Coinbase introduces wrapped ETH staking token cbETH

Coinbase introduces wrapped ETH staking token cbETH

As the crypto community braces for the much-anticipated Ethereum upgrade scheduled next month, crypto exchange Coinbase took to Twitter on Wednesday to announce the launch of a new ERC-20 staked and wrapped Ethereum token, called “cbETH.”

“Coinbase Wrapped Staked ETH (“cbETH”) is a utility token that represents Ethereum 2 (ETH2), which is ETH staked through Coinbase. Over time, the price of cbETH will likely deviate from ETH because cbETH represents 1 staked ETH plus all of its accrued staking interest,” explained the company in a help center article

In essence, customers who stake their Ethereum on Coinbase will receive the cbETH utility token, which can be transferred or sold off, while ETH2 remains locked up until a future protocol upgrade. According to the company, the token can also be used across other DeFi apps. 

“If you want to sell your ETH2 or send it to another wallet, wrapping it for the cbETH is your only option. cbETH is an ERC-20 token and can be sold or sent anytime,” reads the article. 

Even though wrapped tokens can be generally moved across one blockchain to another – for instance, Wrapped Bitcoin (WBTC) can be used on the Ethereum Blockchain – the Twitter thread suggests that cbETH can’t be used on other networks. 

The primary purpose of the token would be to provide liquidity to staked users. Anyone with access to ETH staking, available in selected geolocations on the platform, will be eligible to wrap the staked ETH (ETH2) into cbETH.

There are also certain risks associated with the token. The market might value cbETH less than that of ETH because of events like slashing or liquidity crunch. As a precaution, Coinbase intends to soon introduce unwrapping, which is in development and would allow users to return to staked ETH. 

“With cbETH, Coinbase aims to contribute to the broader crypto ecosystem through creating high-utility wrapped tokens and open sourcing smart contracts,” stated Coinbase in the cbETH whitepaper.

“Our hope is that cbETH will achieve robust adoption for trade, transfer, and use in DeFi applications.” 

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About the Author
Himan Mohapatra
Himan Mohapatra
Himan Mohapatra is a crypto and NFT focused writer for Coinmash. He is passionate about finance and disruptive tech, such as blockchain. One can find him playing Valorant or FIFA when away from his desk.