. Nothing changes for users or cbBTC’s role in cover quotes for now, so the status quo stays intact.

I’d love to hear your thoughts on this reframed angle. Does it address some of your concerns? I’m happy to dig deeper or explore adjustments. Thanks for engaging. This kind of discussion is what makes governance strong.

Best

9

Understood.

To clarify the gas costs, the increase occurs whenever an additional asset is added to the pool irrespective if it’s also a Cover Purchase Asset or not. The NXM price is required for cover purchase, which means the contracts need to know the Book Value of all assets, which means an oracle price call for each asset.

Total cbBTC in the pool is quite low, currently sub 1 cbBTC, so don’t see much value in diversifying into tBTC at this stage. Circumstances could change of course, it just doesn’t make sense to me right now.

10

Hello there

Thanks for clarifying the gas cost details. Appreciate your care for the details and that makes sense.

That said, I think the impact is still pretty low and fits a pattern we’ve seen before. The Capital Pool already handles separate oracle calls for stETH and rETH alongside ETH, DAI, and cbBTC, each adding a bit of gas overhead when they were onboarded. Those additions were worth it for diversification and yield, and the community embraced them despite the cost. With tBTC, we’re looking at a similar incremental step — maybe $0.03–$0.075 per transaction based on typical call costs, which feels manageable for a modest and pays of as the amount of cbBTC and tBTC increases in the Capital Pool. It’s a small price for the benefit, in my view.

I’d love to shift the focus back to the heart of the proposal: diversifying the Capital Pool and boosting safety by reducing reliance on centralized custody. While cbBTC’s custodial risk via Coinbase is low, tBTC’s decentralized model via Threshold Network gives us a hedge against centralized points of failure, regulatory shifts, management hiccups. Having both in the pool complements cbBTC’s strengths with tBTC’s DeFi-native resilience, which aligns with Nexus Mutual’s ethos in long term.

Plus, this ties into NMPIP 239’s cbBTC plans. The Advisory Board hasn’t swapped all the proposed ETH into cbBTC yet, but it’s coming at some point - and should continue to be carried out in my view. Adding tBTC now gets us ahead of the curve, validating it as a pool asset so we’re ready to balance BTC exposure gradually as that swap happens. It’s a proactive step to ensure the pool is diversified and robust when BTC backed cover scales up.

Does the diversification and safety angle outweigh the gas bump ? I’m all ears for your take, especially on how we can refine this to keep the focus on those core benefits. Thanks again for keeping this discussion interesting and constructive.

11

Appreciate the detail and follow up here.

Generally speaking, there’s only value in adding new assets to the Capital Pool if:

  • It’s an in-demand asset to denominate cover in (e.g., cbBTC, ETH, USDC); or
  • It’s an investment asset that generates earnings for members

I understand the diversification aspect of your proposal, but tBTC doesn’t generate yield natively and if it’s not going to be used as a cover denomination asset, then it results in higher gas prices for transactions (especially cover buy transactions) and in the event of a cbBTC-denominated claim payout, tBTC would need to be swapped to cbBTC to meet obligations.

cbBTC does come with custody and counterparty risk. I noted that in the RFC and NMPIP where I proposed onboarding cbBTC. Since adding cbBTC to the Capital Pool, we’ve seen demand for cbBTC-denominated cover and growing interest as BTCFi continues to grow and expand.

As I said before, tBTC has a lower marketcap and hasn’t seen the same market demand that cbBTC has. If the Capital Pool sees growth in BTC-denominated exposure in the future, I’d be happy to revisit this proposal assuming tBTC sees growth from here. At this time, I personally wouldn’t support adding tBTC to the Capital Pool given exposure to cbBTC in the Capital Pool is low and the other points I’ve previously shared.