Overview
Chaos Labs supports listing cbBTC on Seamless.
cbBTC
cbBTC is a token backed 1:1 by native BTC held by Coinbase. Minting is initiated when a user withdraws BTC held on Coinbase to Ethereum or Base. cbBTC is burned when deposited to a Coinbase account, with a corresponding amount of BTC released from the reserve and assigned to it. Importantly, no fees are associated with minting and burning, reducing friction in this process and likely improving peg stability.
Minting and burning use the same set of smart contracts as used in cbETH; “no material contract code” has been modified in deploying cbBTC. cbBTC utilizes both hot and cold wallets, and redemption rights remain with cbBTC holders; additional details are dictated in the Coinbase User Agreement.
We find that cbBTC presents similar risks in these regards as cbETH and USDC, both assets which have been listed on Seamless previously.
Pricing cbBTC
Given the structure of cbBTC, particularly its minting and burning mechanism, we anticipate that cbBTC’s price will closely track that of BTC. However, shortly after launch it is possible that the asset will experience volatility relative to BTC, which may cause unnecessary liquidations and potential cascades. Given these factors, we recommend initially pricing the asset using the BTC/USD market oracle.
LTV, Liquidation Threshold, and Liquidation Bonus
While we are not able to analyze the asset’s historical price volatility, given the pricing setup described above, we recommend aligning cbBTC’s collateral parameters with WBTC’s on other protocols: 73% LTV and 78% LT; we recommend setting the Liquidation Bonus to 10%.
Supply and Borrow Caps
We utilize our usual supply cap methodology, setting it at 2x the liquidity available beneath the LB price impact. Additionally, we recommend setting the borrow cap at 10% of the supply cap, as we have observed little historical borrow demand for BTC-linked assets.
We also note that these measurements are taken shortly after launch, and we anticipate liquidity will improve; we are prepared to facilitate cap increases after the asset is listed.
IR Curve
We recommend setting the IR with a UOptimal at 45%, noting that we have observed little historical borrow demand for similar assets.
Recommendations
| Parameter | Value (Base) |
|---|---|
| Isolation Mode | No |
| Borrowable | Yes |
| Collateral Enabled | Yes |
| Supply Cap | 200 |
| Borrow Cap | 20 |
| Debt Ceiling | - |
| LTV | 73% |
| LT | 78% |
| Liquidation Bonus | 10% |
| Liquidation Protocl Fee | 10% |
| Variable Base | 0% |
| Variable Slope1 | 4% |
| Variable Slope2 | 300% |
| Uoptimal | 45% |
| Reserve Factor | 20% |