Coinbase Focused On Staking
With Multiple lawsuits and an SEC probe looking into Coinbase, one would think the main concern for CEO Brian Armstrong would be turning a profit, but it's not. It's staking.
“Any given quarter, it could be up or down,” he said of the crypto market on Coinbase’s most recent earnings call. “It’s important to distinguish between what is in our control and what’s out of our control.”
The crypto winter has led to lower interest from institutional and retail investors, with trading on Coinbase falling 50% compared to the same quarter last year, slumping from $462 billion to $217 billion.
On the same call, Coinbase CFO Alesia Haas claimed that when faced with the slashing in prices, “investors tend to shift from traders to holders.” But she did note that the monthly number of users is up by 200,000 compared to the same quarter last year.
In the shareholder letter, Coinbase brought up how it retains users through the ability to stake assets, “As a result of our core retail customer trading less, our [monthly transacting user] mix has trended more towards non-investing activities—notably staking.”
Popular coins like Bitcoin are Proof of Work, meaning its generated by using machines competing to solve complex problems to “mine” coins and digital assets. Proof of Stake works differently by choosing from a pool of people holding the Proof of Stake coin. A Proof of stake “Validator Node” can be added to the pool by staking coins for a certain period, giving Proof of Stake “Validators” a source of income without needing powerful mining hardware. It's also referred to as a consensus mechanism that rewards users for validating on the blockchain.
The letter mentions how Coinbase sees its staking feature as an “early win,” It is considered one of its most prioritized products, with the number one goal being to become the number one staking company in the world.
Ethereum, Solana, Cardano, Algorand, Cosmos, and Tezos are all assets you can stake on Coinbase. During this year's Q2 earnings report, Coinbase said that up to 67% of its monthly users were engaged in non-investing products offered by the company.
It did not specify how much of that 67% is made up from staking, but the company stated, “Across all assets we support, [Coinbase] saw higher native units staked in Q2 compared to Q1.”
The next couple of months are being targeted as the date for the Ethereum merger, which will see the number two cryptocurrency in the world move from a proof-of-work algorithm to a proof-of-stake model. Coinbase is emphasizing staking as part of its business model with this in mind.
“In early August, we began offering Ethereum staking for institutional clients for the first time,” the letter to shareholders states. ”We’ll continue to add more assets for staking for both our retail and institutional clients going forward.”