Coinbase Wrapped BTC

Coinbase Bitcoin (cbBTC) allows users to send their Bitcoin directly to addresses in the Base and Ethereum ecosystems, enabling them to participate in decentralized finance (DeFi) applications like trading, lending, and borrowing. The primary utility is that it lets Bitcoin holders engage with smart contracts using value transferred from Bitcoin (BTC) on the Bitcoin network. The supply of cbBTC reflects actual Bitcoin reserves held in custody by Coinbase, and can be redeemed directly at the same value, with each cbBTC token backed 1:1 by Bitcoin.

cbBTC is a streamlined version of a wrapped token, one that it is automatically wrapped and unwrapped when a user interacts with Bitcoin or cbBTC on Coinbase:

• When you send BTC to an address on Ethereum or Base networks from Coinbase, cbBTC is issued.
• When you receive cbBTC to your Coinbase account, your account is credited with BTC.

Another distinguishing feature of cbBTC is that Coinbase, a regulated and publicly traded company, acts as the custodian of the Bitcoin backing cbBTC. Coinbase already custodies a majority of the Bitcoin held by Bitcoin ETFs, enhancing trust.

cbBTC directly competes with WBTC by offering a Coinbase-backed wrapped Bitcoin product on Ethereum, and bring Bitcoin to Base, where WBTC has very low liquidity. Given Coinbase's large user base and reputation, cbBTC may have increased appeal among users who want a more regulated and transparent alternative to WBTC. It also comes at a time when WBTC has faced criticism over restructuring its custody model.

cbBTC is currently available on Ethereum mainnet and Base, a Layer-2 network incubated by Coinbase and built with Optimism’s open-source OP Stack. Official communications state that cbBTC will also be made available on other networks, perhaps even beyond those on which WBTC (wrapped Bitcoin) is already established.

Coinbase has developed cbBTC and manages the primary method for converting cbBTC to BTC and vice-versa, on Ethereum and Base. Base itself is a project that was launched with help from Coinbase but operates independently and is led by Jesse Pollak, Coinbase’s Head of Protocols, who spearheaded the project. 

cbBTC is a wrapped token that tokenizes the asset Bitcoin. It is an ERC-20 token that represents a corresponding amount of Bitcoin and can be redeemed for Bitcoin through a Coinbase account, enabling a seamless method for moving Bitcoin liquidity into the Ethereum and Base onchain ecosystems. Wrapped tokens are useful as they allow assets to be represented in a standardized format that is understood by smart contracts, even on networks where the asset is not natively supported. 

Coinbase Bitcoin (cbBTC) launched on September 12, 2024.

The launch of cbBTC is part of Coinbase's broader strategy to build a fully-fledged onchain economy within the Base ecosystem, and deploying it to Ethereum enables cbBTC to be more widely adopted. With millions of Coinbase customers now able to seamlessly issue cbBTC in the context of DeFi, cbBTC is expected to increase the liquidity and utility of Bitcoin through new use cases powered by smart contracts, and greater scalability.

At the time of launch, Coinbase only offers the ability to send BTC as cbBTC, or redeem cbBTC for BTC, for customers in the US (excluding New York State), UK, EEA states, Singapore, Australia, and Brazil. cbBTC itself can be traded and used by anyone globally over the Ethereum and Base networks, and can be traded on platforms like Matcha.