Crypto exchange Coinbase (NASDAQ:COIN) on Thursday announced the launch of Coinbase Wrapped BTC (cbBTC), a new ERC20 token backed 1:1 by Bitcoin (CRYPTO: BTC) held in Coinbase’s custody.
What Happened: This move aims to expand Bitcoin’s utility within the decentralized finance (DeFi) ecosystem.
The rollout, which began today, initially supports the Base and Ethereum networks, with plans to extend to additional blockchains in the future.
cbBTC allows Coinbase’s extensive user base to seamlessly access Ethereum (CRYPTO: ETH)-based DeFi applications using their existing Bitcoin holdings, potentially driving greater adoption and liquidity in the DeFi space.
cbBTC is designed to remove friction in onchain Bitcoin usage, enabling novel DeFi use cases such as providing liquidity or using Bitcoin as collateral for borrowing other crypto assets.
The token integrates with major DeFi protocols at launch, including Aave, Compound, and Curve.
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For Coinbase users, the process is streamlined: when sending BTC from Coinbase to an address on Base or Ethereum, it’s automatically converted 1:1 to cbBTC. Conversely, when users receive cbBTC in their Coinbase accounts, it’s converted back to BTC at the same ratio.
However, the launch comes amid industry-wide discussions about the risks associated with wrapped Bitcoin products.
Recent controversies surrounding WBTC, another wrapped Bitcoin token, have raised concerns about centralization and control in such products.
Coinbase has not directly addressed these issues.
What’s Next: The introduction of cbBTC highlights the ongoing evolution of Bitcoin’s role in the broader cryptocurrency ecosystem, a topic likely to be discussed at Benzinga’s upcoming Future of Digital Assets event on Nov. 19.
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