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Coinbase introduces Wrapped Staked ETH: Here’s what you need to know

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Popular crypto-exchange Coinbase announced on Wednesday the release of cbETH, its new wrapped and staked Ethereum ERC-20 token. The timing of this announcement is interesting, especially with the Ethereum Merge now on the horizon.

“Coinbase Wrapped Staked ETH (cbETH) is a utility token that represents ETH2, which is ETH staked through Coinbase. cbETH can be sold or sent off-platform, while ETH2 will remain locked-up until a future protocol upgrade.”

According to the exchange’s tweet, the token will be Ethereum-based and following the Merge, it can be used to stake Ether (ETH), the network’s native currency, using Coinbase. In addition to receiving the usual incentives for staking or locking coins on the network, liquid staking enables investors to increase their yield.

So, what’s new about the token?

The whitepaper added that while cbETH is “more extensively compatible with dApps in DeFi today because they are ERC-20 compliant,” it will serve as a compound token or cToken.

“ETH and cbETH are not pegged or expected to be interchangeable 1:1. In fact, as the underlying staked ETH continues to accrue rewards, each cbETH token is expected to represent more staked ETH, which may result in a divergence in prices for these assets over time.”

Other offerings that are anticipated to offer comparable services also exist, in addition to this liquid token. On 19 July, for instance, Lido Finance revealed that it would shortly start selling staked Ethereum on Layer 2 networks that operate more quickly and affordably than the Ethereum mainnet.

The Merge or Ethereum’s transition from a proof-of-work to a proof-of-stake consensus process is expected to be completed sometime between September 10 and 20. The switch will significantly reduce the energy used by the network.

After the Merge, the token will serve several purposes and Coinbase wants to encourage its widespread use. The whitepaper went on to say that “our objective is that cbETH will acquire robust adoption for trade, transfer, and use in DeFi applications.” 

In fact, through developing high-utility wrapped tokens and open-sourcing smart contracts, Coinbase hopes to contribute to the larger crypto-ecosystem using cbETH. Separately, the whitepaper claimed that cbETH investors will be able to sell their staked ETH for cash or transfer their staked ETH to another non-custodial wallet.

Coinbase in trouble?

The launch of the new staking token coincides with Coinbase being the subject of legal actions, including one alleging that it made “false and misleading statements” about its business. This, while under investigation by American regulators for allegedly listing unregistered securities and engaging in insider trading.

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Ser Suzuki Shillsalot has 8 years of experience working as a Senior Investigative journalist at The SpamBot Times. He completed a two-hour course in journalism from a popular YouTube video and was one of the few to give it a positive rating. Shillsalot's writings mainly focus on shilling his favourite cryptos and trolling anyone who disagrees with him. P.S - There is a slight possibility the profile pic is AI-generated. You see, this account is primarily used by our freelancer writers and they wish to remain anonymous. Wait, are they Satoshi? :/

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