Coinbase is riding The Merge with the launch of a liquid staking token for Ethereum

The US exchange is preparing in its own way for the merger of the Ethereum blockchain scheduled for next month. He announced the launch of a new wrapped and staked ERC-20 token on the network, cbETH. If the liquidity conditions are met, it should be immediately available according to the specific modalities linked to the jurisdictions.

The cbETH enters the dance around the Merge

Coinbase is launching its own staking token on Ethereum. the Coinbase Wrapped Staked ETH is a utility token that users, who have already deposited ether in staking on the platform, will be able to receive. However, these staked ETH are locked until the “Shanghai” upgrade, scheduled for 2023. With cbETH, the escrow is diverted and the staking becomes liquid. In other words, the converted token can be sold, spent, and transferred to a wallet external to Coinbase and traded from that external address.

But unlike a classic wrapped token – a WBTC for example whose parity with the BTC is on a strict equivalence ratio – the cbETH will not follow the value of the original token.

The price of cbETH is NOT supposed to follow the price of ETH 1:1. cbETH represents staked ETH plus all its accrued interest, from the time the conversion rate and cbETH balance were initialized.

Coinbase on Twitter

Preserve the decentralization of the network and … secure a new source of revenue

The exchange maintains that the goal of his initiative is to preserve decentralization in the Lido-dominated Ethereum liquid staking market, a solution that according to its white paper, “is on the verge of exceeding 33% network penetration”. Too large a proportion and properly “untenable” according to him, which joins the concern of users about the concentration of a network held in the hands of a few large entities.

It is necessary for the liquid staking market to have strong and competitive solutions with differentiated qualities.

cbETH White Paper

But it’s also for Coinbase a way to generate a new source of income while he is going through a bad patch with sluggish performance piling up.

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The token will be rolled out gradually to eligible customers. Similarly, trading via the cbETH-USD pair will be done in stages, from the moment the supply of the asset is deemed to be notably sufficient.

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