Coinbase Custody Starts Letting Institutional Investors Earn off of Their Tezos Holdings

Coinbase Custody has recently revealed it’s going to let institutional investors who use its platform, which are estimated to store around $600 million worth of crypto with it, stake or “bake” Tezos (XTZ) tokens for passive income.

According to the San Francisco-based cryptocurrency exchange’s announcement, institutional investors with Tezos on their accounts will be able to take advantage of the cryptocurrency’s staking model, as it doesn’t rely on mining like bitcoin or ether do.

Currently, anyone who holds roughly $10,000 worth of XTZ tokens – about 8,000 units – can participate in its proof-of-stake model by “baking” the tokens. This means users have to run a software node, and set it up through a somewhat technical process.

Coinbase’s new offering means institutional investors will be able to offload the technical aspect of staking to the cryptocurrency exchange, and be able to easily collect passive income. This, however, comes at the cost of Coinbase’s 20% commission for the service.

Per Fortune, the firm has revealed firms like Polychain Capital and Andreessen Horowitz’s crypto-focused investment fund are looking to use the new service. Tezos’ co-founder Kathleen Breitman was quoted as saying:

The launch of Tezos staking through Coinbase Custody serves an acute need that existed up until now—a way for institutional players who want to rely on a custodian while taking an active role in the network.

Tezos is notably expected to be the first of various proof-of-stake cryptocurrencies that’s set to be listed on Coinbase Custody, allowing investors to earn on their holdings. The offering is good for Coinbase, as it gives it an alternative revenue source that could make up for the fees it has been losing over the bear market and various #DeleteCoinbase campaigns.

The firm is also reportedly planning a service that will help customers participate in decentralized voting for projects like Tezos and MarkerDAO. While Coinbase’s Tezos staking is so far only available for institutional investors, there are other options for passive income in the crypto space.

The Compound Protocol, for examples, pays users interest on their ether and other ERC-20 tokens, while BlockFi allows users to create crypto deposit accounts and earn interest. The move has seen BlockFi received $25 million in crypto for deposits merely two weeks after launching the service.

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Binance ‘Unknowingly’ Earns $775K via Staking, Set to Launch Huge XLM Giveaway

On Thursday (July 18), Binance, the world's largest cryptoasset exchange (by adjusted trading volume), made a rather interesting announcement: it had "unknowingly" earned 9.5 million Stellar Lumen (XLM) tokens through staking rewards, and it is going to give all of it away to all Binance users who maintain XLM balances between July 20 and September 1.

Binance explained via a blog post that in August 2018 the Binance team followed the advice of the Stellar Development Foundation "to change some parameters on both cold and hot wallets," which resulted in the exchange "unknowingly" earning staking rewards for its XLM holdings since 31 August 2018.

Then, this week, while the Binance team was considering the idea of adding support for XLM staking, it found out that Binance had earned around 9.5 million XLM tokens (each of which was worth approximately $0.08157 at the time). Binance notes that all "weekly staking rewards between then and now are documented on the blockchain." 

So, the team made two decisions:

  • add support for XLM staking to Binance.com; and
  • give away the aforementioned staking rewards to the Binance community (i.e. Binance users).

This is not the first time that Binance has added staking support to Binance.com. The exchange already "distributes NeoGas for NEO holders, Ontology Gas for Ontology holders, VTHO for VeChain holders, and BitTorrent tokens for TRON tokens."

Here is how this 9.5 million XLM giveaway is going to happen.

From July 20, Binance will support XLM staking. Between this date and September 1, Binance will take "daily snapshots" of XLM balances in Binance user accounts.

Then, on September 1, Binance will "tally average user XLM balances based on these snapshots," and process the distribution of staking rewards to these user accounts (that maintained XLM balances during the staking period). Furthermore, the roughly 9.5 million XLM tokens that Binance has unknowingly earned to date will be distributed as a bonus payment to all Binance users who jave maintained non-zero XLM balances since July 20. 

Binance says in its blog post that it estimates this "one-time distribution of 9,500,000 XLM shared proportionately among Binance users" to be worth "10 to 12 months of typical monthly rewards."

According to a support article published on July 18, here are the details of Binance's "Monthly XLM Staking Airdrop Program":

  • Binance will start these daily XLM balance snapshots at 00:00 (UTC) on 20 July 2019.
  • This is how Binance will calculate the XLM staking distribution:

XLM generated by each user = Total XLM staking rewards received by Binance * User XLM holdings ratio. User XLM holdings ratio = User XLM holdings / Total XLM staked by Binance.

  •  In order to qualify for XLM staking rewards, Binance users must have a balance of at least 10 XLM.
  • This initial distribution of XLM staking rewards will be calculated until 1 September 2019, "with the total amount distributed equal to the staking rewards accrued on holdings during the 43 day period."
  • These XLM staking rewards are calculated on a daily basis and are distributed monthly. 
  • XLM distrubutions will be "completed before the 5th of each month."

In other Binance news, another support article explained that Binance's Margin Trading platform has added support for two margin assets (EOS and LINK), three borrowable assets (BNB, EOS, and LINK), and three margin pairs (EOS/USDT, EOS/BTC, LINK/USDT, LINKBTC).

Binance's announcement about its 9.5 million XLM giveaway may have helped the XLM price. According to CryptoCompare, XLM is currently trading at $0.08914, up 7.96% in the past 24-hour period:

XLM-USD 24-Hour Chart on 18 July 2019.png

Featured Image Courtesy of Binance