Coinbase Launches Wrapped Bitcoin (cbBTC)
Coinbase has introduced a new wrapped Bitcoin token, cbBTC, which is now available in the UK, Australia, Singapore, and across the US, excluding New York. This token operates on both the Ethereum network and Coinbase’s layer-2 network, Base.
How cbBTC Works
The cbBTC token is backed 1:1 with Bitcoin held by Coinbase. It doesn’t have a separate order book or trading pairs on the Coinbase platform. When a user sends Bitcoin to a Base or Ethereum address, cbBTC is automatically minted at a 1:1 ratio. Conversely, sending cbBTC to a Coinbase address will convert it back to standard Bitcoin.
Future Expansion Plans
Coinbase aims to expand cbBTC to other blockchain networks and ecosystems in the future, although specific details are still pending.
Why Use Wrapped Bitcoin?
Wrapped Bitcoin like cbBTC allows Bitcoin to be used in decentralized finance (DeFi) applications, which are primarily built on Ethereum. The Bitcoin ledger consists of unspent transaction outputs (UTXO), limiting its use in DeFi. Wrapped Bitcoin enables users to use their Bitcoin as collateral for loans or as a lending asset to earn yield. At launch, cbBTC will be supported on platforms like
- Aave
- Compound Finance
- Morpho
- Spark
- Moonwell
- and others.
BitGo’s Wrapped Bitcoin Controversy
The launch of cbBTC follows BitGo’s announcement of a new custodial structure for its Wrapped Bitcoin (WBTC) product, which will now include centers in Hong Kong and Singapore. This move has sparked controversy, especially due to the involvement of Tron founder Justin Sun. Risk management firm Block Analitica has proposed restricting all WBTC positions, citing Sun’s involvement as an “unacceptable level of risk.”
