Before the Ethereum merge, Coinbase releases the Liquid Staking Token
Ahead to the Ethereum blockchain's Merge in September, Coinbase (COIN) will launch its own liquid staking token dubbed Coinbase Wrapped Staked ETH (cbETH), the cryptocurrency exchange announced in a tweet on Wednesday.
According to the tweet, the token will be Ethereum-based and following the Merge, it can be used to stake ether (ETH), the network's native currency, using Coinbase. In addition to receiving the usual incentives for staking or locking coins in a network, liquid staking enables investors to increase their yield.
According to a whitepaper published by Coinbase, liquid staking involves the "wrapping" of locked staked assets into transferrable tokens that indicate ownership of the underlying staked assets and any rewards received. The generated tokens can be unwrapped to claim the underlying staked assets and are completely transferrable.
Other services that are anticipated to offer comparable services also exist in addition to this liquid token. On July 19, Lido Finance said that it would shortly start selling staked Ethereum on Layer2 networks, which operate more quickly and affordably than the Ethereum mainnet.
The Merge, or Ethereum's transition from a proof-of-work to a proof-of-stake consensus process, is expected to be completed sometime between September 10 and 20. The switch will significantly reduce the energy used by the network.
After the Merge, the token will serve a number of purposes, and Coinbase wants to encourage widespread usage of it. The whitepaper states that "our hope is that cbETH will achieve robust adoption for trade, transfer, and use in DeFi [decentralized finance] applications." The whitepaper also stated that through developing high-utility wrapped tokens and open-sourcing smart contracts, Coinbase hopes to contribute to the larger crypto ecosystem using cbETH.
Separately, the whitepaper states that cbETH investors will be able to sell their staked ETH for cash or transfer their staked ETH to another non-custodial wallet.
If all liquidity requirements are satisfied, trading of the liquid token will begin on August 25, according to Coinbase's Twitter thread. The post said that trading of the cbETH-USD trading pair will start once there is a sufficient supply of this asset.
By fLEXI tEAM