Coinbase has released a new token focusing on the long-awaited update The Merge. According to the company, the new token is called Coinbase Wrapped Staked Ether (cbETH) and will allow its users to stake Ether (ETH) on the platform.
Coinbase will allow customers to stake Ether with cbETH
The new token is a net representation of ETH staking on the exchange. It works in the same way as Staked ETH (stETH), a synthetic token created by Lido Finance. Because of the token and its staking, Lido now accounts for over 31% of all ETH staking.
With cbETH, Coinbase also wants to take a slice of this market and explore the possibilities of The Merge. cbETH can be used across the entire decentralized finance (DeFi) ecosystem.
All ETH wagered is locked on Coinbase due to The Merge rules. The lock will remain as long as ETH does not receive the Shanghai update, scheduled for after The Merge. When this occurs, Coinbase and the other protocols will unlock withdrawals.
In the meantime, the new cbETH token will give users the option to trade their staked ETH. In practice, cbETH will have the customers’ ETH as a base. Furthermore, the new cbETH token will also be traded on the Coinbase platform.
Coinbase share in ETH
Coinbase is one of the biggest holders of ETH, according to Kenneth Worthington, an analyst at JP Morgan bank. As a result, the company will be one of the biggest beneficiaries of the update scheduled for September 15th.
According to Worthington’s estimates, the largest exchange in the United States owns around a 15% stake in ETH’s assets. The amount is just under 50% of the total held by Lido, which is the largest staking protocol on the network.
Ran Neuner, a cryptocurrency trader at CNBC, revealed that Coinbase will be one of the biggest validators of ETH with the change to the consensus algorithm. The end of Proof of Work (PoW) and the arrival of Proof of Stake (PoS) replaces miners with validators.
However, Neuner also predicts that this will be a big problem for ETH. After all, PoS mining tends to concentrate more power in the hands of validators, and a validator the size of Coinbase would have disproportionate power compared to other users.
Another problem is the US Treasury’s sanctioning of Tornado Cash, which means that any centralized company that verifies Tornado Cash transactions could also face US wrath. Coinbase can refuse to validate transactions coming from the mixer, which would mean a huge risk of censorship.
Coinbase prepares for The Merge update
Coinbase has set out its preparations for the arrival of The Merge. During the upgrade, the company will pause the withdrawal of ETH and ERC-20 tokens from Ethereum. The objective, according to the company, is to protect users against possible problems when updating.
While Coinbase expects The Merge to go smoothly, the company is taking a cautious stance. Furthermore, Coinbase reveals that the ETH code will remain the same.
So if any user sees codes like “ETH2” impersonating Ether, don’t put any data or your private key.