Coinbase’s cbBTC Launches on Base and Ethereum Platform

Coinbase has introduced its own tokenized version of Bitcoin (BTC) on its layer 2 network Base and the Ethereum mainnet, making a significant move to offer a tokenized BTC on different blockchains. As the largest cryptocurrency exchange in the U.S., Coinbase’s cbBTC is fully backed by BTC held in the exchange’s custody, maintaining a 1:1 ratio as revealed in a press release shared with Unchained. When users transfer BTC from Coinbase to an address on Base or Ethereum, the BTC automatically converts to cbBTC and vice versa.

Data from blockchain analytics firm Arkham indicates that Coinbase holds over 843,783 bitcoins in its on-chain reserves, valued at nearly $48.7 billion at current market rates. The issuance of cbBTC tokens by Coinbase is directly tied to the amount of bitcoins the exchange possesses, with its BTC holdings representing more than 4% of the total 21 million BTC supply.

Ian Unsworth, the co-founder of crypto research firm Kairos, expressed positivity about the move, stating, “From our perspective, we think it’s great to see more bitcoin being used productively on-chain, especially given today’s market dynamics where we have seemingly secular flows of fresh capital going primarily to BTC via ETFs.”

The launch of cbBTC follows BitGo’s recent announcement regarding changes in the custody of wrapped Bitcoin (wBTC). BitGo disclosed on Aug. 9 that TRON founder Justin Sun would be involved in the new custodial operations of wBTC, sparking concerns within the crypto community due to Sun’s controversial reputation. At the time of the announcement, wBTC had a market capitalization of nearly $8.8 billion according to CoinGecko.

Coinbase hinted at the launch of cbBTC shortly after BitGo’s announcement about Sun’s involvement. Will Robinson, Coinbase’s vice-president of engineering, emphasized the significance of cbBTC, stating, “cbBTC is one step closer to our vision of bringing 1 billion people on-chain. By making it easier for bitcoin holders to access DeFi, Coinbase is helping to build a more inclusive financial system where anyone, anywhere, can participate in the future of finance.”

Upon its official launch, several DeFi protocols, including decentralized exchanges Aerodrome and Curve, will support cbBTC. Aave Chan Initiative, a service provider of the Aave DAO, proposed the onboarding of Coinbase’s cbBTC to Aave v3, the latest version of the lending protocol, anticipating a natural fit for cbBTC in both Base and Mainnet Aave pools.

Coinbase’s stock has nearly doubled over the past year but experienced an 18% decline in the last month, currently trading at $157.22 according to Yahoo Finance data.