Aug 25, 2022 Frank Stewskid

Coinbase announces liquid staked ETH - cbETH

The centralized exchange Coinbase announced it will add support for Coinbase Wrapped Staked ETH on the Ethereum network in the form of a cbETH ERC-20 token. The move happens while the crypto community awaits the historical Ethereum merge next month and the new utility token is meant to represent ETH staked through Coinbase to secure the new PoS Ethereum blockchain. 

Users are now able to wrap staked ETH or ETH2 and receive cbETH, through the Coinbase app, which can be traded or transferred off the platform, while ETH2 remains locked until Ethereum enables unstacking in its future releases. 

Coinbase published an extensive whitepaper describing the new token’s model and utility. According to the document, cbETH is not meant to follow Ethereum’s price movement, instead, the wrapped token will represent staked ETH plus all its accrued interest. The conversion rate will also be accounted for at a total pool level in the following manner: conversion rate equals the total wrapped staked ETH divided by the total cbETH supply, where the total wrapped staked ETH represents ETH staked in settled wraps minus staked ETH in settled unwraps plus its net rewards, while the total cbETH supply represents all issued cbETH tokens minus all redeemed cbETH.

While the price of cbETH is claimed to be determined by the market with no control from Coinbase’s side, users can acquire cbETH through the preset conversion rate in the Coinbase wrapping token smart contract, or in “different forms of risk to affect the price of cbETH relative to ETH”. According to the published whitepaper, the cbETH smart contract is inherited from USDC with two different features – an exchangeRate function and an oracle role. While the exchangeRate function determines the token’s rate of exchange, the oracle is tasked with updating it. Although the oracle’s control can be changed in the future, currently its address is controlled by Coinbase, which updates the exchangeRate every 24 hours at 4 pm UTC.

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