Since its launch on the 12th of this month, cbBTC has been quickly accepted by the market. In just one week, it has become the third largest wrapped Bitcoin (wrapped BTC), with a circulation of 2,944 pieces and a total market value of US$180 million, surpassing HBTC and renBTC, tokens issued four years ago.
cbBTC is fully secured by Bitcoins held by Coinbase. It initially supported Base and Ethereum. At the recently concluded Solana Breakpoint event, Coinbase announced that cbBTC will be expanded to Solana (the specific time is yet to be officially announced). Although cbBTC is not decentralized and Coinbase has not yet disclosed the address of its Bitcoin custody, it is still widely accepted by the market due to Coinbase's good reputation.
However, Tron founder Justin Sun tweeted last night (13th) that “cbBTC is not BTC”, sparking widespread discussion in the community.
Netizens warn cbBTC users of security concerns
Sun Yuchen's comment was a repost of a netizen's interpretation of the Coinbase cbBTC terms. The netizen issued a warning and quoted the following cbBTC user terms:
Subject to the terms of this Agreement, cbBTC Holders have an ownership interest in the Bitcoins in Coinbase’s custody. In the event of a shortage of Bitcoins in Coinbase’s custody, Coinbase’s liability to cbBTC Holders will be limited to such Holder’s pro rata share of the shortage.
The netizen interpreted that if Coinbase lost the Bitcoin that supports cbBTC for some reason, the holders could only distribute the remaining Bitcoins in proportion and could not receive full compensation, which caused his concern about the safety of cbBTC users.
However, Cointelegraph senior writer @IntrinsicDeFi explained that this is not what the clause actually means. The correct interpretation is:
Coinbase will only compensate the holder for lost bitcoins, and only for the corresponding portion of cbBTC, but will not be responsible for other losses. For example, if a user uses cbBTC as collateral for a loan, if the loan is liquidated due to a vulnerability, Coinbase will not compensate for the liquidation loss.
Coinbase’s General Counsel subsequently confirmed @IntrinsicDeFi’s interpretation. He further explained:
This is a basic limitation of liability clause: Coinbase’s liability is limited to lost Bitcoins and will not be responsible for other additional losses. In addition, the terms also clearly state the custodial relationship between Coinbase and the customer and refer to the relevant clause 9.1.5.
BlackRock asks Coinbase to speed up custody BTC withdrawal process
On the other hand, Coinbase has recently caused community concerns about its sale of "paper BTC" (Paper BTC refers to synthetic financial products without actual Bitcoin backing) to ETF issuers. In response, according to a tweet from Bitcoin Magazine, BlackRock, one of the issuers of the US Bitcoin spot ETF, has amended its Bitcoin spot ETF custody agreement with Coinbase, requiring a shorter withdrawal time for Bitcoin. According to the agreement, Coinbase must withdraw Bitcoin from the custody account to a public address within 12 hours of receiving the instruction.
This change shows that BlackRock attaches great importance to Bitcoin liquidity and transparency. Quick withdrawal to a public address not only improves transparency and security, but also reduces custody risks. Regarding this matter, Justin Sun also took the opportunity to comment, saying: "Even BlackRock is not stupid; they said: we want actual Bitcoin."
At present, Justin Sun may enter the largest packaged Bitcoin WBTC, which continues to cause a crisis of trust. SKY (formerly MakerDAO) will remove WBTC from its ecosystem from October 3.
