Will it overtake WBTC in DeFi?

Coinbase's Wrapped Bitcoin (cbBTC) has soared to a $1 billion market cap in just 57 days since its launch.

This growth trajectory represents almost 10% of the total Bitcoin (WBTC) market cap, currently sitting at $12.88 billion, according to CoinMarketCap.

Coinbase's cbBTC has a $1 billion market cap

Data on Dune shows that the cbBTC Bitcoin cap has a market capitalization of $1.04 billion as of this writing. Most of this value is held by Ethereum at $855.43 million, followed by Base Layer-2 blockchain and finally Solana.

Specifically, of the total supply of CBBTC 14,678.95, more than 12,000 are available on Ethereum. Meanwhile, Beth and Solana hold 2,388 and 262 tokens respectively.

As a Bitcoin wrapper, cbBTC allows BTC to be represented on other blockchain networks. Its rise reflects an important trend: Ethereum-based assets experience faster net supply changes than other leading Bitcoin liquid staking tokens (LSTs). These include eBTC, solvBTC, BBN and pumpBTC, among others.

“The network effect is unbeatable. You can easily get discounts/discounts/trades for MMS/funds in their various lines of business with liquidity and adoption,” said Tom Wan, researcher at Chain Data.

This rapid growth, just over two months after launch, indicates significant demand for Coinbase's packaged bitcoin product. The momentum reflects the growing preference for cross-chain compatibility in decentralized finance (DeFi).

It comes as users and protocols seek more accessible and flexible Bitcoin-pegged assets. Coinbase first launched cbBTC on Base in mid-August.

The product is unannounced as a futures market rival for Bitcoin (WBTC). The Bitcoin boom has seen more support and interest in decentralized finance (DeFi).

The idea of ​​Bitcoin wrapper is to expand users' access to BTC. For example, with CBBTC in Solana, holders can take advantage of the network's reduced fees and high transaction speeds.

These parameters are particularly useful for high-frequency DeFi transactions. Aave, a leading DeFi protocol, is already targeting cbBTC for the V3 protocol.

At its inception, CBBTC attracted attention from venture capitalists such as Dan Elitzer. In August, the VC predicted that cbBTC would be a “great strategy” for Coinbase. He said it could exceed the supply of WBTC within six months.

“Honestly, I'm surprised they weren't sent years ago,” Elitzer said.

Elitzer also emphasized that the introduction of CbBTC could encourage DeFi users to look for more decentralized Bitcoin-wrapped alternatives, considering the “mishandling” of WBTC by Justin Sun-Affiliated Management.

The controversy surrounding Coinbase's PoR for cbBTC

Indeed, the arrival of Coinbase's cbBTC came against the backdrop of the WBTC controversy involving Justin Sun. WBTC, once wrapped around Ethereum and the go-to solution for Bitcoin, is facing growing skepticism due to concerns over governance and transparency under the influence of Justin Sun.

cbBTC's rapid growth has not been without controversy. Coinbase's transparency and Proof of Reserve (PoR) approach invites scrutiny. Critics in particular remain a bone of contention.

Prominent user Duo Nine on X has warned that Coinbase's reliance on user trust without providing concrete evidence of BTC reserves could lead to a collapse similar to the FTX collapse. This result, he explained, was reinforced against Coinbase by issuing more cbBTC than it could recover.

“They don't provide any proof of backup for the BTC they claim or any proof of support for the BTC they claim to have. If they print too much paper BTC, they go the FTX way,” Duo Nine said.

Justin Sun echoed the sentiment, raising questions about Coinbase's decision to abandon regular reserve audits for cbBTC. A Tron executive argued that this lack of transparency poses significant risks. In light of such fears, Coinbase's security practices have come into question, prompting BlackRock to revise its security agreement with the exchange.

This concern has led users to alternatives such as cbBTC, which some see as a “safer” Bitcoin alternative backed by Coinbase. As cbBTC attracts more support, it poses a threat to WBTC's long-term dominance. Whether cbBTC will eventually overtake WBTC remains to be seen, but its rapid growth indicates a significant shift in user preferences in DeFi.