Summary: Coinbase's new ERC20 token, Coinbase Wrapped Staked ETH (cbETH), is a liquid form of staked Ethereum (ETH). Users can convert their ETH to cbETH for various transactions and stake it on DeFi platforms like Convex Finance for additional rewards. However, cbETH may fluctuate in value compared to staked ETH, and comes with smart contract risks when used with DeFi platforms. The underlying staked ETH and rewards are locked until a future Ethereum upgrade.
- Earn up to 9.88% APY on staked cbETH/ETH LP tokens.
- One of the safest and most trusted DeFi Protocols with over $4B in TVL.
- Developed and maintained by the team behind Curve Finance.
What is Coinbase cbETH?
Coinbase has introduced an ERC20 utility token called Coinbase Wrapped Staked ETH (cbETH). This token provides a liquid representation of staked Ethereum (ETH), which is otherwise locked until a future Ethereum protocol upgrade. Users can use their cbETH in various ways including selling, transferring, or spending, both on and off the Coinbase platform.
The conversion rate between staked ETH and cbETH changes over time due to accrued rewards or potential slashing events. Unwrapping your cbETH to receive the underlying staked ETH is also an option. The cbETH price might deviate from the staked ETH price as it is influenced by staking rewards and its varying market value across different exchanges.
How do I wrap ETH to cbETH on Coinbase?
The process of wrapping ETH to cbETH is easy thanks to Coinbase's intuitive user interface. First, you will need to convert your ETH to ETH2 on the platform. Then, you can follow the simple steps below to get started:
- Sign into your Coinbase account and find the assets page.
- Find the 'Ethereum 2' token and select it.
- Find the 'Send your ETH2' button to convert your ETH to cbETH.
- Input the amount of ETH2 you want to wrap and click 'Accept and Wrap now'.
- You will now have cbETH on your wallet that you can hold or withdraw to an on-chain wallet.
Is cbETH Safe?
The first issue to address is the safety and risks around cbETH, prior to exploring how to earn more rewards. At its core, cbETH is a representation of Ethereum 2 that has been staked through Coinbase, and is backed by the underlying ETH2 tokens held in cold storage. As such, it is highly secure and safe to use on-chain with other DeFi protocols.
Moreover, Coinbase has implemented multiple layers of security, including additional monitoring and auditing processes around the staking of ETH2. As a result, users can rest assured that their cbETH tokens are safe to use on-chain with other DeFi protocols.
Where is the Best DeFi yields for cbETH?
Once you are comfortable with the process of wrapping ETH to cbETH on Coinbase, you can now withdraw it off the platform to a Coinbase Wallet or MetaMask Wallet. In doing this, you can now stake your cbETH on a DeFi protocol to earn extra yield outside of the staking rewards that get accrued to the cbETH token.
Our top pick for DeFi yields on cbETH is Convex Finance. They are currently offering a 9.88% APY to provide liquidity for ETH/cbETH on the platform. For users looking to do this, you can follow this guide:
- Visit Curve Finance and connect your MetaMask or Coinbase Wallet.
- Add liquidity to the cbETH/ETH pool and receive a staked ETH/cbETH LP token (this is a token that represents your stake in the pool).
- Visit Convex Finance and deposit the ETH/cbETH token into the protocol.
- You will now accrue rewards that can be claimed at any time.
What are the risks of cbETH?
The risks of using cbETH to wrap your staked ETH include potential fluctuations in the value of cbETH compared to staked ETH. This could result in a loss of cash value if you choose to sell your cbETH when its value is lower than staked ETH. Additionally, while unwrapping cbETH to ETH2 is free and returns both the underlying ETH2 and accrued rewards, the unwrapped ETH2 and rewards remain locked up and cannot be accessed until a future protocol upgrade.
Outside of this, if you are interested in using a DeFi platform to earn extra rewards, there are smart contract risks associated with those platforms. This means that the DeFi contracts used to earn rewards could suffer exploits that result in loss of user funds, which in most cases is not recoverable.
In conclusion, Coinbase's cbETH is an innovative solution that provides liquidity to staked Ethereum, which is otherwise inaccessible until the completion of a future Ethereum upgrade. Users can leverage cbETH for transactions on and off the Coinbase platform and can also stake it on DeFi protocols like Convex Finance to earn additional rewards.
However, it's important to note that while cbETH offers liquidity and potential extra yield, it comes with its own set of risks including value fluctuations compared to staked ETH, and smart contract risks when used with DeFi platforms. Therefore, careful consideration and understanding of these aspects are recommended when using cbETH.