Coinbase Launches cbBTC: A New Wrapped Bitcoin Token for Ethereum and Base Networks

Coinbase Launches cbBTC: A New Wrapped Bitcoin Token for Ethereum and Base Networks

Coinbase, the leading cryptocurrency exchange, has introduced its own version of wrapped bitcoin, launching the cbBTC token on the Ethereum and Base networks. This new asset was initially teased in August and officially rolled out on Thursday, September 12.

As the world’s first cryptocurrency, Bitcoin plays a key role in attracting users to the crypto space. Coinbase aims to extend the utility of Bitcoin across more blockchain networks by introducing cbBTC, an ERC-20 token fully backed 1:1 by Bitcoin held at Coinbase. This new asset will enable users to leverage Bitcoin in decentralized finance (DeFi) applications, enhancing the interconnectedness of the crypto ecosystem.

According to Coinbase, wrapped assets like cbBTC promote a more efficient financial system by allowing Bitcoin to interact with decentralized applications (dApps) across multiple blockchains. Users can provide Bitcoin liquidity to DeFi protocols, use it as collateral to borrow other assets, and participate in various decentralized trading and lending activities.

At launch, cbBTC is supported by several major DeFi platforms, including decentralized exchanges (DEXs) Aredrome and Curve, as well as lending protocols Aave, Compound, and Morpho. Additionally, DeBridge, a cross-chain swaps platform, has also integrated cbBTC. Coinbase is planning to expand cbBTC's availability to other blockchain networks in the future.

How cbBTC Works Coinbase Wrapped Bitcoin allows users to convert their Bitcoin holdings into cbBTC for use on the Ethereum and Base networks. When Bitcoin is sent from Coinbase to a user's Ethereum or Base on-chain address, it is automatically converted 1:1 into cbBTC. Conversely, when cbBTC is sent back to a Coinbase account, it is converted back into Bitcoin at the same 1:1 ratio.

Notably, cbBTC will not have a separate order book or trading pair on Coinbase. However, it will be available for trading on decentralized exchanges using Coinbase’s non-custodial web3 wallet. While cbBTC can be sent or received globally on Ethereum and Base, the send and receive feature on Coinbase is initially limited to users in select regions, including the U.S. (excluding New York), the UK, the European Economic Area, Singapore, Australia, and Brazil.

Expanding Bitcoin-Related Services The launch of cbBTC is part of Coinbase’s broader strategy to expand its Bitcoin-related offerings. Earlier this year, Coinbase began providing custodial services for U.S. spot Bitcoin exchange-traded funds (ETFs) and introduced support for the Bitcoin Layer 2 Lightning Network in collaboration with Lightspark.

Competition with Wrapped Bitcoin (WBTC) Coinbase’s cbBTC enters a market already dominated by Wrapped Bitcoin (WBTC), the largest tokenized Bitcoin product with a market cap of nearly $9 billion, according to The Block's data. WBTC is backed by BitGo, which recently announced a partnership with Hong Kong-based BiT Global, linked to Tron founder Justin Sun, to manage WBTC custody. This development has raised concerns within the crypto community regarding potential centralization and security risks due to Sun's controversial reputation.

In response, BitGo CEO Mike Belshe defended the partnership, emphasizing BitGo's commitment to security and legal oversight, aiming to maintain trust in WBTC as a secure and widely-used product.

The introduction of cbBTC provides users with an alternative to WBTC, potentially increasing competition in the wrapped Bitcoin market. As Coinbase continues to innovate in the DeFi space, cbBTC could become a key player in facilitating Bitcoin’s integration into decentralized financial applications across multiple blockchains.