By
Godfrey Benjamin
May 10th, 2024
The cbETH token will give customers the option to sell, transfer, spend, or otherwise use their staked-ETH while it remains locked.
On Wednesday, August 24, cryptocurrency exchange Coinbase announced that it will be introducing a Coinbase Wrapped Staked ETH (“cbETH”). The announcement comes just three weeks ahead of the scheduled Merge upgrade on the Ethereum mainnet.
The cbETH is an ERC-20 utility token and shall be available to customers who stake ETH on Coinbase. Other users can withdraw their ETH to Coinbase, stake them, and then wrap the ETH2 into cbETH. Coinbase stated that all staked ETH have been locked until the future upgrade on the Ethereum protocol.
The cbETH token will “give customers the option to sell, transfer, spend, or otherwise use their staked-ETH while it remains locked”. In the blog post, Coinbase further explained:
“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.”
As a matter of caution, the exchange explained:
“Coinbase will add support for Coinbase Wrapped Staked ETH (cbETH) on the Ethereum network (ERC-20 token). Do not send this asset over other networks or your funds will be lost”.
Also, Coinbase noted that the cbETH doesn’t track the price of ETH 1:1. It just represents staked ETH in addition to all of the accrued staking interest. Since each of the cbETH tokens represents more staked ETH, it could result in “a divergence in prices for these assets over time”.
Coinbase to Benefit from ETH Staking
Crypto exchange Coinbase started offering ETH staking to retail players the last year. Earlier this month, they also started offering ETH staking to institutional players. In a recent note, JPMorgan analyst Kenneth Worthington noted that this could prove to be another revenue stream for Coinbase.
“We estimate Coinbase incremental annual staking revenue from the Ethereum merge of $650mn based on $2,000Eth and a 5% Eth yield. We see an incremental annual income of $80-$100mn of staking income,” said Worthington based on the numbers.
The Ethereum Merge upgrade is coming pretty close to the final date. The Ethereum Merge event will happen in two different instances. The Bellatrix upgrade will happen on the Beacon Chain on September 6. Similarly, the Paris upgrade will happen on the execution layer on September 15.