Coinbase has made an exciting announcement on September 12 regarding the launch of its new wrapped Bitcoin token, cbBTC, on both its layer-2 network, Base, and the Ethereum mainnet. This follows a month-long teaser campaign on the social media platform X.
What is cbBTC?
cbBTC, according to Coinbase, is an ERC-20 token that is entirely backed by Bitcoin and securely held within the platform. When users transfer BTC from Coinbase to either Base or Ethereum, it seamlessly converts to cbBTC, and the process works the other way around as well.
Benefits of cbBTC
Wrapped Bitcoin tokens provide users with the capability to utilize their BTC across different networks. Coinbase highlights that cbBTC is designed to foster innovative financial solutions and accelerate Bitcoin adoption within the decentralized finance (DeFi) sector.
Integrations with Major DeFi Protocols
Several leading DeFi protocols have already integrated cbBTC, including:
- Aave
- Morpho
- Sky
- Compound
- Aerodrome
- Curve
- Veda
- Mellow
- Maple (real-world asset platform)
Additionally, cbBTC is accessible via the Coinbase app in multiple regions, including Singapore, the UK, the European Economic Area, Australia, Brazil, and the US (excluding New York State). Furthermore, users globally can access it on Base and Ethereum.
Coinbase’s Bitcoin Holdings
According to Arkham Intelligence, Coinbase manages over 984,000 BTC, valued at roughly $57 billion. A significant portion of this is allocated for exchange-traded fund issuers like BlackRock, which use Coinbase for custodian services.
Challenges Facing Wrapped Bitcoin Tokens
The introduction of cbBTC arrives at a pivotal moment as the predominant Wrapped Bitcoin token, WBTC, issued by BitGo, faces scrutiny.
Concerns Surrounding WBTC
In recent weeks, crypto enthusiasts have been exploring alternatives to WBTC, particularly due to BitGo’s partnership with TRON’s founder, Justin Sun. Despite efforts by BitGo to reassure users, critics have raised concerns about Sun’s involvement and its implications for the token’s stability and reputation.
Emerging Competitors in the Bitcoin Wrapping Space
This situation has led various projects to capitalize on the unrest, exploring alternative wrapped Bitcoin solutions. Notably:
- This month, 21.co, the parent company of 21Shares, released its own wrapped Bitcoin product, named 21BTC, on the Ethereum blockchain.
- Additionally, the DeFi protocol Threshold has proposed a merger between its BTC wrapper token, tBTC, and WBTC, with the aim of preserving the latter’s popularity.
