Coinbase Promotes cbBTC, Wrapped Bitcoin Alternative for Base Blockchain

Posts on X by Coinbase and Base creator Jesse Pollack suggest that the cryptocurrency exchange is developing a bitcoin packaged to run on a layer-2 blockchain, similar to Bitgo’s wBTC.

Despite some controversy over wBTC, BitGo’s protocol remains stable.

Cryptocurrency exchange Coinbase (COIN) appears to be developing a system that will run on its layer-2 blockchain Base as an alternative to BitGo’s wrapped bitcoin wBTC {{WBTC}} and give users access to the largest cryptocurrency by market cap on the network.

The speculation was triggered by mysterious posts from Coinbase late Tuesday US time, which included the phrases: “cbBTC” and “Coming soon.”

Then came a post from Jesse Pollak, who runs Base, in which he said the team plans to build a “massive Bitcoin economy” on the network.

To say it out loud: I love Bitcoin, I am so grateful for his role in launching crypto, and we will build a massive Bitcoin economy @basis.

— Jesse Pollak (jesse.xyz) 🛡️ (@jessepollak) August 14, 2024

Wrapping a crypto token is a way to make it usable on different protocols than the one it was originally designed for, bringing more liquidity to the target ecosystem. Each wrapped bitcoin represents one of the originals held in custody. When a trader wants to exchange the wrapped token for bitcoin, the wrapped version is “burned” or deleted from the chain, and the original is released.

Coinbase’s announcement comes as a cloud hangs over wBTC. Earlier in the month, BitGo said it had formed a joint venture with BiT Global, a Hong Kong-registered custody platform that is partly owned by the Tron ecosystem and Tron founder Justin Sun. The venture will continue to use the same BitGo multi-signature technology and deep cold storage, it said.

The response to the announcement was generally neutral, as there are no technical changes to the product and all data on the underlying reserves remains verifiable on-chain. However, some chatter on the forums of DAI stablecoin issuer MakerDAO expressed a negative reaction. An executive proposal for MakerDAO token holders proposes to stop borrowing wBTC and reduce wBTC debt limits to 0 DAI to reduce risk, and is open for the next month.

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Still, on-chain data from Dune shows no change in the wBTC supply, meaning investors are not attempting to exit the protocol en masse.

Sun said in a post on X that there will be “no changes to WBTC” outside of the joint venture, and that he does not control the protocol’s private keys and cannot move any of the BTC reserves.

“My personal involvement in WBTC is purely strategic,” he wrote.