Deep Dive: Coinbase
- Coinbase is one of the seminal financial services companies of this generation.
- Here's a deep dive into Coinbase's products, business, and company.
Coinbase is a leading cryptocurrency exchange that offers customers a platform to buy, sell and manage their cryptocurrency assets. It provides crypto based products such as the Coinbase Wallet, the Asset Hub and Coinbase Pro. The company provides varying levels of support for 50 cryptocurrencies in terms of buying, selling, depositing and withdrawing, while cryptocurrencies unavailable for trading exist on the platform for educational purposes.
In December 2020, Coinbase confidentially filed with the SEC to go public. It intends to go public through a direct listing and has chosen Nasdaq as its listing venue.
The startup was launched in 2012 by Brian Armstrong and Fred Ehrsam. Coinbase is currently available in more than a 100 countries and has had more than $455 billion in total volume traded in addition to around $90 billion of assets on its platform.
The company has headquarters in San Francisco, California and has offices in Dublin, Tokyo, Portland, London, New York and has more than 1200 employees.
The Coinbase App is a product for consumers to buy and sell cryptocurrencies. It is a regulated on-ramp to crypto using US dollars or other fiat currencies. Coinbase.com and the mobile apps are available in more than 100 countries.
The Coinbase Wallet, which is separate from the Coinbase app, does not require registration with a Coinbase account. The Coinbase Wallet lets users custody their cryptocurrencies and explore decentralized exchanges, jobs and digital collectibles with a dapp browser. Coinbase Wallet allows users to store their crypto holdings directly on their devices and supports crypto payments that can be sent or received through a Coinbase Wallet username.
The Coinbase Card is a Visa debit card powered by a customer’s Coinbase account balance which allows customers to pay online and in physical stores using cryptocurrency. Upon swiping, Coinbase automatically converts crypto to fiat currency to complete a purchase. The card is accepted worldwide and allows users to make payments through contactless, Chip and PIN and ATM cash withdrawals. Spending summaries and transaction receipts can be tracked through the Coinbase app.
USD Coin USDC - Stablecoin by Coinbase
USD Coin is a stablecoin developed by the Centre Consortium, a collaboration between Coinbase and Circle Internet Financial. It is a stablecoin fully backed by the U.S. dollar. For customers with a U.S dollar bank account, 1 USD Coin can always be redeemed for $1. Coinbase allows eligible customers to earn rewards for every USD Coin they hold.
Coinbase Earn allows a few select customers to earn cryptocurrencies by learning about crypto through educational video courses. Customers are quizzed after each video and receive cryptocurrencies in their Coinbase wallet after completing a quiz.
Coinbase Pro is a trading platform for individual traders to buy, sell and trade digital assets across trading pairs. Coinbase Pro customers can track the market, view trading history, monitor open orders, and manage multiple portfolios. Coinbase Pro offers a Websocket feed that allows traders to gain access to market data and it also provides a trading API which lets users develop programmatic trading bots. Digital assets on Coinbase Pro are fully insured and all USD balances are covered by FDIC insurance, up to a maximum of $250,000 per customer.
Coinbase Prime is a crypto brokerage platform for institutional investors. It offers multiple execution options and liquidity through its exchange and OTC desk. It is linked with Coinbase Custody to offer clients storage access for their assets. Similar to Coinbase Pro, it offers a Websocket feed for investors to tap into market data and a trading API for developing trading bots. It supports OTC trading through the Coinbase OTC, an agency-only trading desk that offers smart order routing, advanced algorithms, and post-trade transaction analysis. Prime also provides support through its institutional coverage team that helps clients during the onboarding process.
Coinbase Asset Hub
The Coinbase Asset Hub allows asset issuers to list and promote their digital assets across Coinbase products and trading interfaces. It offers storage, tools for distribution and liquidity for user networks on and off ramps.
Coinbase Commerce enables merchants to accept decentralized cryptocurrency payments from around the world. Payments facilitated by Coinbase are decentralized and peer to peer based. Merchants have access to hosted checkouts, payment buttons, integrations to e-commerce services such as Shopify and WooCommerce and an API tool to integrate crypto payments into client businesses and apps. The platform currently hosts more than 8000 merchants.
Coinbase Custody offers institutional clients access to its offline storage platform. It functions as an independent fiduciary under New York State Banking Law and is a separate entity from Coinbase Inc. All digital assets are segregated and held in trust for Coinbase Custody clients. The custodian provides third party auditing and financial reporting validation, insurance and four hour withdrawal SLAs.
Coinbase Ventures is the investment arm of Coinbase providing financing for early stage crypto startups. Their investment portfolio includes companies such as Dharma, BlockFi, Compound, CoinTracker, BisonTrails, Keep, UMA and Celo.
Coinbase has over 43 million customers in over 100 countries. Coinbase customers comprise individuals, retail clients, institutional firms, businesses and advanced traders. In its Crypto H1 2020 in Review report, Coinbase revealed that it “saw a noticeable uptick in our institutional business’s growth in H1 and continued to add leading university endowments, traditional multi-strategy hedge funds, VCs, and large family offices to our roster of clients buying digital assets directly.”
Coinbase competitors are major crypto exchanges and custodians.
- River Financial
Recent Mergers and Acquisitions
- Bison Trails
- Digital Wealth
- Distributed Systems
- Keystone Capital Corp.
According to a Coindesk report, Coinbase reached a valuation of $77 billion in mid February of 2021 as the company hit $303 per share on the Nasdaq Private Market. According to Crunchbase, the company has raised $547.3 million in funding since its founding in 2012. In October of 2018, it raised $300 million in a Series E funding round led by Tiger Global Management with investors such as Y Combinator Continuity, Wellington Management, Andreessen Horowitz and Polychain. At the time the company was worth $8 billion.
Coinbase earns commissions and fees upon customers buying and selling cryptocurrency. It earns a margin fee by charging 0.50 percent for crypto purchases and sales depending on rate variations based on market conditions. It also charges a Coinbase fee on all crypto transactions based on customer location and transaction amount. In 2019, Coinbase founder Brian Armstrong announced that the company generated more than $2 billion in transaction fee revenue since launching in 2012. The Coinbase Card generates payment fees tied to every transaction and Coinbase Custody charges $10,000 on implementation fees and a custody fee of 50 basis points.
Coinbase does not have its ESGs listed on its website.
Diversity, Equity and Inclusion
In November 2020, the New York Times published a widely circulated article that revealed a history of racism and discrimination at Coinbase against its black employees. The article contained interviews from former Coinbase employees, many of whom resigned due to the company’s poor diversity, equity and inclusion practices. Another New York Times article published in December 2020 analyzed the company’s internal pay data from 2018 to reveal a 7 percent wage gap between its black and non black employees alongside another wage gap of 8 percent between men and women. Once the NYT factored in stock options for employees, male to female compensation was the same , while the disparity between black and non black employees grew to 11 percent. Coinbase has not shared its diversity related data on its website.
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