In last night's announcement, Coinbase said it would list Coinbase Wrapped Staked ETH (cbETH) as a token ERC-20, allowing customers to use Ether (ETH) staking while still earning rewards on the exchange.
Coinbase will add support for Coinbase Wrapped Staked ETH (cbETH) on the Ethereum network (ERC-20 tokens). Do not send this asset over other networks or your funds will be lost.— Coinbase Assets (@CoinbaseAssets) August 24, 2022
What is cbETH? Let's dive in pic.twitter.com/n3Dp4OA6HOT
Accordingly, cbETH can be sold or transferred off the platform, while ETH will remain locked until The Merge complete. The price of cbETH does not reflect the price of ETH, which is not redeemable 1:1, but represents the staked ETH plus the staking interest as of September 16, when Coinbase initiated the conversion rate and balance of the coin. cbETH.
“ETH and cbETH are not pegged or expected to be 1:1 interchangeable. In fact, as staking ETH continues to accumulate rewards, each cbETH is expected to represent more staking ETH, which could lead to a divergence in the prices of these assets over time.”
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.— Coinbase Assets (@CoinbaseAssets) August 24, 2022
Learn how cbETH works here: https://t.co/jtGdQelSI9
Above Ethereum, staking requires users to lock their ETH. That locked ETH is later used to establish consensus, validate transactions, and secure the network. While locked, they cannot be traded.
For ease of visualization, let's take Lido Finance as an example. This is a project that allows users to stake and lock ETH to participate in the Ethereum 2.0 upgrade. In return, users will receive stETH tokens corresponding to the staked ETH. But unlike cbETH in that, after The Merge ends, stETH can be exchanged for ETH at a ratio of 1:1.
Coinbase's whitepaper outlined the current issues of the ETH2.0 staking market, which they believe will jeopardize Ethereum. As of now, ETH2.0 staking seems to be completely dominated by Lido Finance, is occupying 90% market share and is the staking place of 30% ETH locked on Ethereum 2.0 Beacon Chain.
Trading of the cbETH/USD pair will be rolled out in phases, support for cbETH may be limited in some jurisdictions.
Inbound transfers for this asset are available on @Coinbase & @CoinbaseExch in the regions where trading is supported. Trading will begin on or after 9AM PT on August 25, 2022, if liquidity conditions are met.— Coinbase Assets (@CoinbaseAssets) August 24, 2022
Floor set goals:
“Our expectation is that cbETH will be strongly accepted for commerce, transfers and in applications. DeFi. With cbETH, Coinbase aims to contribute to the ecosystem cryptocurrency vastly through the creation of high utility wrapped tokens and open source smart contracts.”
As Coin68 explained, The Merge Ethereum's most significant upgrade since its launch in 2015, will officially end the ETH mining process with the current energy-intensive Proof-of-Work (PoW) mechanism, replacing it with a new model. Proof-of-Stake figure (PoS) is expected to improve network scalability and be more environmentally friendly than 99%.
Although unforeseen circumstances can happen, the Ethereum development team has fixed the exact time to deploy The Merge to around September 15-16. To prevent uncertainty ahead of the merger, Coinbase has announced that it will suspend withdrawals of ETH and ERC-20 tokens during The Merge.
The exchange has started supporting ETH staking for US customers since August 2, but recently announced that it will close the Ethereum staking service if required by regulators, after the Ministry of Finance sanctioned Tornado Cash on in the first day of this month.
The announcement of the cbETH launch comes at a time when Coinbase is at the center of numerous investigations. Starting with the incident where the former Coinbase Product Manager was arrested for insider trading, followed by a series of legal actions from the US Securities and Exchange Commission (SEC).