Coinbase is moving forward with the launch of cbBTC, an ERC-20 tokenized bitcoin that will go live on Base and other Ethereum ecosystems.
The new bitcoin token will be backed 1:1 by bitcoin reserves and presumably held in centralized custody by Coinbase.
Coinbase first teased the impending cbBTC on Aug. 14 amid a swirl of controversy surrounding BitGo. Today, it was formally announced.
This marks the first significant competitive threat to BitGo’s wrapped bitcoin (WBTC), which controls a dominant 96.6% market share across the Ethereum ecosystem today, according to Dune.
Read more: BitGo moves to allay fears over WBTC custodial changes
Coinbase’s tweet claims cbBTC will be available on several protocols including Aerodrome, Curve, Aave, Morpho, Compound, Moonwell, Spark and more.
“Coinbase is helping users do more with their bitcoin,” Coinbase vice president of engineering Will Robinson told Blockworks. He added that “cbBTC is a big step forward for DeFi, giving bitcoin a much more active role.”
BitGo’s announcement of a “strategic partnership” that involved TRON founder Justin Sun sparked concerns, leading to Sky (previously Maker) delisting WBTC as collateral from its DAI stablecoin.
BitGo declined to provide a comment on cbBTC’s launch.
Following Coinbase’s announcement, Spark Protocol immediately launched a proposal to onboard cbBTC, citing “a strategic need to have a replacement BTC on SparkLend as collateral.”
In anticipation of cbBTC, Aave DAO also floated on Tuesday a governance proposal to onboard the collateral to Base and Ethereum mainnet, with about $150,000 of incentives to bootstrap its growth.
Early comments to the proposal cited the security considerations and regulatory risks surrounding cbBTC.
“If Coinbase were ever to have their accounts frozen for investigation or face further regulatory action, it would put all Aave users at severe risk,” user @DeFiWhale said.
Another user, @midapple, cited the proposal as “premature” without knowledge of the minting and redemption mechanisms of cbBTC being publicly known yet.
Other than WBTC, only BTCB, a wrapped bitcoin on BNB Chain, and the multichain Borderless Bitcoin (BTC.b) have a market share over 1%.
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Source: https://blockworks.co/news/coinbase-wrapped-bitcoin-competitor-cbbtc