Coinbase has announced the development of cbBTC, a wrapped Bitcoin alternative designed for its Base layer-2 blockchain. This move comes shortly after controversies surrounding BitGo’s wrapped Bitcoin (wBTC).
Years after offering wBTC services, BitGo announced changes to its Wrapped Bitcoin business on August 9. The company said it’ll start to hold the underlying Bitcoin in multiple locations, including Singapore and Hong Kong, instead of just in the United States.
The announcement also mentioned that Justin Sun, the founder of the Tron blockchain, will be part of the expansion. This has led to negative reactions toward BitGo. In response, CEO Mike Belshe reassured that Justin’s involvement won’t affect the transparency of the wBTC project.
In the wake of this development, Coinbase revealed on its X account that it plans to launch cbBTC, similar to wBTC.
Wrapped Bitcoin (WBTC) is a token that represents Bitcoin (BTC) on blockchains other than Bitcoin, primarily Ethereum. It allows Bitcoin holders to participate in decentralized applications (dApps) and services within the Ethereum ecosystem.
WBTC is an ERC-20 token, meaning it follows the Ethereum standard for tokens, and it is backed 1:1 by Bitcoin that is held in reserve by a custodian.
The main purpose of WBTC is to provide Bitcoin price exposure to users of decentralized finance (DeFi) while making a BTC-linked asset available for trading against Ether and other ERC-20 tokens. This enables Bitcoin holders to access various DeFi services, such as lending, borrowing, and derivatives, which were previously unavailable to them.
The process of minting and burning WBTC involves merchants sending Bitcoin to the custodian to receive newly minted WBTC, and the reverse process occurs when users want to convert WBTC back into Bitcoin.
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History of wBTC
Wrapped Bitcoin (wBTC) was first launched in January 2019. It was developed as a collaborative effort among several key players in the cryptocurrency industry, including BitGo, Kyber Network, and Ren.
In February 2024, BitGo announced that wBTC is now live on Base, an Ethereum Layer 2 network developed by Coinbase. This integration enables users to leverage Bitcoin’s liquidity and utility in a more efficient and cost-effective environment.
Coinbase is a leading cryptocurrency exchange and financial services platform founded in 2012 by Brian Armstrong and Fred Ehrsam. It allows users to buy, sell, transfer, and store various cryptocurrencies securely.
The company features Coinbase Pro for advanced trading, Coinbase Wallet for accessing decentralized applications, and services such as Coinbase Earn, which rewards users for learning about cryptocurrencies.
The introduction of cbBTC is part of Coinbase’s broader strategy to enhance its offerings and improve user experiences in the crypto space.
