- Coinbase introduces cbBTC, an ERC20 token fully collateralized by Bitcoin in its custody.
- cbBTC enables Bitcoin holders to engage with popular DeFi applications such as Aave, Compound, and MakerDAO.
- More than 843,783 Bitcoins support cbBTC, accounting for 4% of Bitcoin’s total supply.
Coinbase, the leading cryptocurrency exchange in the United States, has officially launched its innovative product, Coinbase Wrapped Bitcoin (cbBTC). This marks a significant step forward in integrating Bitcoin within various blockchain environments.
The ERC20 token is designed to be fully backed by Coinbase’s Bitcoin assets, granting holders the ability to interact with decentralized finance (DeFi) applications on the Ethereum network as well as on Base.
By launching cbBTC, Coinbase is creating a valuable connection between Bitcoin and the DeFi landscape on Ethereum, which empowers Bitcoin holders to borrow, lend, and earn interest on their assets more effectively.
Backing of cbBTC by Coinbase’s Holdings
All cbBTC tokens are supported by Coinbase’s substantial Bitcoin reserves. Currently, Coinbase boasts over 843,783 Bitcoins, valued at approximately $48.7 billion, which constitutes over 4% of Bitcoin’s total circulation. This guarantees significant liquidity for cbBTC users.
The circulation of cbBTC tokens will be directly tied to the quantity of Bitcoin held by Coinbase.
How cbBTC Functions
The operations underlying cbBTC are both straightforward and effective. When users transfer Bitcoin from Coinbase to an address within the Base or Ethereum networks, their Bitcoin is seamlessly converted into cbBTC at a 1:1 ratio. The reverse process occurs when cbBTC is returned to a Coinbase account, converting it back to Bitcoin effortlessly.
It’s important to note that cbBTC will not have its own separate trading pair on Coinbase; it will instead be available on decentralized exchanges (DEXs) like Aerodrome and Curve. There is potential for additional third-party exchanges to list cbBTC in the future.
Advancing Access to Decentralized Finance
The launch of cbBTC is not only a technical improvement; it’s also part of Coinbase’s larger initiative to broaden access to decentralized finance.
Will Robinson, the Vice President of Engineering at Coinbase, has emphasized cbBTC’s vision to onboard “1 billion people on-chain.”
By providing Bitcoin holders with access to DeFi platforms like Aave, Compound, and MakerDAO, cbBTC significantly enhances Bitcoin’s functionality, integrating it into a more extensive financial ecosystem.
With increasing interest in Bitcoin-centric DeFi products, cbBTC positions Coinbase as a frontrunner in the tokenization sector, especially in light of recent announcements from competitors such as BitGo enhancing their wBTC custody services.
As support grows among major DeFi protocols, cbBTC is poised to play a pivotal role in shaping the decentralized finance landscape
