Hello Defiers! Here’s what we’re covering today,
Coinbase made history by being the first crypto exchange to list its stock in the US market; and it made a big splash making its debut at a market cap of almost $100B. We focus on Coinbase’s decentralized finance offerings and how the space will continue shaping the exchange.
zkPorter promises to its the be-all and end-all for Layer 2
Ethereum Berlin hard fork ships tomorrow to lower gas costs
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BOTTOM LINE Coinbase was founded in 2012 as an exchange to buy Bitcoin, and a large part of its revenue still comes from trading of the largest cryptocurrency. But while BTC has shaped Coinbase’s past, it will most likely be decentralized finance that makes the biggest impact on the largest US exchange’s future.
TODAY’S LISTING Coinbase listed its stock today on the Nasdaq exchange at $381 per share and an initial market cap of $99.6B, marking the historic first entry of a crypto exchange onto the US stock market. The Coinbase listing is expected to draw a major new wave of investor interest towards crypto markets.
COIN PRICE Coinbase stock, ticker COIN, jumped to as high as 429.54 after listing, and was trading at just under $400 at the time of writing.
DEFI GROWTH As DeFi protocols continue to grow, trading of their tokens will keep taking market share away from Bitcoin trading. In addition to just buying and selling tokens, DeFi provides the opportunity to do more with users’ assets — such as lend and borrow in a peer-to-peer, or peer-to-smart contract, way. Coinbase has recognized this and since last year has started to aggressively add new tokens and DeFi integrations.
“DeFi protocols are an important and rapidly growing component of the cryptoeconomy, and a substantial business opportunity for us,” the exchange wrote in its 2020 results, adding that it has invested in building relationships with DeFi developers, and piloted a “Day 1 Launch” program to support DeFi protocols’ tokens.
RISK OF MISSING OUT Failing to keep up with the rapidly growing DeFi ecosystem is a risk for Coinbase, the exchange said in the filing.
“If we cannot keep pace with rapid industry changes to provide new and innovative products and services, the use of our products and services, and consequently our net revenue, could decline,” the report said. “Our industry has been characterized by many rapid, significant, and disruptive products and services in recent years. These include decentralized applications, DeFi, yield farming, staking,” and others.
DECLINING BTC REVENUE Last year cryptocurrencies other than Bitcoin surpassed Bitcoin trading volume on Coinbase for the first time, a sign that going forward, these tokens will continue making larger contributions to the exchange’s bottom line.
“In 2020, other crypto assets contributed a greater share of Trading Volume,” Coinbase wrote. “This growth was driven by the addition of over 20 crypto assets, including multiple DeFi crypto assets, which diversified Trading Volume away from Bitcoin and Ethereum.”
24-HOUR DATA Coinbase didn’t provide as detailed data on trading volume for its annual results, so it’s hard to say whether the trend of growing non-BTC volume seen in last year is increasing. Still, 24-hour data provided by Coingecko shows that about 30% of Coinbase Pro trading volume came from BTC/fiat pairs, while the other 70% of its 24-hour trading volume is an assortment of crypto tokens, many of them DeFi. The data only encompasses Coinbase Pro, and not the larger Coinbase platform.
TLDR The Ethereum Berlin hard fork ships tomorrow. The upgrade contains four Ethereum improvement proposals (EIPs) mainly aimed at optimizing gas costs, and is the first of its kind since Muir Glacier shipped on Jan. 2, 2020.
HARD FORKS “Hard forks” are a result of distributed networks like Ethereum upgrading or making changes in their software. Node operators must upgrade their Ethereum client in order to be compatible with Berlin. Also, some exchanges will suspend deposits and withdrawals while upgrading their software.
TLDR zkSync introduced an Ethereum Layer 2 solution called zkPorter yesterday promising to push the blockchain’s transactions per second (TPS) capabilities to over 20,000. This would put Ethereum within striking distance of Visa, which says its network can handle 24,000 TPS.
“To bring true scalability, we need an exponential gain in throughput,” the team wrote in a blog post. “That’s why we believe this is such an important breakthrough. We have designed a system with 20,000+ TPS that offers more security than optimistic rollups. More importantly, it is coming to mainnet in 6 months with zkSync 2.0.”
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🧑💻 ✍️ Stories in this newsletter were written by Owen Fernau and Dan Kahan, and edited by Camila Russo. Videos were produced by Robin Schmidt and Alp Gasimov. Podcast was led by Camila, edited by Alp.
The Defiant is a daily newsletter focusing on decentralized finance, a new financial system that’s being built on top of open blockchains. The space is evolving at breakneck speed and revolutionizing tech and money. Sign up to learn more and keep up on the latest, most interesting developments. Subscribers get full access, while free signups get only part of the content. Click here to pay with DAI (for $100/yr) or sub with fiat by clicking on the button above ($15/mo, $150/yr).