Introduction of Wrapped Tokens
On June 25, Coinbase announced the introduction of wrapped tokens for Cardano (cbADA) and Litecoin (cbLTC) on its Base layer-2 network. Each of these synthetic tokens is designed to be fully collateralized, with a 1:1 backing by the actual assets held in custody by Coinbase. To ensure transparency, Coinbase has made available proof-of-reserves pages that display the on-chain addresses safeguarding the collateral. As of now, the Base network has issued approximately 11,364 LTC and over 2.9 million ADA, as shown on these transparency pages.
Previous Releases and Growth
This launch comes on the heels of the earlier release of wrapped tokens for Dogecoin (cbDOGE) and XRP (cbXRP) in early June, finalizing the set of four anticipated assets that Coinbase previewed in a post on May 13. Additionally, Coinbase already offers a synthetic Bitcoin token (cbBTC) as well as a liquid staking token for Ethereum (cbETH). Data from Dune Analytics indicates that since their deployment, these synthetic tokens have experienced consistent growth in both circulating supply and transfer volume. Notably, cbBTC commands 24% of the synthetic Bitcoin market, while cbETH makes up 7% of all Ethereum staked as of June 23.
Layer 2 Analytics and Security Measures
Moreover, Layer 2 analytics from L2Beat highlight that Base ranks as the second-largest layer-2 solution for Ethereum, securing in excess of $12 billion within its infrastructure. Coinbase assures that deposits of ADA and LTC are stored in separate cold wallets that adhere to rigorous custody controls, similar to those applied to cbBTC and cbETH reserves. The minting process for these cb-tokens only occurs after verifying incoming on-chain deposits, and they are burned when users opt for redemption back to native assets.
Future Expectations and Fee Structure
In a bid to enhance liquidity, Coinbase is expected to implement incentives for decentralized exchanges on Base, mirroring the model used for cbETH, though no specific launch date has been announced. The company has committed to releasing quarterly attestations that will cover all synthetic assets released under the Coinbase Wrapped branding. During the initial launch phase, Coinbase will not impose conversion fees on these new tokens, which align with the established smart contract framework that has previously been audited for cbETH.
Conclusion
With the successful introduction of cbADA and cbLTC, Coinbase now provides users on Base with ERC-20 entry points to six of the top ten largest non-stablecoin cryptocurrencies by market cap. The exchange will also continue to handle the management of collateral balances and redemption processes in real-time through its custody unit.
