Bitcoin-Backed Liquidity Worth $5B Could Flow to Monad Through cbBTC Bridge
Through Chainlink's protocol, Coinbase's cbBTC token can now transfer from Base to Monad, bringing significant Bitcoin-backed liquidity to the layer-1 blockchain's decentralized finance ecosystem.
Through the implementation of Chainlink's Cross-Chain Interoperability Protocol, transfers of Coinbase's wrapped Bitcoin token, cbBTC, can now flow from Base to the Monad blockchain, potentially bringing over $5 billion in cbBTC value into the Monad ecosystem.
Monad's announcement on Monday revealed that the integration delivers cbBTC access to the Monad DeFi ecosystem, with multiple applications such as Curvance and Neverland already implementing cbBTC markets on the platform.
This integration delivers Bitcoin-backed liquidity to various decentralized finance (DeFi) applications on Monad, including lending, borrowing, and additional financial services. Monad operates as an EVM-compatible layer-1 blockchain engineered for high-throughput trading operations and diverse financial applications.
William Reilly, head of strategic initiatives at Chainlink Labs, stated that "As Bitcoin-backed assets grow into the tens of billions, the infrastructure moving them has to meet that scale." He further explained that CCIP was built with multiple layers of decentralized validation to reduce cross-chain risks and maintain consistent 1:1 backing across networks.
With the capability to process up to 10,000 transactions per second and achieve sub-second finality, Monad presents itself as foundational infrastructure designed specifically for transaction-intensive financial applications.
In September 2024, Coinbase introduced cbBTC as a wrapped Bitcoin token operating on Ethereum and Base, maintaining 1:1 backing with BTC held in custody. The token is engineered to automatically mint and redeem against Bitcoin deposits made on the exchange.
New products aim to make Bitcoin a yield-bearing asset
Bitcoin's proof-of-work design does not natively generate yield, unlike proof-of-stake networks such as Ethereum (ETH) and Solana (SOL), where users can earn rewards by staking tokens. This limitation has traditionally restricted onchain income opportunities for holders of the largest cryptocurrency, though emerging financial structures have begun bridging this gap.
Ryan Chow, co-founder of Solv Protocol, commented in May that demand for Bitcoin yield strategies is accelerating, with particular interest from companies seeking liquidity without selling Bitcoin. He highlighted proof-of-stake integrations and delta-neutral trading strategies as growing methods through which Bitcoin can generate returns while simultaneously supporting network security and liquidity.
During that same month, Coinbase unveiled the Coinbase Bitcoin Yield Fund aimed at delivering 4% to 8% annual net returns for institutional investors located outside the US. Approximately one month following this launch, Kraken rolled out a Bitcoin staking product utilizing an integration with Babylon Labs, providing users the ability to lock up their BTC and delegate it to secure proof-of-stake networks without requiring bridging or wrapping.
The expansion of wrapped Bitcoin across various networks has also maintained momentum. In November, WBTC achieved integration with the Hedera network through support from BitGo and LayerZero, bringing the largest tokenized version of Bitcoin into another smart contract ecosystem.
In the previous week, Telegram's integrated TON Wallet introduced vaults that enable users to earn yield on Bitcoin directly within the messaging application through underlying decentralized finance infrastructure.