Coinbase (COIN) is unveiling a new alternative to BitGo’s wrapped Bitcoin (wBTC) designed for its layer-2 blockchain, Base. The new product, tentatively named “cbBTC,” aims to provide users with access to Bitcoin through the Base network.
The cbBTC Announcement: What It’s All About
- Initial Hints: On Tuesday afternoon, U.S. time, Coinbase posted cryptic tweets featuring the terms “coming soon” and “cbBTC.” This was followed by a tweet from Jesse Pollak, the creator of Base, announcing plans to build a “massive Bitcoin economy” on the network.
- Mechanics of cbBTC: cbBTC will function as a wrapped token, enabling Bitcoin to be used on platforms beyond its native network. Each cbBTC represents one Bitcoin held in custody by BitGo. When traders redeem cbBTC, it is burned (deleted from the blockchain), and the corresponding Bitcoin is released.
Context and Market Reactions
- BitGo and WBTC Scrutiny: Coinbase’s move comes amid scrutiny of BitGo, the current issuer of wBTC. Earlier this month, BitGo announced a joint venture with BiT Global, a Hong Kong-based custody platform partially owned by the Tron ecosystem and Tron founder Justin Sun. This new venture will continue using BitGo’s multisignature technology and cold storage solutions.
- Market Sentiment: Reactions to BitGo’s announcement have been generally neutral, with no significant technical changes to wBTC and all information regarding underlying reserves remaining verifiable on-chain. However, discussions on MakerDAO forums have raised concerns. A proposal to halt wBTC borrowing and reduce wBTC debt limits to zero DAI to mitigate risk is open for consideration over the next month.
- On-Chain Data: Despite these concerns, on-chain data from Dune Analytics shows no significant change in wBTC supply, indicating that traders are not exiting the protocol en masse.
- Coinbase’s introduction of cbBTC represents a strategic move to offer a wrapped Bitcoin alternative on its Base blockchain, aiming to enhance Bitcoin’s accessibility and liquidity within the network. As cbBTC develops, it will be important for market investors to monitor its performance and impact compared to existing wrapped Bitcoin options and other altcoins.