Introduction to cbETH
The Ethereum blockchain underwent a monumental shift with The Merge in September 2022, transitioning from proof-of-work (PoW) to proof-of-stake (PoS). This upgrade enhanced efficiency and reduced Ethereum’s environmental impact.
As part of this transition, Coinbase introduced cbETH—a wrapped ERC-20 token representing staked Ethereum (ETH2) on its platform. This guide explores cbETH’s purpose, functionality, and role in the Ethereum ecosystem.
👉 Discover how cbETH compares to other staked ETH tokens
What Is cbETH?
cbETH is an ERC-20 utility token issued by Coinbase, designed to mirror staked ETH (ETH2). Key features:
- Liquid Representation: Allows trading of staked ETH (otherwise locked until post-Merge withdrawals).
- Accrued Value: Each cbETH token equals 1 staked ETH + accumulated staking rewards.
- Price Divergence: Over time, cbETH’s value may deviate from standard ETH due to rewards.
How cbETH Works
- Users stake ETH via Coinbase, receiving ETH2 (illiquid until Merge completion).
- Coinbase issues cbETH as a tradable counterpart.
- Holders can trade, sell, or use cbETH in DeFi while their underlying ETH remains staked.
Why Was cbETH Created?
1. Solving Liquidity Lock-Up
Pre-Merge, staked ETH couldn’t be withdrawn or traded. cbETH provided a liquid alternative, enabling users to:
- Sell or transfer staked ETH value.
- Participate in DeFi without unlocking ETH.
2. Beacon Chain Compatibility
Validators on Ethereum 2.0’s Beacon Chain needed wrapped assets to verify transactions. cbETH fulfilled this requirement.
How to Use cbETH
Step-by-Step Guide
- Stake ETH on Coinbase (must meet KYC requirements).
- Navigate to Assets → Ethereum 2 → Wrap ETH2.
- Enter the amount to convert to cbETH.
- Confirm the transaction; cbETH appears in your wallet.
- Trade or use cbETH in DeFi protocols.
Note: Unwrapping cbETH back to ETH2 isn’t immediate post-conversion.
👉 Explore DeFi platforms accepting cbETH
cbETH in DeFi
As an ERC-20 token, cbETH integrates seamlessly with decentralized finance:
- Collateral: Use in lending platforms (e.g., Aave, Compound).
- Trading: Swap on DEXs like Uniswap.
- Yield Farming: Stake in liquidity pools for additional rewards.
Coinbase’s Goal: Drive adoption for trading, transfers, and DeFi utility.
FAQs About cbETH
1. Can I convert cbETH to Bitcoin?
- No direct conversion, but trade cbETH → ETH → BTC via Coinbase’s exchange pairs.
2. Is cbETH the same as stETH (Lido’s token)?
- Similar purpose (liquid staking), but cbETH is Coinbase-specific; stETH is Lido’s version.
3. What happens to cbETH after Ethereum’s Merge?
- Retains value as staked ETH + rewards; remains tradeable post-withdrawal enablement.
4. Are there risks to holding cbETH?
- Price volatility: May diverge from ETH due to reward accrual.
- Centralization: Relies on Coinbase’s infrastructure.
Conclusion
cbETH solves liquidity challenges during Ethereum’s PoS transition, offering:
- Tradability of staked ETH.
- DeFi compatibility.
- Flexibility pre/post-Merge.
For Ethereum holders, cbETH balances staking rewards with market participation—making it a pivotal innovation in Ethereum’s evolution.