Coinbase Reveal Wrapped ETH Staking Coin
Just weeks before the proposed Ethereum merger, the San Francisco-based crypto exchange Coinbase announced the rollout of a new staked and wrapped Ethereum ERC-20 token, cbETH.
"Coinbase Wrapped Staked ETH (cbETH) is a utility token that represents ETH2, which is ETH staked through Coinbase," the company tweeted, adding that “cbETH can be sold or sent off-platform, while ETH2 will remain locked-up until a future protocol upgrade."
Staking is the method of locking an asset to a network to help validate transactions. In return, the investoror will receive periodic rewards in platform-specific coins.
A wrapped token is a cryptocurrency coin pegged to the value of another crypto. It's called a wrapped token since the token is put into a kind of wrapper, a digital vault that allows the wrapped version to be moved onto another blockchain.
For example, a Wrapped Bitcoin (WBTC) allows the utilization of Bitcoin on the Ethereum blockchain. Traditionally, wrapped tokens follow the price and are backed by their original asset, meaning the cost of Wrapped Bitcoin will always follow the price of Bitcoin.
Following the announcement, Coinbase explained in a Twitter thread, that the price of cbETH is not going to track the price of Ethereum; instead, it will represent staked ETH and all of its built-up interest beginning with when Coinbase initialized cbETH's conversion rate and balance, on Jun 16th, 2022.
In a Q and A article, Coinbase says users who choose to stake their Ethereum on the exchange will receive the cbETH ERC20 utility token in return. Coinbase claims that the new token is a liquid representation of staked ETH.
Coinbase said holders of staked ETH or ETH2 can “wrap” their token and receive cbETH through the exchange, adding that feature will be rolled out to eligible users progressively throughout the day."
The company finished its thread by saying that once the asset is adequately provided, trading of the cbETH-USD pair will launch in phases as support for cbETH is restricted in some jurisdictions.
The announcement came just two weeks after the exchange said it would focus on Ethereum staking during this crypto winter. In a letter to investors, Coinbase stated that it saw its staking feature as an “early win” It is considered one of its most prioritized products, with the number one goal being to become the number one staking company in the world.
In the shareholder letter, Coinbase brought up how it retains users through the ability to stake assets, “As a result of our core retail customer trading less, our [monthly transacting user] mix has trended more towards non-investing activities—notably staking.”
This reveal can be seen as a bright spot in Coinbases recent press run, as the exchange has been the victim of multiple bad headlines over the past couple of weeks.
Beginning with the announcement of an SEC probe looking into whether the company had allowed its users to trade assets that are unregistered securities and if it harbored insider trading. The following week the company was hit with two lawsuits, including one that claimed the exchange was making "false and misleading statements" about its business.