Coinbase Introduces Wrapped Staked ETH Token

Key Takeaways

• Coinbase (NASDAQ:COIN) has announced cbETH, a liquid-wrapped token that will represent ETH staked on its platform.
• Coinbase intends for users to circulate cbETH, as staked ETH might otherwise remain locked until 2023.
• The company says it will compete with another major liquid staking platform, Lido.

Coinbase has announced that it will launch its own wrapped token in advance of Ethereum’s upcoming merge.

Coinbase Announces cbETH

Coinbase announced on Wednesday that it would introduce a token called Coinbase Wrapped Staked ETH (cbETH).

The cbETH token represents ETH2, which represents ETH staked with the exchange. ETH2 will remain locked until a future Ethereum upgrade is expected as soon as 2023.

By contrast, cbETH will be liquid, and users can exchange cBETH or send the asset elsewhere. Coinbase notes that this will help users exit staked ETH, use the token as collateral in DeFi, and transfer or “gift” staked ETH.

Coinbase warns that transferring cbETH will only be possible on the Ethereum network. “Do not send this asset over other networks or your funds will be lost,” it advises.

The company describes cbETH as a “utility token,” a term often used to distinguish cryptocurrencies from payment tokens and other assets that might fall under securities regulations.

It adds that “no fees associated with wrapping or unwrapping cbETH,” though staking fees will apply.

Coinbase says that cbETH is not intended to maintain a price peg with ETH at a 1:1 ratio. Rather, it represents staked ETH and its accrued interest starting when the company initialized cbETH’s conversion rate and balance on June 16.

In its whitepaper, Coinbase acknowledges that it plans to compete with another product “on the verge of breaching 33% network penetration.” That competing product is presumably Lido and its liquid-staked ETH (stETH) token. Coinbase believes it can diversify the staking market based on its successful involvement in the USDC stablecoin.

The announcement comes weeks before Ethereum’s merge, scheduled to begin on Sept. 6. The event will see Ethereum replace its Proof-of-Work mechanism with Proof-of-Stake network validation.

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