Coinbase, one of the largest cryptocurrency exchanges, has announced plans to bring its wrapped Bitcoin token, cbBTC, to the Solana blockchain.
The move is expected to strengthen Coinbase’s position in the growing world of decentralised finance (DeFi), where competition over wrapped Bitcoin tokens is heating up.
This news comes shortly after Coinbase launched cbBTC on Ethereum and Base earlier this month. The new token is available to users in several countries, including the UK, Australia, Brazil, Singapore, and almost all US states, except New York.
The launch occurred at a time when BitGo, another company in the space, was rolling out its own version of wrapped Bitcoin called WBTC. There were also concerns around the involvement of Tron founder Justin Sun, which sparked debate in the community.
Despite the mixed reactions, cbBTC quickly gained popularity. Within a week of its launch, it became the third-largest Bitcoin token, according to data from CryptoQuant.
However, some users raised concerns about Coinbase’s redemption policies, wondering how the exchange would handle situations where Bitcoin was lost.
Coinbase’s Chief Legal Officer, Paul Grewal, responded by explaining that Coinbase would fully reimburse users if their Bitcoin was lost due to unexpected events or malicious activity.
However, this compensation would not cover commission fees or losses resulting from loans that were backed by cbBTC.
“Our customers will be protected if their Bitcoin is lost, but we will not cover financial losses related to other activities like loan liquidations”, said Grewal.
What is cbBTC and why is it important?
cbBTC is a wrapped Bitcoin token, meaning it’s a token on another blockchain that is backed by real Bitcoin.
In this case, it’s an ERC-20 token, which means it was originally launched on the Ethereum network. Each cbBTC token is backed by one Bitcoin, held in reserve by Coinbase.
Wrapped Bitcoin tokens like cbBTC allow users to use Bitcoin in decentralised finance (DeFi) applications. These tokens can be used as collateral to borrow other digital assets, or they can provide liquidity for DeFi protocols. This expands the use of Bitcoin beyond just being a store of value or a payment method.
During the Breakpoint 2024 event in Singapore, Coinbase’s country director for Singapore, Hassan Ahmed, announced the next step for cbBTC.
“We recently launched cbBTC on Base, but our users love Solana, and so do we. So, we are very excited to announce that we will be bringing native cbBTC to Solana as well”, said Ahmed.
While he did not provide a specific date for when cbBTC will be available on Solana, this move is expected to bring new opportunities to Coinbase users. Currently, Coinbase users hold more than $18 billion worth of Bitcoin on the exchange.
With the addition of cbBTC on Solana, they will gain access to Solana’s $6.2 billion DeFi ecosystem, which includes an estimated three million active users. This could create more liquidity and financial opportunities on the Solana network.
Rising competition for wrapped Bitcoin tokens
The world of DeFi has seen increased competition over wrapped Bitcoin tokens. Various companies are offering their own versions of these tokens, as the demand for Bitcoin-backed assets grows.
BitGo, the company behind WBTC, has been expanding its token to new networks, while another competitor, Stacks, is preparing to launch its sBTC token on the Aptos and Solana networks. These developments are putting pressure on Coinbase to make cbBTC stand out in an increasingly crowded market.
A significant moment for cbBTC came when Sky, a former Maker executive, proposed replacing WBTC with cbBTC as a form of collateral on Maker’s platform.
After a vote, Maker’s community supported the idea, removing WBTC in favour of cbBTC. This was a win for Coinbase, but challenges remain, especially around security concerns.
One of the main issues in the wrapped Bitcoin space is the involvement of figures like Justin Sun, which has raised questions about the safety of these tokens.
In response, the CEO of BitGo, Mike Belshe, tried to reassure the community, stating that strict security measures are in place to protect assets.
As Coinbase continues to push its wrapped Bitcoin offerings, cbBTC’s long-term success will depend on its ability to gain trust in the DeFi community and address these security concerns.
If cbBTC succeeds, it could play a key role in the broader movement to decentralise digital assets.
