I think allocating part of the reserve to BTC will greatly contribute to UST stability, but I am wondering on how to actually implement BTC asset management in a decentralized and safe way.
In the Pomp article about the topic he writes
Now this evolution of Terra, and bitcoin’s role as collateral, doesn’t come without risk. The team at Terra has identified the biggest risk being a successful bridge between bitcoin and their ecosystem. The security model for bridging bitcoin to a large system with lots of users is still unproven. Many people will point to wrapped bitcoin as a successful answer, but the process of wrapping bitcoin in its current form eliminates the decentralized elements of bitcoin, so this isn’t a true bridge from bitcoin to a decentralized ecosystem.
I share the concern that putting that much critical collateral in wrapped or bridged assets seems quite centralized and risky.
So here are my two questions:
- How is the BTC collateral managed currently?
- How can BTC collateral be stored and managed in a safe, decentralized way?