What is Coinbase Wrapped Staked ETH (cbETH)?

Deep Dive

1. Purpose & Value Proposition

cbETH solves the liquidity problem of staked ETH, which is typically locked until Ethereum’s network upgrades. By wrapping staked ETH into cbETH, Coinbase users retain exposure to staking rewards (currently ~3-5% APY) while gaining flexibility to trade, transfer, or deploy the token in decentralized applications. This bridges the gap between securing Ethereum’s proof-of-stake network and participating in DeFi’s yield opportunities.

2. Technology & Architecture

cbETH is an ERC-20 token pegged 1:1 to ETH staked via Coinbase. Unlike decentralized alternatives like Lido’s stETH, cbETH relies on Coinbase’s centralized custody and validation services. When users stake ETH through Coinbase, they receive cbETH, which accrues rewards automatically. The token’s value reflects the staked ETH plus accumulated rewards, adjusted via an exchange rate tracked on-chain.

3. Key Differentiators

cbETH competes with decentralized liquid staking tokens (e.g., stETH) but targets users prioritizing convenience over decentralization. Its centralized model simplifies compliance and reduces technical barriers, making it accessible to retail investors. However, this contrasts with DeFi-native alternatives that emphasize trustlessness, as noted in analyses of Ethereum’s staking ecosystem.

Conclusion

cbETH fundamentally acts as a liquidity bridge for staked ETH, combining Coinbase’s custodial ease with DeFi compatibility. While its centralized nature positions it differently from protocols like Lido, it addresses a critical need for flexible staking solutions. How might its role evolve as Ethereum’s staking ecosystem balances decentralization and accessibility?