Coinbase launches cbBTC on Solana, can it fill the Bitcoin vacancy left by FTX's collapse?

The collapse of FTX has left a Bitcoin-sized hole in Solana DeFi. Can Coinbase's cbBTC fill it? - Coinbase has launched cbBTC to bring Bitcoin to the Solana blockchain. - Bitcoin helps enable trading and lending on centralized crypto exchanges, but this key functionality requires extra effort in DeFi. - Some hope Coinbase's move will spur more DeFi activity on Solana. The collapse of FTX nearly two years ago left a Bitcoin-sized hole in Solana-based decentralized finance that has yet to be truly filled - until now, perhaps. Bitcoin remains the benchmark asset for trading and lending on centralized crypto exchanges. Bringing this key financial functionality to DeFi on other blockchains requires more effort. Essentially, someone needs to issue a token on-chain that is backed by and pegged to Bitcoin. Exchange giant Coinbase is trying to fill that role with cbBTC on Solana. The token launched on Thursday, allowing traders to swap in and out by sending Bitcoin-backed tokens between the exchange and their Solana wallets. This easy in-and-out access has many Solana protocol contributors hoping cbBTC can become the gold standard for the entire ecosystem. A senior Solanaland official said people have "high hopes" for Coinbase's cbBTC to be a big success, especially with Bitcoin, the world's largest cryptocurrency, hitting new all-time highs after the election of former President Donald Trump. Since the mysterious disappearance of the previous standard holder soBTC, Solana DeFi has lacked such a direct Bitcoin substitute. It was widely believed that the wrapped Bitcoin token was controlled by FTX. It vanished in November 2022 with the collapse of the fraudulent exchange. The failure of soBTC left the entire DeFi ecosystem on Solana without a widely-accepted standard for trading Bitcoin on the chain. This put it at a disadvantage compared to Ethereum DeFi, which has long had its own solutions (including Coinbase's own new solution) that Solana protocols access via bridges. InfraRay, a contributor to the Solana-based decentralized exchange Raydium, said Coinbase natively issuing cbBTC on Solana "cuts the risk surface in half". "We can see a huge increase in on-chain BTC liquidity, which could drive increased usage across many different DeFi protocols," they said. "It's still early days, but hopefully the strong liquidity of cbBTC can get some of those flywheels spinning." That will only happen if Coinbase succeeds in making cbBTC the standard Bitcoin substitute on Solana. Efforts by other companies have failed. 21.co has less than $1.5 million worth of 21BTC circulating in Solana DeFi. Threshold's tBTC hasn't fared much better. In contrast, according to blockchain data, Coinbase has nearly $10 million worth of cbBTC ready to deploy into Solana DeFi. Another $500,000 in cbBTC is already circulating in trading pools on Meteora and Orca, and deposited into the Kamino trading protocol's reserves. "I think and hope it will be hugely successful. Most of the BTC DeFi stuff has no reason to be happening on Ethereum," said Kamino co-founder Marius Ciubotariu. Coinbase has never before participated in Solana DeFi. CbBTC is its first native token issued on the Solana blockchain. The exchange is more engaged in the Ethereum world, especially through its own Layer 2 network Base. "Unlocking the utility of BTC for on-chain economies is core to our decision to launch cbBTC. Expanding support to Solana and other potential chains gives our customers more choice, which aligns with our overall strategy of bringing billions of users onto the chain," a company spokesperson said. In September, Coinbase first launched cbBTC on Base and Ethereum, promising to support more blockchains later. But Bitcoin transfers to cbBTC on Base have a slight edge over Bitcoin transfers to Solana's cbBTC. Bitcoin transfers to Base from Coinbase are free; Bitcoin transfers to Solana from Coinbase cost 40 cents.