 | One big piece of crypto news yesterday was that Coinbase created a cbETH token which will provide a liquid option of staked ETH2.0 for holders. There's been a few questions and misconceptions about the token. Most of these are covered in the white paper Coinbase published, so I'll do my best to summarize what it says. However, if you have a financial interest in ETH, cbETH, and ETH2, you probably should read the paper yourself. Link to whitepaper- https://www.coinbase.com/cbeth/whitepaper Key Takeaways - Liquid staking was created to address some of the shortcomings of traditional staking. With liquid staking, locked staked assets are wrapped into transferable tokens that represent ownership of the underlying staked assets, and any rewards earned. The resulting tokens are fully transferable and can be unwrapped to claim the underlying staked assets.
- Coinbase is supporting liquid staking for its ETH stakers with Coinbase Wrapped Staked ETH (cbETH), where the staked asset is Ether, and the staking provider and token issuer is Coinbase.
- cbETH follows the cToken model (not aToken model, will cover later). It can be minted or burned according to a floating conversion rate. At a high level, this conversion rate tracks the underlying staked ETH to an account for staking and unstaking activity, rewards, penalties, and fees. Basically, the change in the underlying ETH to cbETH.
- The price of cbETH is NOT meant to track the price of ETH 1:1, or be pegged 1:1. cbETH represents staked ETH plus all of its accrued staking interest, starting from when cbETH's conversion rate and balance were initialized (June 16, 2022 19:34 UTC).
- Structured as a cToken, cbETH will have rights to underlying staked ETH and accrued rewards and penalties. Changes in these underlying amounts would have effects on the conversion rate between cbETH and ETH.
- At first mint (June 12th, 2022), there was a 1:1 ratio between the ETH on Coinbase and cbETH. This will change over time. Coinbase will continually assess how much eligible ETH is staked on the platform and will mint/burn a corresponding amount of cbETH. They will use an exchangeRate and an oracle.
- Coinbase did not simply create paper ETH to sell to customers. The mint/burn features ensures ETH is accounted for appropriately.
- cbETH has it's own market! It is subject to market factors. If people are trying to get out of their staked ETH position and overwhelming sell cbETH, the price will go down compared to staked ETH2, even when factoring the staking rewards. It is not a scam, and the cbETH market is not maintained by Coinbase.
cToken vs aToken - aToken: Pioneered by Aave, these tokens operate by constantly updating supply to map 1:1 with the underlying asset.
- Example: Alice supplies 10 ETH to lending protocol and receives 10 aETH. After some time passes, she earns 2 ETH of rewards. Her aETH position incrementally rebases to 12 aETH over that time. Rebasing does not require transactions; it is more akin to “updates.” She then removes her liquidity from the protocol, converting her 12 aETH back to 12 ETH
- cToken: Pioneered by Compound, cTokens represent ownership of underlying principal plus any rewards accrued on that principal, minus any penalties (e.g., slashing ). The conversion rate between the cToken and the underlying assets (principal + rewards - penalties) thus changes as a function of the rewards and penalties affecting the principal.
- Example: Bob supplies 10 ETH to a lending protocol and receives 10 cETH. After some time passes, he earns 2 ETH of rewards. His cETH position remains at 10 cETH (no change in supply held), but it’s now backed by 12 ETH (which changes the conversion rate of cETH relative to ETH). He then removes his liquidity from the protocol, converting his 10 cETH for 12 ETH.
User Examples https://preview.redd.it/2nvzo7rokwj91.png?1490&format=png&auto=webp&s=368c7ebb32d7d0d1a5caeda5b1ce78d0c7389249 I hope this helps you understand the launch of cbETH a little better. Read the whitepaper yourself for a great understanding.
[link] [comments] |
Comments