607,473 COMP Votes Support Compound Proposals to Restrict tBTC Supply and Borrowing Against It
Key Facts
Each proposal received 607,473 COMP votes in support, with no votes against, for two governance proposals at Compound aimed at reducing lending markets’ exposure to tBTC. A participant in the Compound forum said in a Nov. 4 update that the proposals had reached quorum, with zero COMP recorded against each. Gauntlet had proposed on Oct. 31 setting the token’s supply cap and collateral factor for borrowing to zero in 6 markets on Ethereum, Base and Arbitrum. The proposals left liquidation settings unchanged. This does not mean all tBTC transactions within Compound are frozen; the announced text focuses on stopping new supplies and reducing the token’s ability to support borrowing.
Gauntlet posted its proposal on the Compound forum at 15:19 UTC on Oct. 31, saying that bringing it onchain required governance approval. A snapshot of positions at 11:59 UTC that day estimated that 72 accounts had supplied a total of 101.2 tBTC to the covered markets. Those supplies were worth about $7.8 million, according to the report. Gauntlet also estimated total debt among accounts supplying tBTC at about $23.1 million. It attributed about $4.2 million of that debt to tBTC when allocated according to each account’s share of collateral.
Setting the collateral factor for borrowing to zero means tBTC will add no new borrowing capacity in the affected markets if the proposal passes. A forum participant explained that an account whose debt exceeds the borrowing capacity provided by its other collateral would be unable to borrow more or withdraw its collateral. That would remain the case until it repaid part of its debt or added other collateral. Liquidation settings would remain unchanged under the proposal. The proposed measure therefore differs from liquidating existing positions, and it does not establish that the token was exploited or that all dealings in it were frozen.
Compound’s move came after Threshold temporarily halted new BTC deposits, tBTC minting and new redemption requests during security maintenance. Reports linked the maintenance to the disclosure of a vulnerability in the Linux kernel, without attributing its discovery to Threshold. The network said it had found no evidence that the vulnerability had been used to attack tBTC contracts. It also found no evidence of unauthorized minting or unauthorized transfers of bridged Bitcoin. It said node operators had updated their systems or shut down their nodes.
Threshold said in a Nov. 1 update that bridge wallets held about 4,320 BTC, against about 4,185 tBTC in circulation, and said the token was fully backed. The network did not set a date for the bridge to resume, tying the return of functions to completion of security remediation and operation of nodes on patched systems. In a parallel move, Aave froze the tBTC reserve in its Ethereum Core market after a recommendation from LlamaRisk; the transaction was executed at 10:01 UTC on Oct. 31. Repayment, withdrawal and liquidation remained available on Aave, and the measure did not change the health factors of existing positions. LlamaRisk said it would propose measures to restore the Aave market after confirming operations had returned to normal.
According to the governance update published on Nov. 4, voting was expected to end around Nov. 5 at 17:16 UTC. The update estimated that execution would not begin before about Nov. 7 at 17:16 UTC on Ethereum, if voting was not extended. On Base and Arbitrum, execution might not begin before Nov. 8, allowing for the time needed to relay messages between networks. In a comment dated Nov. 3, a forum participant said tBTC continued to trade on Ethereum within about 0.2% of WBTC and cbBTC despite the halt in redemptions. Those estimates remain tied to the voting and execution timelines cited in the update.