Coinbase Introduces Wrapped Bitcoin Token After BitGo WBTC Dispute
America’s largest cryptocurrency exchange, Coinbase, has introduced its wrapped Bitcoin token, cbBTC, following a prior tease in August. This move comes amid ongoing controversies surrounding the original Bitcoin token in the rapidly evolving crypto space.
The concept behind cbBTC is to enable traders to utilize their Bitcoin on the Ethereum network. This token operates on Ethereum, the second-largest cryptocurrency by market capitalization, while being backed 1:1 with Bitcoin. The primary purpose is to allow traders to engage with decentralized finance (DeFi) applications using their Bitcoin.
Coinbase stated that by expanding assets across multiple chains, wrapped tokens like cbBTC contribute to creating a more efficient and interconnected financial ecosystem. DeFi aims to revolutionize traditional financial services by leveraging decentralized applications to eliminate intermediaries and streamline processes like loan applications.
Accessing DeFi applications with Bitcoin has been a longstanding desire among Bitcoin holders. However, the dominance of Ethereum-based apps has posed challenges. Wrapped tokens like cbBTC aim to bridge this gap, functioning on both the Ethereum mainnet and Coinbase’s layer-2 network, Base.
Coinbase highlighted that the launch of cbBTC marks the first time that deep off-chain Bitcoin liquidity is connected to cost-effective and rapid financial infrastructure on Base and Ethereum.
Nevertheless, the introduction of wrapped Bitcoin has not been without controversy. BitGo, the custodian of WBTC, the largest asset in the industry, recently announced a partnership with BiT Global to diversify custody operations. This move drew criticism due to BiT Global’s association with Justin Sun, a controversial figure in the crypto space.
MakerDAO, a DeFi organization issuing the stablecoin DAI, expressed concerns over Sun’s involvement in WBTC, citing potential risks. The controversy surrounding wrapped tokens has prompted other major players to enter the market, with Coinbase teasing cbBTC shortly after BitGo’s announcement and the parent company of crypto ETF issuer 21Shares launching its own version of wrapped Bitcoin, 21BTC.
Overall, the introduction of wrapped Bitcoin tokens like cbBTC signifies a significant development in the crypto space, aiming to enhance accessibility and functionality within the decentralized finance ecosystem.
