The Week: Coinbase Hikes Trading Fees and Apple Quashes Crypto Rumours

This week saw mixed fortunes for Coinbase. The company attracted attention with several announcements, including the news it will offer 1.25% interest on its USDC stablecoin and the introduction of a new banking agreement for faster deposits and withdrawals for UK customers.

 However the exchange also faced backlash over a massive fee increase for retail customers on Coinbase Pro and drew scepticism over its Crypto Ratings Council initiative, run in collaboration with other major exchanges.

In other news, Brave proposed the addition of a decentralised VPN (dVPN) service to its popular browser, an Algorand-focused VC fund was hacked for $2 million, a16z announced the launch of a Crypto Startup School, BitTorrent’s decentralised file sharing protocol went live, and Charles Hoskinson is prepared to eat a shoe…if an important deadline is missed.

Tim Cook Dismisses AppleCoin Prospect

Apple CEO Tim Cook has rules out the idea that the company could follow Facebook’s lead in issuing its own cryptocurrency, stating that responsibility for currency issuance is best retained by central banks and governments. His comments extinguished speculation that resulted from earlier remarks by the head of Apple Pay that the company was “watching” developments in crypto.

PayPal Withdraws From Libra

PayPal, one of several major corporations originally announced as supporters of Facebook’s Libra, has backed away from the project following the intense regulatory scrutiny the proposal has received. It was anticipated that PayPal would maintain one of the network’s nodes. Focus is now on whether fellow payments services Visa and Mastercard will follow suit is distancing themselves from the project. 

Maker Devs Catch Critical Bug

Developers working on the MakerDAO Multi-Collateral Dai (MCD) upgrade managed to fix a flaw that could have resulted in 7 million DAI being drained from the project’s smart contract. The flaw was found by a hacker on the bug bounty platform HackerOne. The launch of MCD is hotly anticipated due to the popularity of Maker’s existing (single collateral) contract, which has been one of the success stories of the DeFi movement.

Who Is Coinbase Competing With?

With the anticipation of a cyclical flux of new crypto investors, both retail and institutional, ready to enter the space, competition among exchanges is decidedly fierce. This week, Coinbase – long the most popular crypto wallet and fiat on-ramp for retail investors – surprised users with the news it significantly raising fees on its Coinbase Pro platform.

This stands in stark contrast to its competitor Binance, which announced recently its offering zero fees for U.S. customers for the next three months to celebrate the launch of its new US platform.

The Coinbase announcement understandably drew ire from everyday crypto investors, who will now face fees up to 0.5% for buying and selling crypto. It was not so long ago that the company offered zero fees, both for makers (who add bids to the order book) and takers (who fill the order book bids), on the platform.

For retail customers, this provided several options for buying assets – either they could transfer their funds to Coinbase.com and ‘buy now’, getting instant access to assets but at the cost of ‘paying the spread’ (the difference in price between buys and sells) as well paying an additional service fee. Or, they could transfer their funds to Coinbase Pro, where they could place a buy order to get the asset at the price they wish to pay, without incurring any additional costs.

Now, it appears, Coinbase is placing a clear separation between the two platforms, with Coinbase.com being positioned as the venue for retail. This strategy has been in place for a while, with the addition of several altcoins, including Chainlink, BAT and Stellar, to give less experienced investors easy access to such assets.

It is also introducing auxiliary services such as interest payments on USDC and education through Coinbase Earn in order to help bed more new users into the new world of crypto. In this respect, it is competing with both traditional retail banks, currently burdened by the low-interest macro environment, and with Binance, which has strong brand awareness among existing crypto users but may be seen as a ‘riskier’ option for those new to the space.

With Coinbase Pro, it has shifted emphasis towards institutions, giving them a platform where they are rewarded for large volumes with low fees, supported by its new Custody solution following the acquisition of Xapo Custody in August. In this respect, Coinbase is competing with the newly launched Bakkt exchange, although there is as yet no suggestion Coinbase Pro will be adding margin trading or futures any time soon.

