Coinbase Announces Wrapped Ether Staking Token Ahead of the Merge

Coinbase Announces Wrapped Ether Staking Token Ahead of the Merge

The cryptocurrency exchange Coinbase has introduced a new liquid staking ethereum derivative token ahead of Ethereum’s proof-of-stake (PoS) upgrade. The new ERC20 utility token is called coinbase wrapped ethereum, or CBETH, and it will allow people to stake their ether in a non-custodial fashion or trade the tokens on the open market.

Coinbase Reveals the CBETH Liquid Staking Solution

On August 24, Coinbase Global announced the launch of a new ERC20 token called coinbase wrapped ethereum (CBETH), roughly two weeks before the highly anticipated Ethereum upgrade known as The Merge is expected to take place. Essentially, Coinbase is enhancing the company’s staking services by leveraging the same method as Lido. Lido provides market participants with a wrapped ether token called lido staked ether (STETH).

"All staked-ETH is locked until a future Ethereum protocol upgrade is complete," Coinbase explained on Tuesday. "In the meantime, Coinbase has created CBETH to give customers the option to sell, transfer, spend, or otherwise use their staked-ETH while it remains locked. Holders of CBETH will be able to move these tokens to a self-custodial wallet and trade them off the Coinbase platform."

The exchange revealed that it will introduce a wrapping functionality on its platform and it also shared the ERC20’s contract address for CBETH. There is a total supply of 642,831 CBETH and 354 holders so far. Coinbase has announced that CBETH is not valued at 1:1 with ethereum (ETH).

"Note that the price of CBETH is NOT meant to track the price of ETH 1:1," Coinbase explains. "CBETH represents staked ETH plus all of its accrued staking interest, starting from when CBETH’s conversion rate and balance were initialized [on] June 16, 2022, 19:34 UTC."

The 'Liquid Staking Market on Ethereum Is Dominated by a Single Solution’

Coinbase has also published a CBETH white paper, and the paper explains that there is a need for strong competing liquid staking solutions with "differentiated qualities." "Today, the liquid staking market on Ethereum is dominated by a single solution that is on the verge of breaching 33% network penetration." Coinbase believes the trading platform’s trusted reputation will help CBETH grow.

Presently, the liquid staking solution Lido offers a wrapped ether token called STETH, and the token’s market capitalization today equates to 0.65% of the USD 1.09 trillion crypto economy. STETH is Lido’s largest liquid staking asset in terms of valuation, but it also offers liquid staking solutions for Polkadot, Solana, Polygon, and Kusama. At one time, the platform offered Terra liquid staking services, but since the Terra blockchain ecosystem imploded, Lido decided to wind down the Terra-based service.