An In Depth Look at Coinbase — The USA’s Most Popular Exchange

Coinbase has become the most popular cryptocurrency exchange in the United States over the past 24 months and continues to grow and state its presence on a global scale. With such incredible growth, they have also had their fair share of controversy.

Coinbase is a centralised exchange. We have written about centralised exchanges vs decentralised exchanges before. Being centralised means that they are a profit oriented company that operates and holds funds on behalf of its customers.

However, Coinbase serves a very important function in the cryptocurrency market however. Being one of the exchanges that allows users to deposit traditional Fiat currencies, Coinbase acts as an entry point for new people to enter the cryptocurrency market. This is in contrast to exchanges like Binance, for example, who only serve as a crypto-to-crypto exchange.

Coinbase have made huge efforts over the past 12–24 months to be extremely compliant with regulators in the United States. They are positioning themselves as a key proponent for Americans and others to enter cryptocurrency in a trustworthy and regulated manner.

Early History

Coinbase was originally founded in 2012 by Brian Armstrong and Fred Ehrsam. Armstrong is still the current acting CEO. After going through the Y Combinator startup incubator programme, Coinbase attracted investment from a number of venture capital firms such as Andreessen Horowitz, Union Square Ventures, Ribbit Capital and even the New York Stock Exchange. Since launching, Coinbase has allowed users to buy and sell Bitcoin through bank transfers. This has played a huge role in their success to date. By 2014, the company had grown to 1 Million users and now in September of 2018, they have an estimated 20 Million registered users.

They rebranded their Coinbase Exchange to the Global Digital Asset Exchange (GDAX) in 2014, and have recently rebranded this again to Coinbase Pro.

In 2016, Armstrong posted about the vision and mission of Coinbase and how they want to impact the world. It is clear that Coinbase understand the impact that the new digital economy is going to have on a global scale and expressed their vision accordingly:

“Digital currency will bring about more innovation, efficiency, and equality of opportunity in the world by creating an open financial system.”

Couple this with their mission:

“The mission of Coinbase is to create an open financial system for the world.”

They intend on doing this by bing the easiest place to buy and sell digital currency. Since inception, they really have been aiding the masses in doing this by creating the on ramp for the general population to enter cryptocurrency. They have strived and continued to build relationships with regulators and banking institutions around the world.

Listings

Currently, Coinbase offers users the ability to purchase 5 cryptocurrencies. These are:

• Bitcoin
• Litecoin
• Ethereum
• Ethereum Classic
• Bitcoin Cash

Coinbase have also recently expressed interest in listing a number of different tokens on their exchange. In a blog post in mid July they announced they are exploring the idea of adding Cardano, Basic Attention Token, Stellar Lumens, Zcash, and 0x. Many have hypothesized that this announcement was an effort to compensate for any sudden future listings they might make.

This is because when then initially listed Bitcoin Cash on the exchange on December 20th 2017, there was much speculation about its sudden addition and possible insider trading. The BCH/USD trade pairing went live for 5 mins before being taken down, only to return a day later.

Coinbase has also just recently created a new asset listing process aimed at accelerating the listing process for new projects onto their exchange. Their new Digital Asset Framework will allow people to submit listing applications which will be considered and satisfied in a jurisdiction-by-jurisdiction manner. According to their blog post in relation to the new Digital Asset Framework “listing announcements will become more frequent, we expect to publicly announce the addition of new assets only at or near the time of public launch across one or more Coinbase products.”

Coinbase Custody

Coinbase are also making moves to bring institutional money and investment into the cryptocurrency space. As per their announcement in early July, Coinbase Custody’s mission is to make digital currency investment accessible to every eligible financial institution and hedge fund in the world. Coinbase Custody provides secure storage of digital assets for institutions in both the US and Europe and they hope to expand this to Asia by the end of 2018 too.

Just as we now see many banks and financial institutions preparing themselves for an increase in digital asset trading, Coinbase custody are setting themselves up as a trusted broker to deliver products and services that are tailored to their unique needs.

Coinbase.com vs Coinbase Pro

Coinbase.com itself is one of the easiest ways to purchase digital assets if you are new to cryptocurrencies. There are options to purchase using a credit/debit card or to use bank transfer. It must be noted that purchases with credit/debit card will incur higher fees over funding it through your bank account.

As we mentioned above, Coinbase recently rebranded GDAX.com to Coinbase Pro. This is Coinbase’s exchange offering where they have markets for the five cryptocurrencies we listed above. The exchange interface on Coinbase Pro is professional, intuitive and relatively easy to navigate. Users on Coinbase Pro will also incur less maker and taker fees than on coinbase.com. Deposit and withdrawal fees for digital assets is also free on Coinbase Pro.

The Future for Coinbase

Coinbase continues to play an extremely important role in the overall cryptocurrency ecosystem. Being a facilitator and on-ramp for people to access this new paradigm cannot be understated. Although centralised exchanges go somewhat against the decentralised nature of Bitcoin and most cryptocurrencies, we see this as a necessary step towards gaining adoption of these digital assets on a large scale.

Many projects are now building out decentralised exchanges. However, the question of how Anti Money Laundering (AML) and Know Your Customer (KYC) processes will work with these decentralised offerings is still very much unknown. Coinbase prides itself on working closely and complying with regulators, especially with AML and KYC, so it will be interesting to see if they will dip their toe into creating a decentralised exchange.

Coinbase continue to grow and flourish. With backing and investment from top venture capital firms they will no doubt continue to dominate the cryptocurrency exchange space in the United States. It seems they are preparing themselves to add a much greater offering of digital assets with the launch of their new Digital Asset Framework. We will likely see many more trading pairs added to their exchange throughout 2019.

Originally published at cryptosuss.com on September 28, 2018.