Justin Sun, co-founder of Tron, a smart contract platform and one of many blockchains competing with ethereum, has a problem with the recently launched cbBTC, a bitcoin token wrapped by Coinbase, a major U.S.-compliant cryptocurrency exchange.
Tron's Justin Sun points out problems with cbBTC
In a post on x, Sun x.com/justinsuntron/status/1834242086079750335″ target=”_blank” rel=”noopener nofollow”>selected There are several obvious concerns, especially those surrounding its centralization, the risks of government confiscation, and its opaque nature.
Technically, cbBTC will serve as a wrapped bitcoin and as another token to compete with wBTC, which aims to allow btc holders to participate in DeFi. However, while positive, the perceived lack of transparency and centralization could explain the intense debate across the crypto community.
Sun argues that cbBTC does not have a verification system used by major exchanges like Binance and OKX, for example, to assure holders that their assets are not mixed with the exchange’s. Additionally, the co-founder said that cbBTC’s code has not undergone thorough audits, meaning it could be at risk of being hacked and having its funds stolen.
However, one of the main concerns is that Coinbase, the US government-run issuer, can order cbBTC to be frozen at any time. Sun said a simple subpoena is needed for the government to seize all the coins.
In light of these risks, Sun acknowledges innovation and believes cbBTC marks a “dark day for bitcoin.” The co-founder also compared Wrapped bitcoin to a “central bank bitcoin,” further emphasizing the dangers of centralization and the real risk of the government freezing a currency that is, in its pure form, censorship-resistant.
Coinbase wants to boost DeFi
Another chimed in: x.com/martypartymusic/status/1834251709188854184″ target=”_blank” rel=”noopener nofollow”>taking note that the use of multisig wallets, which are inherently centralized, to protect cbBTC effectively means that there is a level of centralization. For this reason, the commentator, responding to Sun’s concerns, thinks that cbBTC and similar tokens pose a risk to the broader crypto ecosystem.
Coinbase has yet to respond to these criticisms. However, in its announcement, the exchange platform btc-cbbtc-is-now-live” target=”_blank” rel=”noopener nofollow”>saying cbBTC will be issued on ethereum, complying with the ERC-20 standard. Wrapped bitcoin will also be available on Base, an ethereum layer 2. Through this token, it will aim to boost DeFi adoption.
Each cbBTC in circulation will be backed 1:1 by btc held in custody. However, the token will only be accessible to users in Brazil, Australia, and the United States, excluding New York, among others.
Featured image from Flickr (Oberazzi), chart from TradingView
