Author: Nancy, PANews

After WBTC experienced a crisis of trust, many competing products emerged in the market, among which cbBTC, which is backed by Coinbase, the largest crypto exchange in the United States, has received the most attention. In less than two weeks after its launch, cbBTC, as an important substitute in the market, has become the third largest packaged Bitcoin, but at the same time, it is causing market concerns due to asset transparency issues.

It has become the third largest Bitcoin packager, with a market share of only 1.2%.

On September 12, Coinbase officially launched its wrapped Bitcoin version Coinbase Wrapped BTC (cbBTC) a few days after the announcement. It is backed by 1:1 BTC and will run on the Ethereum mainnet and Base.

As the largest crypto exchange in the United States, Coinbase, known for its compliance advantages, has led cbBTC to quickly carve up market share. In particular, WBTC, which originally dominated the market, is being replaced by more giant whales and established DeFi projects such as SKY (MakerDAO) and AAVE. "abandon".

According to Dune data, as of September 24, the circulating supply of cbBTC reached 2,944, of which the Ethereum chain accounted for 53.9% and the Base chain accounted for 46.1%. The current market value of cbBTC exceeds 180 million US dollars, and the transaction volume in the past 24 hours is nearly 1.31 billion US dollars, mainly concentrated in Aerodrome (93.3%) and Uniswap (4.4%).

At the same time, the latest data disclosed by IntoTheBlock shows that the number of cbBTC user addresses has exceeded 3,500, and these addresses settle an average of US$472 million worth of Bitcoin on the Base chain every day.

In terms of market share, Dune data shows that as of September 23, cbBTC ranked third with BBTC at 1.2%, still far behind WBTC (68.5%) and BTCB (26.6%). However, according to Hassan Ahmed, head of Coinbase Southeast Asia, at the Solana Breakpoint event recently, cbBTC plans to introduce Solana, which may further drive its market expansion.

Due to the continuous questioning of terms of service and transparency, the official response is that there are plans to implement PoR

Trust is the anchor of the value of packaged assets. Shortly after its launch, cbBTC was caught in a crisis due to its asset reserves and terms of service.

In the middle of this month, cbBTC was questioned for the lack of transparency of its Bitcoin reserves a few days after its launch. At that time, crypto analyst Tyler Durden wrote an article suggesting that Coinbase allowed BlackRock to borrow Bitcoin without providing collateral, saying that the two companies might profit by controlling Bitcoin price movements. Regarding the claim that cbBTC was sold to BlackRock and did not maintain 1:1 support, Coinbase CEO Brian Armstrong denied it, saying that the Bitcoin minting and destruction of BlackRock's spot Bitcoin ETF were transparent and carried out on the chain. For privacy reasons, Coinbase cannot share the wallet addresses of its institutional customers. But he also admitted that cbBTC is supported by a centralized custodian, in this case, the custodian is Coinbase itself. At the same time, BlackRock runs its own blockchain nodes to verify IBIT's Bitcoin holdings and ensure the safety of customer assets. If an institutional customer requests it, BlackRock will display this data, but it will not be made public to the world.

Not long after, cbBTC was again involved in controversy over its terms of service. Some community users stated that cbBTC's user terms stated that if Bitcoin is lost due to malicious activities or unforeseen events, Coinbase will not fully compensate customers, but will distribute it to customers according to the proportion of the remaining Bitcoins.

In response, Paul Grewal, Coinbase's chief legal officer, said that if the exchange loses the underlying Bitcoin, Coinbase will fully compensate customers. The policy is to limit the exchange's liability for external losses caused by complex transactions and leveraged positions that customers may enter. For example, if a trader uses cbBTC as collateral on a loan platform and is liquidated due to malicious activity resulting in the loss of the underlying Bitcoin, Coinbase will fully compensate for the lost Bitcoin, but will not compensate for any fees or monetary losses incurred due to the loan liquidation itself.

However, Coinbase's explanation does not seem to eliminate the outside world's doubts, including TRON founder Justin Sun, who also "fanned the flames" and said "cbBTC is not BTC." In terms of user asset protection, WBTC and cbBTC are different. The issuer of the former, BitGo, provides an on-chain insurance fund of up to 250 million US dollars, while cbBTC does not provide any financial protection, and the existence of asset reserves is not transparent.

DeFiLlama founder 0xngmi recently posted on a social platform, “To be honest, almost every cross-chain bridge (including WBTC) provides proof of reserves (PoR) so that users can check whether the issued tokens have sufficient support. However, Coinbase did not do this, and cbBTC is far below the standard in terms of transparency. This is why it has not been listed on DeFiLlama yet, because its TVL cannot be verified. If we do not list other cross-chain bridge projects whose TVL cannot be verified, then we will not make an exception for Coinbase. We treat all projects equally.”

Hildobby, a data analyst at Dragonfly, also wrote, “I am disappointed to see Coinbase issue cbBTC without any proof of reserves (very similar to cbETH two years ago). When cbETH was launched, I complained but was told that I could only use their centralized terminal to get the conversion rate. In last year’s survey, Coinbase accounted for 12% of the pledged ETH (this has never been officially confirmed in any way). In addition, Coinbase’s quarterly report disclosed the amount of pledged ETH, but they did not disclose it in the recent report.

In addition, some community members pointed out that cbBTC’s service agreement was signed with Coinbase Inc., which is not a regulated financial institution and was accused by the SEC last year of being an unregistered securities exchange, broker-dealer and clearing agency. It is independent of Coinbase Trust Company, a crypto custody business regulated by the New York Department of Financial Services (NYDFS).

In response, Lukas Staniszewski, product manager of cbBTC, said, “We understand the importance of proof of reserves. For cbBTC, we have planned to implement proof of reserves since the early days, and the team is working hard to advance this work. We didn’t state this publicly before because we wanted to complete the construction first.”