- Coinbase has launched a DeFi-compatible version of Bitcoin.
- The move comes as DeFi users look for alternatives to Wrapped Bitcoin.
In a move designed to bolster its burgeoning DeFi business, Coinbase rolled out a new product called cbBTC on Thursday.
The token is a one-to-one version of Bitcoin, backed by coins held in custody by Coinbase.
But there’s a key difference: Unlike “vanilla” Bitcoin, cbBTC can be held and traded on programmable blockchains, like Ethereum.
This lets Coinbase customers for the first time leverage their $18 billion of Bitcoin holdings across Ethereum and Base’s combined $45 billion DeFi ecosystems.
Much-needed boost
Adoption of cbBTC could provide a much-needed boost to Ethereum’s ailing DeFi ecosystem.
Despite Bitcoin hitting an all-time high in March, deposits to Ethereum DeFi protocols have lagged behind their 2021 levels.
An $18 billion opportunity
CbBTC has a large pool of potential users.
Bitcoin is the most traded crypto asset on Coinbase, accounting for almost 37% of trading volume, according to data compiled by CoinMarketCap.
Coinbase customers store approximately one million coins on the exchange, worth some $58 billion, says an analysis by blockchain data platform Arkham Intelligence.
While around $40 billion of this amount is Bitcoin the exchange holds on behalf of exchange-traded fund issuers like BlackRock, some $18 billion is held by retail and institutional customers.
There’s plenty of ways for Coinbase’s customers to use cbBTC in DeFi. Integrations with popular decentralised exchange Curve Finance and top lending protocol Aave are already live.
Here's the full list of cbBTC's DeFi protocol integrations on Ethereum and Base:
Aerodrome, Curve, Aave, Morpho, Compound, Moonwell, Sky (f.k.a. MakerDAO), Spark, Veda, Mellow, DeFinitive, DeBridge and Maple.
This is important because these protocols let cbBTC holders earn yield on their tokens and incentivise its use.
Hot competition
The move comes amid a shakeup in the market for DeFi-compatible versions of Bitcoin.
In recent weeks, several protocols and their users have started looking for alternatives to Wrapped Bitcoin, the biggest DeFi-compatible version of Bitcoin.
The token’s issuer, BitGo inked a new partnership involving Tron founder Justin Sun. Critics say Sun’s history of turbulent crypto acquisitions could cause issues, and warn the move jeopardises the $9 billion Bitcoin held by BitGo that backs the token.
Coinbase’s timely launch of cbBTC could be an attempt to lure users unhappy with BitGo.
Other firms have the same idea, though.
Bitcoin layer 2 Stacks is in the process of launching its own DeFi-compatible version of Bitcoin called sBTC, set to go live in mid-September.
Lombard Staked BTC, a version of Bitcoin that earns yield from Bitcoin staking protocol Babylon, has attracted almost $300 million of deposits since its August 21 launch.
But cbBTC isn’t the first time Coinbase has a similar product.
In 2022, Coinbase launched cbETH, a DeFi-compatible version of Ethereum’s Ether token that earns staking yield. It’s grown to become the fifth-largest staked Ether token with almost $500 million in circulation.
The question now is whether cbBTC will be able to achieve similar success.
Tim Craig is DL News’ Edinburgh-based DeFi Correspondent. Reach out with tips at tim@dlnews.com.
