- Coinbase has launched a DeFi-compatible version of Bitcoin.
- The move comes as DeFi users look for alternatives to Wrapped Bitcoin.
In a bid to bolster its booming DeFi business, Coinbase launched a new product called cbBTC on Thursday.
The token is a one-to-one version of Bitcoin, backed by coins held by Coinbase.
But there is one key difference: unlike “vanilla” Bitcoin, cbBTC can be held and traded on programmable blockchains, like Ethereum.
This allows Coinbase customers to leverage their $18 billion in Bitcoin assets on the combined $45 billion Ethereum and Base DeFi ecosystems for the first time.
A much needed boost
The adoption of cbBTC could provide a much-needed boost to Ethereum’s struggling DeFi ecosystem.
Although Bitcoin hit an all-time high in March, deposits on Ethereum DeFi protocols remained below 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 nearly 37% of trading volume, according to data compiled by CoinMarketCap.
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Coinbase customers store about a million coins on the exchange, worth about $58 billion, according to an analysis by blockchain data platform Arkham Intelligence.
While about $40 billion of that is bitcoin held by the exchange on behalf of exchange-traded fund issuers like BlackRock, about $18 billion is held by retail and institutional clients.
Coinbase customers have many ways to use cbBTC in DeFi. Integrations with popular decentralized exchange Curve Finance and leading lending protocol Aave are already live.
Here is the full list of cbBTC’s DeFi protocol integrations on Ethereum and Base:
Aerodrome, Curve, Aave, Morpho, Compound, Moonwell, Sky (formerly MakerDAO), Spark, Veda, Mellow, DeFinitive, DeBridge and Maple.
This is important because these protocols allow cbBTC holders to earn yield on their tokens and incentivize their usage.
A fierce competition
The move comes amid a market upheaval for DeFi-compatible versions of Bitcoin.
In recent weeks, several protocols and their users have started looking for alternatives to Wrapped Bitcoin, the largest DeFi-compatible version of Bitcoin.
Token issuer BitGo has signed a new partnership involving Tron founder Justin Sun. Critics say Sun’s turbulent history of cryptocurrency acquisitions could cause problems and warn that the move puts BitGo’s $9 billion worth of Bitcoin backing the token at risk.
Coinbase’s timely launch of cbBTC could be an attempt to lure disgruntled BitGo users.
Other companies, however, have the same idea.
Bitcoin Layer 2 Stacks is launching its own DeFi-compatible version of Bitcoin called sBTC, which is expected to go live in mid-September.
Lombard Staked BTC, a yield-generating version of Bitcoin through the Bitcoin Babylon staking protocol, has attracted nearly $300 million in deposits since its launch on August 21.
But cbBTC is not the first time Coinbase has offered a similar product.
In 2022, Coinbase launched cbETH, a DeFi-friendly version of Ethereum’s Ether token that generates a staking yield. It has become the fifth most staked Ether token with nearly $500 million in circulation.
The question now is whether cbBTC will be able to achieve similar success.
Tim Craig is DL News DeFi correspondent based in Edinburgh. Feel free to share your tips with us at tim@dlnews.com.
