America's biggest crypto exchange Coinbase introduced two new "wrapped" tokens this week, allowing traders to use XRP and Dogecoin on DeFi protocols.
By introducing cbDOGE and cbXRP, Coinbase is hoping to address surging demand for cross-chain functionality in the complex DeFi world, the company and industry observers told Decrypt.
The exchange is making the new offerings available on its own Ethereum layer-2 Base network.
"Bringing cbDOGE and cbXRP into the ecosystem is a smart way to get more users involved and unlock new liquidity," the CEO of DeFi app Balancer Labs Marcus Hardt told Decrypt.
A Coinbase spokesperson added: "The launch of cbDOGE and cbXRP on Base allows customers to use the assets they already hold in new ways and makes trading more accessible to everyone."
DeFi, or decentralized finance, is the catchall term for apps used in the crypto space that aim to automate acts like borrowing or lending, eliminating middlemen and centralized authorities.
The launch comes as DeFi makes a bigger push into the mainstream. Previously a convoluted and unregulated world, now even President Trump has backed a decentralized finance project.
Such apps often run on Ethereum, presenting problems for traders who want to use their Bitcoin or other digital tokens in DeFi.
Wrapped tokens aim to solve this, with Wrapped Bitcoin (WBTC) on Ethereum being the most popular example. But more and more wrapped tokens are popping up as the blockchain world expands.
XRP and Dogecoin are two leading cryptocurrencies—the fifth- and eighth-largest cryptocurrencies, with market caps of $128.5 billion and $27.9 billion, respectively.
Due to their size, both coins are popular, and there is demand to use them as collateral across the fast-moving and complex world of DeFi.
"Coinbase just showed it can efficiently put a meme coin (DOGE) and cross-border payments coin (XRP) into the DeFi ecosystem without a third-party bridge," Sam Mudie, CEO and co-founder of tokenized real-world assets firm Savea, told Decrypt—adding that he expects more large-cap coins to follow.
Because Coinbase pulls the strings of these wrapped tokens, however, some DeFi proponents have raised concerns about the move.
"Coinbase controls the issuance, minting, burning, and smart contracts, without involvement from independent entities or the broader community," Flare Head of Research Max Luck told Decrypt.
Edited by James Rubin
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