The question, of course, is whether Coinbase serves either of these distinct user groups well enough that they would make Coinbase their primary venue. Fiat on-ramp aside, retail users with a base level of experience would still typically prefer to use Binance over Coinbase due to both the vast range of assets Binance offers and the higher volumes that exist, even despite U.S. users being migrated to a new platform.

Institutional traders are in a similar boat. They want access to a wide range of institutional-grade products, such as margin or indexes, for which they may be better served at Bakkt, BitMEX (regulatory issues notwithstanding) or a newer competitor such as FTX. Even Binance is moving into this area with the launch of its Binance Futures product, which is seeing encouraging uptake.

The risk for Coinbase is that in seeking to segregate their users into two broad buckets, they risk losing differentiation. Too vanilla for one user group, too basic for the other. In short, by trying to compete with everyone they ultimately compete with no one.

Tweets of the Week

Viktor Bunin finds a connection between the fall of a major clothing retailer and crypto’s most famous fixed supply asset:

Hashgraph’s Brady Gentile pokes fun at PayPal’s withdrawal from Libra:

Alex Libertas notes that John McAfee’s new DEX isn’t quite up to security standards:

The Week’s Best Content:

Recommendation 1 – So you want to build a crypto startup?

Esteemed VC Hasseb Qureshi shares some valuable advice with aspiring crypto entrepreneurs, covering everything from knowledge-building and finding the killer idea, through to fund raising and go-to-market strategy.

Recommendation 2 – James Prestwich appears on On the Brink with Castle Island

Castle Island Venture’s Nic Carter interviews James Prestwich, a developer with rare expertise in working across Bitcoin, Ethereum and several other blockchains. The pair discuss interoperability and cross-chain assets.

Recommendation 3 – DeFi Summit videos

Miss this year’s DeFi Summit? Videos from the presentations have now been posted online. Watch to find out about some of the most innovative products being built in the space, including talks by UMA, Set Protocol and 0x.

Don’t Miss:

Ethereum London October Keynote

London

Wednesday 9 October, 7pm

Have you been following the BBC’s popular The Missing Cryptoqueen podcast series? If so, you may want to make your way to Imperial College on Wednesday to see the show’s presenter and producer discuss the background to their OneCoin investigation.

Basic Attention Token Will Be Listed on Crypto Exchange Gemini Later This Month

Digital asset exchange Gemini, which was founded in 2014 by the famous Winklevoss twins, announced on Monday (April 6) that it will soon be adding support for the trading of Basic Attention Token (BAT).

In a blog post published earlier today, Gemini said it will be allowing of BAT deposits into Gemini accounts starting at 09:30 Easter Time (or 13:30 UTC) on 24 April 2020, and mentioned that trading would "follow soon thereafter."

Here is how Gemini describes BAT:

"Basic Attention Token is the native currency token of the Brave Browser, which is built to provide a more efficient and effective mechanism for connecting and rewarding users, advertisers, and publishers.

"Brave blocks unsolicited ads and tracking by default and rewards users with BAT payments when they opt-in to view ads.

"Users can then directly or indirectly contribute BAT to the sites they visit while enjoying a faster, more secure browsing experience, all of which is accomplished without revealing a user’s browsing history or preferences.

"Brave and BAT were created by Brendan Eich, who developed the Javascript programming language and also is a co-founder of Mozilla."

This is the first time that Gemini is adding support for a new digital asset since December 2018 (when it listed Bitcoin Cash), and this move by Gemini will bring the total number of cryptoassets it supports to six (the others are Btcoin, Ether, Bitcoin Cash, Litecoin, and Zcash).

Gemini pointed out that "BAT deposits to existing Gemini Ethereum addresses are not supported", and that instead, in order to deposit BAT, "you must first create a new Ethereum deposit address by logging into Gemini and going to the Transfer page."