Coinbase releases cbETH Wrapped Ethereum staking token

  • The cbETH token from Coinbase brings liquidity to all the staked ETH locked until the Pos upgrade.
  • Coinbase believes that cbETH will achieve robust adoption for trade, transfer, and use in DeFi applications.

On Wednesday, August 24, cryptocurrency exchange Coinbase unveiled its new liquid token cbETH called Wrapped Ethereum Staking. Coinbase said it would list the cbETH token on the Ethereum network as an ERC20 token.

With cbETH, Coinbase has devised a unique way for users to use their staked ETH while simultaneously earning rewards on the exchange. As we know that all staked ETH on the Ethereum protocol remains locked until the Ethereum POS transition is complete. The wrapped Ethereum staking token cbETH just provides additional liquidity to these locked tokens.

Coinbase said that cbETH “gives customers the option to sell, transfer, spend, or otherwise use their staked-ETH while it remains locked”. Along with facilitating the selling and transfer of staked ETH, cbETH will also work as collateral in several decentralized finance (DeFi) projects. The official whitepaper for Wrapped Ethereum Staking (cbETH) token notes:

Our hope is that cbETH will achieve robust adoption for trade, transfer, and use in DeFi applications. With cbETH, Coinbase aims to contribute to the broader crypto ecosystem through creating high-utility wrapped tokens and open sourcing smart contracts.

Coinbase believes that its liquid staking token cbETH will address the shortcomings of traditional staking. Liquid staking allows the wrapping of locked staked assets into transferable assets. Besides, they also continue to represent the ownership of the underlying staked assets along with additional rewards earned. Coinbase thinks that liquid staking is inevitable and a crucial step towards continued adoption.

The working of cbETH

The whitepaper notes that cbETH will function as a compound token or a cToken. Besides, it can also be burned or minted as per the floating conversion rate.

This conversion rate just tracks the underlying staked ETH which will account for staking/unstaking activities, penalties, rewards, and fees. This will also allow users to easily move between cbETH and ETH. In the whitepaper, Coinbase adds:

ETH and cbETH are not pegged or expected to be interchangeable 1:1. In fact, as the underlying staked ETH continues to accrue rewards, each cbETH token is expected to represent more staked ETH, which may result in a divergence in prices for these assets over time.

As per Coinbase cbETH will be available for trading on Aug. 25 “if liquidity conditions are met”. Once cbETH goes live, any DeFi protocol will be able to add support for it without the need for any permission from Coinbase. Coinbase added that all cbETH contracts are open source.

The crypto exchange concludes by saying “Coinbase hopes to drive adoption for cbETH among our ecosystem of protocol, dapp, and Business partners”.

Related: Ethereum Foundation offers $1M bounty among important updates ahead of the Merge upgrade

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