Coinbase has launched cbBTC, a wrapped version of Bitcoin designed to integrate seamlessly with decentralized finance (DeFi) applications on the Ethereum and Base networks.

This new token operates under the ERC-20 standard, allowing users to convert cbBTC back to Bitcoin at a 1:1 ratio, ensuring that each token is backed by Bitcoin held in reserve.

However, the launch has sparked criticism, particularly from Justin Sun, co-founder of Tron, who labeled cbBTC a 'dark day for Bitcoin' and raised concerns about its centralization.

Many Bitcoin enthusiasts echo these concerns, arguing that cbBTC's centralized nature could expose it to government scrutiny and undermine the principles of decentralization.

In the DeFi community, some users, such as Aave's Midapple, have expressed skepticism about cbBTC's viability, questioning its minting mechanisms and liquidity before it even goes live.

Despite these criticisms, Coinbase CEO Brian Armstrong has defended the initiative, asserting that centralized custody is necessary to attract institutional investment in Bitcoin.

Armstrong emphasized that all minting and burning operations for cbBTC will be settled on-chain, which he believes will enhance security and transparency.

Concerns about transparency have also been raised regarding Justin Sun's involvement with WBTC, prompting MakerDAO to express unease over the risks associated with his management.

Despite the controversies, some analysts speculate that cbBTC could surpass WBTC in supply within six months due to its strategic advantages and zero fees for minting and redeeming.

Coinbase's stock has experienced significant fluctuations, reflecting a 98.3% increase over the past year, yet it remains down 12.9% year-to-date, highlighting the challenges the company faces.

As Coinbase seeks to innovate and maintain its stock performance, products like cbBTC are part of a broader strategy to tap into the growing demand for stablecoin borrowing and DeFi solutions.