Coinbase Promotes cbBTC, Wrapped Bitcoin Alternative for Base Blockchain

Tweets from the crypto exchange and Jesse Pollack, the creator of Base, suggest cbBTC could run on the layer-2 blockchain.

Crypto exchange Coinbase (COIN) is seemingly building an alternative to BitGo's wrapped bitcoin (WBTC) to operate on Base, its own layer-2 blockchain, giving users a way of accessing the largest cryptocurrency by market capitalization on the network.

The speculation began with cryptic tweets from Coinbase late Tuesday U.S. time, which included the wording: "cbBTC" and "Coming soon."

These were followed by a tweet from Jesse Pollak, who runs Base, outlining how the team is planning to build a "massive bitcoin economy" on the network.

Wrapping a crypto token is a way of making it available on protocols other than the one it was originally designed for, adding more liquidity to the target ecosystem. Each wrapped bitcoin represents one of the original, which is held in custody. When a trader wants to redeem the wrapped token for bitcoin, the wrapped version is "burnt," or deleted from the chain, and the original is released.

Coinbase's announcement comes as a cloud hangs over wBTC. Earlier this month, BitGo said it was setting up 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 multisignature technology and deep cold storage, it said.

The announcement drew a largely muted response as there is no technical change to the product and all data about underlying reserves continues to be verifiable on-chain. However, some chatter on the forums of DAI stablecoin issuer MakerDAO expressed a negative reaction. A MakerDAO executive proposal for token holders to stop wBTC borrowing and cut wBTC debt limits to 0 DAI to reduce risk is open for the next month.

On-chain data from Dune shows there has been no change in supply for wBTC, suggesting traders aren't trying to exit the protocol en-masse.

In a post on X, Sun said that there will be "no changes to WBTC" outside of the joint venture and he does not control the protocol's private keys and can't move any of the BTC reserves.

"My personal involvement in WBTC is entirely strategic," he wrote.

Edited by Zack Seward

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