Coinbase Launches Several New Institutional Grade Products and Services

  • Coinbase has launched several new products/services to unlock the billions of dollars in institutional money currently sitting on the sidelines.
  • There are four new offerings: "Coinbase Custody", "Coinbase Markets", "Coinbase Prime", and "Coinbase Institutional Coverage Group".

Coinbase, which operates the largest crypto exchange in United States, has unveiled several institutional grade new products and services in order to tempt the world's largest financial institutions to get into the cryptocurrency market.

Coinbase Custody

According to the Coinbase CEO, Brian Armstrong, an increasing number institutional investors are becoming interested in trading (or investing in) digital assets -- he estimates that around $10 billion in institutional money is sitting on the sidelines, waiting to be unlocked -- and that they are saying that the biggest barrier to entry for them is the lack of a digital asset custodian service that they can trust. And based on what Coinbase has just announced, Coinbase Custody should be a pretty good answer to this problem.

Coinbase Custody, which is being launched in partnership with a SEC-regulated broker-dealer, has the following features:

  • strict financial controls: "support for multiple signers, audit trails, segregation of duties, whitelisting IPs, and the ability to set withdrawal limits";
  • dedicated phone support: for confirming fund transfers and changes to accounts;
  • SLAs on fund transfers;
  • multi user accounts (with separate permissions);
  • support for all major coins and tokens;
  • regular (cyber and physical) security audits by external firms.

This service is only available to institutional investors with a minimum of $10M in deposits. As for the price, there is an initial setup fee of $100,000 USD, and a fee of 10 basis points per month on assets under custody.

Coinbase Markets

Coinbase Markets already provides "a centralized pool of liquidity for all Coinbase products." Coinbase is planning to improve this service by opening an engineering office in Chicago. Over the course of the year, Coinbase will be introducing new features such as "low latency performance, on-premise datacenter colocation services, institutional connectivity and access, and settlement and clearing services." Essentially, what Coinbase will be doing via this office is upgrading its systems so that it can become one of the first crypto exchanges that supports high frequency trading (HFT). HFT requires "low latency performance" or extremely fast processing times (think microseconds rather seconds). "On-premise datacenter colocation" means that HFT firms will be able to put their servers next to Coinbase's servers to minimize the delay associated with sending data between the HFT firm and the exchange. These improvements should benefit clients in the form of reduced bid-ask spreads. 

According to a report in the Wall Street Journal, Adam White, the General Manager at Coinbase, told them in an interview that Coinbase would ensure that HFT firms would not receive any unfair advantages: "We are going to be thoughtful and deliberate in the way we do that, to make sure we don’t disadvantage any market participant over another."

Coinbase Prime

This is a brand new online interface to Coinbase's trading platform. It will provide a variety of tools and services designed to meet the trading needs of the institutional investor. During the coming months, Coinbase will be offering "lending and margin financing products to qualified clients, high touch and low touch execution services like over-the-counter (OTC) trading and algorithmic orders, and new market data and research products" as well as platform improvements such as "multi-user permissions and whitelisted withdrawal addresses."

Here is a screenshot that should give you an idea of what the Coinbase Prime interface looks like:

coinbase prime.png

Coinbase Institutional Coverage Group

This is a new group, based in Coinbase's New York City office, that will be focused on providing a personalized "white glove" service to institutional investors. The basic idea is to guide these investors through the onboading process and provide them with any help they need (for example, advising them on trading strategies) for navigating "the increasingly complex world of cryptocurrency investing." 

 

Feature Image Credit: "Wall Street Sign" by "EllenTheMelon1" via Flickr; licensed under "CC BY-SA 2.0"

Error in Time-Locked Bitcoin Contracts Allows for Miner 'Fee-Sniping'

Michael LaVere
  • Crypto researcher 0xb10c discovered an error in bitcoin "time-locked" transactions that could be used as an attack vector.
  • Miners can take advantage of the program to carry out "fee-sniping" and steal funds from one another. 

Users have discovered an error in bitcoin “timelocked” contracts that could potentially allow miners to steal BTC from one another. 

Anonymous crypto engineer 0xb10c reported discovering more than one million “time-locked” transactions made between September 2019 and March 2020. In a post, 0xb10c detailed how these special bitcoin transactions were not being accurately enforced by the network. 

As opposed to normal transactions, time-locked transactions prevent recipient bitcoin from being accessed after sending. Users must wait for a specific number of blocks to be added to the network in ten-minute intervals before gaining control of their bitcoin. 

0xb10c claimed the errant time-locked transactions provided an attack vector for miners to steal transaction fees  from one another via “fee-sniping.” According to the engineer, the backlog of time-locked transactions were being purposefully designed for a “potentially disruptive mining strategy” involving the theft of miner fees. 

In an interview with CoinDesk, 0xb10c said time-locked transactions represented a “low-priority” problem at present that could eventually balloon to involve the wider network. He explained that fee-sniping would become more lucrative in a few years as the majority of miner income shifts towards transaction fees. 

He continued, 

A fix for this has been released in early 2020. However, it will take a while before all instances of the currently deployed software are upgraded.

Featured Image Credit: Photo via Pixabay.com