[ARFC] Onboard cbBTC to Aave v3 on Base and Mainnet

Governance New Asset
2

I have significant concerns about the timing and implications of this proposal that I believe warrant careful consideration by the Aave community.

The proposal to onboard cbBTC seems premature, given that the asset is not yet live. This raises several critical questions:

  1. Minting and Redemption Mechanisms: Without a clear understanding of how cbBTC will be minted and redeemed, it’s challenging to assess the potential risks and benefits to the Aave protocol.

  2. Proof of Reserves: What assurances do we have regarding the backing of cbBTC? Who has access to the private keys custodying these assets? These are crucial questions for maintaining the integrity and trust of the Aave ecosystem.

  3. Liquidity Concerns: As of now, there appears to be no DEX liquidity for cbBTC. While this may change by the time the ARFC vote concludes, it’s a significant factor that needs to be addressed before onboarding. I do not see how this proposal can even be properly voted on when liquidity does not yet exist for the asset.

Regulatory Risks

The regulatory landscape for cryptocurrencies, particularly in the United States, is increasingly complex and often antagonistic. This raises several concerns:

  1. Coinbase’s Regulatory Exposure: As a U.S.-based company, Coinbase is subject to potential regulatory actions that could directly impact cbBTC. How can we ensure that Aave users won’t be affected if Coinbase faces sanctions or other regulatory challenges?

  2. Custodial Risks: If cbBTC is primarily custodied by Coinbase, does this not introduce a single point of failure that represents a large risk to the credit worthiness of the asset?

While I understand the strategic importance of onboarding new assets for Aave’s growth, we must question whether we’re compromising our principles for short-term gains:

  1. Exceptional Treatment: Are we making too many exceptions for cbBTC due to its potential to drive growth? How does this align with our established standards for asset onboarding? In particular, consider tBTC. @bgdlabs just posted their thorough technical review of the architecture and contracts underlying tBTC. I would hope that cbBTC undergoes a similarly thorough vetting process. It should also be noted that tBTC is only now just receiving favorable attention for being onboarded. Their very first attempt at getting added was in 2020!

  2. Influence of Capital: It’s crucial to consider whether the Aave DAO is being unduly influenced by the promise of increased liquidity. Our decisions should be guided by the long-term health and principles of the protocol, not just immediate financial incentives.

While growth is important, we should not compromise on our standards. Let’s ensure we have thorough answers to the above questions and a comprehensive technical review before moving forward. Lastly, it seems that the standard vetting process has been sidestepped entirely, and cbBTC is receiving special treatment that other assets have not been afforded. This sets a dangerous precedent and raises questions about the integrity of our decision-making process.

Regardless of where one stands on these broader issues, at the very least I think we can agree that this proposal cannot even be properly voted on when liquidity does not yet exist for the asset. How can we make an informed decision about risk parameters, or choice of oracle for an asset that isn’t even trading?

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