Coinbase Debuts Liquid Wrapped Token cbETH Ahead Of Ethereum Merge

Coinbase is preparing for the upcoming Merge of Ethereum in September with the launch of Coinbase Wrapped Staked ETH (cbETH), a liquid wrapped token that will represent the number of Ether (ETH) staked on the crypto exchange.

In a Wednesday announcement via a series of Twitter posts, Coinbase unveiled the cbETH token on the ERC-20 standard using which crypto investors can earn rewards via their staked ETH as well as spend cbETH in place of their ETH.

When staking, the assets of an investor are locked -- which means that they cannot be used. Ahead of the upcoming Merge, many ETH holders have staked their ETH to earn rewards. Now cbETH will allow investors to spend and use their staked ETH while earning rewards from them at the same 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," the exchange tweeted.

The major crypto exchange noted that the "price of cbETH is not meant to track the price of ETH 1:1 but it represents staked ETH plus all of its accrued staking interest, starting from when cbETH's conversion rate and balance were initialized."

A whitepaper was released explaining the technicalities of the cbETH token and the motive behind the initiative.

"Our hope is that cbETH will achieve robust adoption for trade, transfer, and use in DeFi applications. With cbETH, Coinbase aims to contribute to the broader crypto ecosystem through creating high-utility wrapped tokens and open sourcing smart contracts," Coinbase explained in the whitepaper.

The crypto exchange also added that it plans to compete with another product that is "on the verge of breaching 33% network penetration." It seems that the exchange is talking about Lido Finance and the stETH.