Hold onto your hats, crypto enthusiasts, because there's a whirlwind brewing around Coinbase's new cbBTC, a wrapped Bitcoin product. Let's break it down in plain English, shall we?
So, recently, folks have been buzzing about Coinbase's terms of service for cbBTC. The main worry? Whether the exchange would fully reimburse users if their Bitcoin got zapped by hackers or other unforeseen mishaps. Turns out, the answer's a bit of a mixed bag.
An eagle-eyed user on X (formerly known as Twitter) flagged a clause in the cbBTC user agreement, suggesting that Coinbase might only give back a “proportional share” of whatever Bitcoin is left in the pot. This got people wondering if they'd be left holding the bag if something went wrong.
Enter journalist Alex O'Donnell, who chimed in with some context. He explained that while Coinbase would indeed compensate for lost Bitcoin on a per-BTC basis, they wouldn't cover any extra losses from trades or leveraged positions. So, if you were using cbBTC as collateral for a loan and got liquidated because some Bitcoin vanished, you'd get the lost Bitcoin back but not a penny more for any additional fees or losses.
Coinbase's Chief Legal Officer, Paul Grewal, stepped up to clear the air. He confirmed that Coinbase's liability stops at the lost Bitcoin itself and doesn't stretch to cover any other trading mishaps. “It's a pretty basic limitation on liability: we aren’t liable for more than the BTC we lose,” he said.
And just in case there were any lingering doubts, Coinbase CEO Brian Armstrong also reiterated that cbBTC is backed by the exchange itself, aiming to put to rest any transparency concerns.
Coinbase launched cbBTC on September 12, right in the middle of some drama surrounding BitGo’s Wrapped Bitcoin (WBTC). Despite cbBTC quickly becoming the third-largest wrapped Bitcoin product, with a recent report showing it has 1,670 tokens in circulation compared to WBTC's 153,000, the competition remains fierce.
BitGo recently stirred the pot by announcing a plan to split the custody of WBTC across Hong Kong, Singapore, and the U.S. This raised eyebrows, especially given Tron founder Justin Sun's involvement. BitGo's CEO had to step in to assure everyone that Sun wouldn't have any control over the funds.
So there you have it. The world of wrapped Bitcoin is anything but dull, and with cbBTC now in the mix, it's shaping up to be a wild ride. Keep your eyes peeled and your crypto close!
