Coinbase launched a liquid staking product, cbETH, on August 24. Similar to Lido’s liquid staked ether, stETH, cbETH creates a tokenized deposit that offers redemption rights to the ether staked on its platform.
Liquid staking will offer more liquidity to assets staked in Ethereum’s Proof-of-Stake network by allowing users to transfer, trade, or use the token in decentralized finance (DeFi) without disturbing the underlying assets, ARK Analysts Frank Downing and Yassine Elmandjra wrote in a recent newsletter.
“As the first major exchange to offer a liquid staking product, Coinbase is attempting to gain share in a market characterized by highly profitable, less volatile, recurring revenue that could be an important diversifier to its base trading business,” Downing and Elmandjra wrote. “To date, investors have wrapped more than 650,000 ether of the estimated 2 million staked ether on Coinbase. In other words, cbETH’s outstanding supply is worth ~$1 billion today.”
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Coinbase’s liquid staking product makes several distinctive design decisions compared to Lido. While Lido’s stETH is based on the aToken model, which updates holder balances daily to reflect interest accrued, cbETH uses the “cToken” model, which reports holder balances based on the original deposit while the redemption value of their tokens increases over time, according to Downing and Elmandjra.
Coinbase is a top-three holding in the ARK Fintech Innovation ETF (ARKF B-), weighted at 7.73% as of September 9, according to the fund’s website.
ARKF is an actively managed ETF that invests in companies deemed to be engaged in the theme of fintech innovation, defined as the introduction of a technologically enabled new product or service that potentially changes the way the financial sector works. This includes transaction innovations, blockchain technology, risk transformation, frictionless funding platforms, customer-facing platforms, and new intermediaries, according to the fund’s website.
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