Coinbase, the leading cryptocurrency exchange in the U.S., has launched its Wrapped Bitcoin product (cbBTC), now available on two blockchain networks: Base and Ethereum. This latest development allows Bitcoin holders to access decentralized finance (DeFi) applications using their Bitcoin, with Coinbase planning to support additional chains in the future, though no specific ones have been mentioned yet.
What is cbBTC?
cbBTC is a wrapped version of Bitcoin where each token is backed 1:1 by actual Bitcoin held by Coinbase. This wrapping allows Bitcoin to be used on other blockchain ecosystems, particularly Ethereum and Base, Coinbase’s own layer-2 network.
The announcement follows Coinbase’s recent integration of the Lightning Network, which enabled faster and cheaper Bitcoin transfers. By introducing cbBTC, Coinbase aims to enhance financial freedom by giving users more flexibility to engage in the broader crypto ecosystem using their existing Bitcoin.
Bridging Bitcoin and DeFi
This launch is a significant step for Bitcoin users looking to explore DeFi. With cbBTC, users can interact with various DeFi protocols, offering new opportunities such as providing liquidity or using Bitcoin as collateral to borrow other assets.
According to Coinbase, cbBTC opens up these possibilities to millions of its customers, enabling them to tap into the Ethereum ecosystem’s financial applications using Bitcoin they already own.
Supported Platforms for cbBTC
Several prominent DeFi platforms, including Curve, Aave, Compound, Mellow, DeFinitive, Steakhouse, and Maple, will support cbBTC from the outset. These platforms offer various services like earning yields, borrowing assets, and providing liquidity, allowing users to maximize the utility of their Bitcoin.
How cbBTC Works
Users can easily convert their Bitcoin to cbBTC by sending it from their Coinbase accounts to designated Base or Ethereum addresses, where it will automatically be converted 1:1 into cbBTC. The reverse process will also allow users to convert cbBTC back into Bitcoin.
Unlike other assets on Coinbase, cbBTC will not have its own order book or trading pair on the platform’s centralized exchange. Instead, it can be traded on decentralized exchanges (DEXs) using Coinbase Wallet or third-party platforms that support it.
Availability
Initially, cbBTC will be available to Coinbase users in the United States (excluding New York State), as well as in the UK, EEA countries, Singapore, Australia, and Brazil. This gradual rollout ensures compliance with regional regulations and allows more users to take advantage of the new offering.
Looking Forward
While cbBTC is currently only supported on Base and Ethereum, Coinbase has hinted at plans to extend the product to other blockchains in the future. This would further integrate Bitcoin into the DeFi space, offering users additional options to unlock liquidity and participate in decentralized financial activities.
In summary, Coinbase’s introduction of cbBTC paves the way for Bitcoin holders to engage more deeply with DeFi, bringing new flexibility and opportunities to use their BTC. With support from major DeFi platforms and plans for future expansion, cbBTC has the potential to become a vital component in the fusion of Bitcoin and decentralized finance.
