- Summary:
- Coinbase has launched cbETH, its wrapped and staked ERC token. We tell you how it works and what it brings to investors.
Crypto exchange Coinbase launched a new wrapped and staked Ethereum ERC-20 token, cbETH, on Wednesday. Wrapped tokens are digital assets that facilitate the transfer of value from one blockchain to another. According to Coinbase, cbETH token holders will be eligible for exchange benefits when using their staked ETH.
The utility token, cbETH, represents ETH2—that is, ETH that has been staked through Coinbase. An upgrade of Ethereum is in the works and could be available as soon as 2023. Therefore, ETH2 will remain unavailable until then.
Ethereum Merge and Coinbase’s decision to launch cbETH
As the Merge approaches, ETH staking has increased significantly. According to their publication, the Ethereum Foundation estimates that the Ethereum Merge will occur between September 10 and 20. After much anticipation and several successful testnet merging, investors and enthusiasts have high confidence.
Those who wish to stake their tokens before converting them to cbETH on Coinbase can do so by sending them to the exchange and receiving ETH2 in return. The company’s whitepaper states that cbETH would operate as a cToken, or compound token. In addition, cbETH is widely interoperable with existing dApps in DeFi because they are ERC-20 compliant.
The most notable aspect is that users can trade, transfer and spend cbETH. This is unlike staked ETH which remains locked until the Shanghai protocol upgrade is complete. Liquidity means that cbETH can be easily converted into other assets or sent to another user. This, according to Coinbase, will allow customers to more easily sell their staked ETH, utilize the token as collateral in DeFi, and “gift” their staked ETH to others.
cbETH is not designed to keep a constant 1:1 pricing peg with ETH. Rather, it reflects ETH that has been staked along with any interest that has accrued since the business set the first conversion rate and balance for cbETH on June 16.