A Second Path to Bitcoin-Backed Loans
Chainflip's lending product accepts native BTC as collateral through protocol-level custody secured by validators. But not every Bitcoin holder keeps their BTC on the native chain. Some hold cbBTC, Coinbase's wrapped Bitcoin token on Ethereum.
For these users, Chainflip now offers a direct route. Deposit cbBTC as collateral and borrow against it at 3.13% APR with up to 80% LTV. No need to unwrap to native BTC first.
This creates two distinct lending paths with different trust assumptions. Understanding when to use each matters.
What Makes cbBTC Different
cbBTC is Coinbase's ERC-20 representation of Bitcoin. Each cbBTC token is backed 1:1 by BTC held in Coinbase's custody. The backing is verified through regular reserve attestations and subject to U.S. regulatory oversight.
The trust model here is explicit. You're trusting Coinbase, a publicly traded company under SEC supervision, to hold and manage the underlying Bitcoin. This is fundamentally different from Chainflip's native BTC lending, where custody is decentralized across the validator network.
Neither approach is universally better. They serve different user preferences and risk tolerances.
cbBTC's Trust Architecture
Coinbase publishes regular transparency reports verifying cbBTC's backing. The company operates under U.S. banking regulations and maintains insurance on custodied assets. For users who already trust Coinbase with their Bitcoin holdings, cbBTC represents that same trust relationship in ERC-20 form.
The regulatory compliance cuts both ways. It provides institutional-grade accountability but also means cbBTC is subject to the same constraints as any Coinbase product. Users wanting to avoid any single point of institutional control should consider native BTC lending instead.
For cbBTC specifically, the transparency reports and regulatory framework create a known quantity. You can verify the backing, understand the custody arrangement, and assess the counterparty risk accordingly.
When cbBTC Lending Makes Sense
You Already Hold cbBTC
If your Bitcoin is already in cbBTC form, using it directly as collateral saves you the unwrapping process. Converting cbBTC back to native BTC requires a redemption through Coinbase, which involves fees and timing delays.
Depositing cbBTC directly to Chainflip's lending contract is a single ERC-20 transaction. For users who acquired cbBTC through Coinbase's ecosystem or DeFi protocols, this is the path of least friction.
You Want Institutional Backing
Some users prefer the accountability structure of a regulated entity. Coinbase's custody comes with insurance, compliance frameworks, and a corporate entity you can point to if something goes wrong.
This doesn't mean it's safer in absolute terms. It means the risk profile is different and, for some users, more familiar. Institutional investors or those with compliance requirements may find cbBTC's structure more compatible with their mandates.
You're Operating Within the ERC-20 Ecosystem
If your DeFi activity is centered on Ethereum, cbBTC keeps your collateral within that ecosystem. The borrowed funds can be deployed to other ERC-20 protocols without additional bridging steps.
Users who want to borrow and immediately deploy to Ethereum-based strategies can do so in fewer transactions. The entire workflow stays on a single chain until you're ready to move.
The Native BTC Alternative
Chainflip's primary lending product uses native Bitcoin with a decentralized custody model. The BTC stays on the Bitcoin network, secured by Chainflip's validator set through threshold signature schemes.
There's no single custodian. The trust is distributed across the protocol's security model rather than concentrated in one entity. For users who hold native BTC and want to maintain that decentralized custody while borrowing, the Lending 2.0 upgrade even allows earning yield on deposited collateral through Boost.
The choice between cbBTC and native BTC lending comes down to where your Bitcoin lives and how you think about custody risk.
Practical Considerations
Collateral Value
cbBTC should trade at parity with BTC, and Chainflip's oracle pricing reflects this. However, cbBTC can occasionally trade at slight discounts during periods of high redemption demand. This doesn't affect your borrowing terms directly, but it's worth monitoring if you're planning to exit the position.
Gas Costs
cbBTC deposits and loan management happen through ERC-20 transactions. Ethereum gas costs apply. For smaller positions, these costs may be proportionally significant. Native BTC lending uses Bitcoin network fees, which are typically lower.
Liquidation Process
cbBTC collateral liquidations follow the same LTV thresholds as native BTC. If your position falls below the maintenance margin, the cbBTC is liquidated. The mechanics are identical; only the underlying asset differs.
Choosing Your Path
If you hold native BTC on the Bitcoin network and want trustless custody: use native BTC lending.
If you hold cbBTC and want to avoid unwrap fees while borrowing: use cbBTC lending.
If you prefer institutional custody with regulatory oversight: cbBTC's model may fit your risk preferences.
Both paths lead to the same outcome: a Bitcoin-backed loan at 3.13% APR with up to 80% LTV. The difference is entirely in how your collateral is custodied and what trust assumptions you're making.
Getting Started
cbBTC lending is available now through Chainflip's LP suite. Connect an EVM wallet, deposit cbBTC, and borrow against it. The interface handles both cbBTC and native BTC deposits through the same workflow.
For users new to Chainflip lending, the complete guide covers the broader context of how the protocol works.
Resources
Swap Now - Start swapping native assets
Lend BTC - Borrow against native Bitcoin
Blog - Product updates and announcements
Chainflip Scan - Track swaps and network activity
Website - Explore Chainflip
Other Chainflip Products:
Boost - Earn fees by providing single-sided liquidity with no IL risk
Stablecoin Strategies - Deposit stablecoins and earn optimized yields
Provide Liquidity - Supply assets to Chainflip's liquidity pools
Stake FLIP - Delegate FLIP and earn staking rewards
Find us:
FAQ
What is cbBTC?
cbBTC is Coinbase's wrapped Bitcoin token on Ethereum. Each cbBTC is backed 1:1 by native BTC held in Coinbase custody, with regular reserve attestations and U.S. regulatory oversight.
Can I use cbBTC as collateral on Chainflip?
Yes. Chainflip accepts cbBTC as collateral for lending. You can borrow at 3.13% APR with up to 80% LTV, the same terms as native BTC lending.
What's the difference between cbBTC and native BTC lending on Chainflip?
Native BTC lending uses decentralized custody secured by Chainflip validators. cbBTC lending relies on Coinbase's institutional custody. The loan terms are identical; the custody model differs.
Should I unwrap cbBTC to native BTC before borrowing?
Not necessarily. If you already hold cbBTC and want to avoid Coinbase's redemption process and fees, you can deposit cbBTC directly. If you prefer trustless custody, consider converting to native BTC first.
Is cbBTC DeFi lending safe?
cbBTC lending involves Coinbase custody risk and smart contract risk. Coinbase provides insurance and regulatory compliance, but users should assess whether this custody model fits their risk tolerance compared to native BTC's decentralized alternative.
