Before we get started, this is not a recommendation or endorsement to buy any token(s) mentioned.
This week, we cover a groundbreaking new form of tokenized Bitcoin called cbBTC, recently launched by Coinbase. In this post, we’ll break down what you need to know about cbBTC and how you can started using it in DeFi ecosystems on Ethereum Mainnet or Base.
On September 12, 2024, Coinbase rolled out cbBTC—Coinbase Wrapped BTC—an ERC20 token backed 1:1 by Bitcoin (BTC), custodied by Coinbase. With cbBTC, Bitcoin holders can now leverage their BTC in DeFi apps across multiple blockchains without having to trade or sell. To start, cbBTC will be live on both Ethereum Mainnet and the Base L2 network, with plans to expand to more chains, bringing even greater utility for Bitcoin to DeFi.
For many of us, Bitcoin was and still is the go-to entry point into the world of crypto, but it has historically faced limitations when interacting with DeFi ecosystems that operate on Ethereum and other chains. Now, with cbBTC, Bitcoin holders can seamlessly enter the Ethereum-based DeFi ecosystem while still holding onto the security and familiarity of BTC.
cbBTC bridges the gap between Bitcoin and DeFi by wrapping BTC into a tokenized version, allowing it to function within DeFi apps as easily as any ERC20 token. This enables BTC holders to tap into advanced DeFi opportunities such as lending, yield farming, or using their BTC as collateral to open a loan.
Using cbBTC is simple for existing Coinbase users. When you send BTC from a Coinbase account to a supported wallet address on Ethereum or Base, it’s automatically converted 1:1 into cbBTC. Whenever cbBTC is transferred back a Coinbase account, it’s automatically converted to BTC, allowing us to move BTC value between ecosystems with zero friction.
One of the most exciting aspects of cbBTC is the broad support across various DeFi protocols. Here’s some of the applications that have already integrated cbBTC or are in development to support it soon:
- Decentralized Exchanges (DEXs): Aerodrome, Curve, Matcha, Uniswap
- Lending Platforms: Morpho, Moonwell, Spark, Aave, and Compound
- Yield Vaults: Mellow, Veda
- Cross-Chain Swaps: DeBridge, DeFinitive
- Oracles and Risk Management: Chronicle Labs, Block Analitica, Gauntlet
- Real-World Asset Tokenization (RWAs): Maple Finance
This wide-ranging support means that users can immediately start putting their cbBTC to work, whether it’s providing liquidity, earning yield, or borrowing against their cbBTC.
Today, I’ll cover a few simple ways I might get started earning onchain with cbBTC!
Three Ways to Farm Onchain with Coinbase’s New cbBTC
Before we get started, please be aware of these risks.
- Smart contract risk in any related apps including Moonwell, Aerodrome, and Morpho
- Front-end spoof attack on any app frontend
- Withdrawal delays if assets lent are 100% utilized
- An economic design exploit
- Colluding signers on any multisig
- cbBTC is backed 1:1 by BTC but the token could depeg so a user would need access to Coinbase to redeem a cbBTC 1:1 for the underlying BTC
- There are controls to freeze cbBTC or blacklist wallet addresses. This is not an uncensorable token.
- Systemic risk across DeFi
Here’s how I get started!
- For this guide, we have 3 options available depending on my…
DeFi Dad is one of the earliest power users of DeFi, having worked with early Ethereum startups going back to 2018, including Zapper.
