Coinbase's new 'cbBTC' could reshape Bitcoin's role in DeFi.
Key Takeaways
- Coinbase's potential cbBTC product follows closely after BitGo's controversial WBTC management changes.
- Wrapped Bitcoin tokens allow Bitcoin to be utilized on non-Bitcoin blockchains, primarily Ethereum.
Coinbase has hinted at the potential launch of a new product called “cbBTC,” sparking speculation that the US-based crypto exchange may be developing its own wrapped Bitcoin token.
Coming soon.
— Coinbase 🛡️ (@coinbase) August 14, 2024
Coinbase’s official account simply stated “cbBTC” followed by “coming soon” in a subsequent comment. An hour later, Jesse Pollak, head of Coinbase’s layer-2 network Base, expressed enthusiasm for Bitcoin and stated that Base would build a “massive Bitcoin economy” on its network.
The cryptic messages from Coinbase and Pollak come just days after controversy erupted involving BitGo, the team behind Wrapped Bitcoin (WBTC), and Tron founder Justin Sun. BitGo recently announced plans to transfer control of WBTC to a joint venture including itself, Hong Kong-based investment manager BiT Global, and Sun’s Tron ecosystem.
This announcement raised concerns within the decentralized finance (DeFi) community, with some calling for WBTC support to be pulled from major protocols. Crypto risk management firm Block Analitica Labs published a proposal on MakerDAO’s governance forum requesting the protocol close all new WBTC debts and prevent new borrowing against WBTC collateral.
BitGo CEO Matt Belshe dismissed security concerns, stating the controversy was a “reaction to the Justin Sun name” rather than a proper assessment of the facts. Belshe later clarified that the underlying WBTC security protocols would remain unchanged. Sun also addressed the issue, stating there had been “no changes to WBTC” and his involvement did not include direct access to funds.
The potential launch of a Coinbase-backed wrapped Bitcoin token could provide an alternative to WBTC for users seeking Bitcoin exposure in DeFi applications.
Wrapped Bitcoin tokens allow Bitcoin to be utilized on non-Bitcoin blockchains, primarily Ethereum, enhancing interoperability between different blockchain networks and enabling Bitcoin holders to participate in DeFi activities without converting to other cryptocurrencies.