Coinbase has launched cbBTC, a wrapped version of Bitcoin on the Ethereum and Base networks. In an announcement on September 12, the exchange said the cbBTC would be fully backed by Bitcoin and held on Coinbase at 1:1.

According to Coinbase, Bitcoin has been crucial in onboarding people to crypto. This new product will expand on this by enabling decentralized finance (DeFi) use, thereby increasing its utility. The exchange added that its cbBTC would connect Bitcoin off-chain liquidity with the high-speed DeFi ecosystem on Base and Ethereum.

“Starting today, millions of Coinbase customers can seamlessly and securely access financial apps within the Ethereum ecosystem using Bitcoin they already hold.”

– Coinbase

Meanwhile, Coinbase described the launch of cbBTC as the start of a new era for DeFi, as it will allow customers to access the Ethereum ecosystem using already-owned Bitcoin. The exchange noted that cbBTC would be compatible with DeFi protocols. Several DeFi protocols, including Aerodrome, Aave, Compound, Curve, Maple, Spark, and DeBridge, are already supporting cbBTC.

Users to mint cbBTC to BTC at a 1:1 ratio

Coinbase cbBTC would be an ERC-20 token similar to other wrapped Bitcoins already in the market. However, the exchange plans to make the minting process more seamless by allowing automatic creation and conversion of Bitcoin to cbBTC and vice versa.

According to Coinbase, users automatically mint the cbBTC at a 1:1 ratio by sending Bitcoin through Coinbase to an Ethereum or Base address and converting back to Bitcoin by sending cbBTC to a Coinbase account. The exchange added that there would be no separate trading pair or order book for cbBTC on its platform, but the wrapped version would be available for trading on decentralized exchanges using the Coinbase wallet.

By making the minting process for BTC to cbBTC relatively straightforward, the exchange plans to get its customers to use their Bitcoin for DeFi transactions, providing more liquidity to decentralized protocols on Ethereum and Base.

For now, only Coinbase users in the US, apart from New York State, the UK, Singapore, Australia, Brazil, and the countries in the European Economic Area (EEA), have access to cbBTC on Coinbase. However, anyone can use the tokenized Bitcoin on Base and Ethereum until the platform enables support on other blockchain networks.

Coinbase cbBTC could be the alternative to BitGo WBTC

The arrival of Coinbase cbBTC comes amidst uncertainties about the future of the most popular version of wrapped Bitcoin, the $9 billion market cap WBTC, making cbBTC a likely alternative. DeFi stakeholders have expressed concerns about the future of WBTC after its custodian, BitGo, announced that it would transfer custody of the wrapped Bitcoin reserves to a new joint venture in partnership with BiT Global.

These concerns are mostly about BiT Global’s links to controversial crypto entrepreneur Justin Sun. These links have forced some DeFi protocols to reconsider their exposure to WBTC, as they believe it would become riskier. Sky (formerly MakerDAO) is one of the most notable DeFi platforms to limit exposure to WBTC pending a clear resolution.

Meanwhile, Threshold Network, the issuer of tBTC, recently proposed the acquisition of WBTC and a partnership with BitGo that will make the wrapped Bitcoin custody and minting process fully decentralized. It is unclear whether BitGo is considering the offer and what will happen to WBTC in the long run.

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