It goes without saying that COVID-19 has impacted the world economy. The unemployment numbers chart is perhaps the most striking statistical representation.
According to Twitter users, Coinbase is alerting people through their Wallet app that they might be roving DApp browser functionality from iOS devices. Apparently, their DApp services are against the iOS App Store’s terms of service. Coinbase recommends that users use the desktop Coinbase Wallet in order to continue using the services.
One of the main appeals to owning crypto assets is that you can store it in an offline wallet, with no intermediary needed. Unfortunately, Robinhood makes this process impossible because they sell the ability to invest in crypto but not the actual tokens. This means that in order to securely store crypto in a wallet, you will have to sell your position on Robinhood and repurchase it at a physically delivered crypto exchange.
The theme of Coinbase’s Winter 2019 Hackathon was “Bring DeFi to the World” which is kind of crazy considering they are one of the most centralized entities in crypto. Coinbase is a centralized exchange that abides by tight regulation and operates a centrally backed stablecoin, USDC, with Circle.
The hacking continues on day two of our Winter 2019 hackathon. With dozens of projects focused on bringing DeFi to the world, we're inspired by the energy and excitement from our teams around the globe. pic.twitter.com/FRG7xMlK7C
— Coinbase (@coinbase) December 11, 2019
DeFi vs. Coinbase
DeFi, or decentralized finance, aims to compete with Coinbase in all aspects other than onboarding. Ironically, Coinbase likely sells many Ether tokens that are part of the relatively large locked value of the DeFi ecosystem.
The most obvious sector where Coinbase and DeFi compete is in personal finance. They both allow users to earn interest on tokens, and DeFi gives much higher APR. In 2019, Coinbase started allowing USDC holders to earn interest on any tokens lying in their portfolio with an APR of 1.25%.
Dharma, an app that requires users to sign up with their Coinbase account, offers 3.6% APR on USDC with little difficulty. They are able to offer higher interest by using Compound, a decentralized lending pool. All it takes to earn more interest in this situation is to take the USDC you have on Coinbase and send it to your Dharma address.
Another way that Coinbase competes/cooperates with DeFi is that they, along with Circle, created a stablecoin. At the same time, they sell the Dai stablecoin on their platform. Dai uses an algorithm and incentives to keep the token pegged to the dollar while USDC is backed 1:1 by USD. USDC cremes Dai in total market cap, but Dai has been gaining notoriety in recent months. On top of that, DeFi lending pools often offer more interest for Dai holdings than USDC.
And finally, they compete because Coinbase is a centralized way to exchange tokens, where as DeFi offers a way to do that straight from one wallet to the other. Exchanges like Uniswap or even aggregated exchanges like DEX.AG act as a forum for users to match orders with each other. Coinbase and other centralized exchanges always win in terms of slippage, but someone who values privacy and decentralization will likely opt for a decentralized exchange.
Is Coinbase promoting DeFi for the culture?
“DeFi, or decentralized finance, is an essential part of an open financial system. DeFi tools are censorship-resistant, unbiased, programmable, and available to anyone with a smartphone. For this hackathon, we’re focusing on bringing DeFi to the world. (Costumes not required.)” – Coinbase
This quote from Coinbase is advertising the opposite of what Coinbase is. Maybe they have accepted the role they play in the space, but as enthusiasts of decentralization, they appreciate breaking boundaries in finance.
One thing that is forsure, is Coinbase has been keen on decentralized projects. ChainLink is a decentralized oracle service, 0x is a decentralized liquidity tool, Dai is a decentralized stablecoin, and ofcourse, Ethereum is the platform to build dApps. Also, the aforementioned projects are on the bottom half of the ranks on Coinbase in terms of market cap, which could imply that Coinbase is sort of sticking their neck out for the ideas.
My theory is that like many others, Coinbase finds DeFi to be one of the more interesting and tangible things coming out of Blockchain tech. I am a bit biased, but listing 0x and Dai doesn’t seem like a decision that was made to rake tons of money and new users in. It seems more like a long-term bet.
Launched in April, the Coinbase debit card allows European users to spend their crypto anywhere by swiping a card. Recently, they’ve been adding more and more crypto assets to pay with, and today, they listed the first stablecoin.
Crypto assets compatible with the Coinbase debit card
Bitcoin, the asset that everyone complains about not being able to spend, but probably shouldn’t be spending. Spending Bitcoin is like spending gold, it’s meant to be a store of value more than a medium of exchange.
Augur, also known as REP. This is a utility coin for a site that where you can gamble on things like ‘Will Trudeau still win the next election?” as if it were a derivative product. It’s been around for a while and claims to be “decentralized.”
Ethereum, the coin with the second highest market cap. Potentially analogous to Amazon in the dot com bubble, Ethereum is also subjectively likely to perform well. I wouldn’t buy coffee with it, but I do use it to pay for gas when wandering about the DeFi ecosystem.
Litecoin, one of the best possible names to help market an asset that is faster than Bitcoin. People with a limited understanding of the blockchain world know that Bitcoin is the O.G., Ethereum is supposed to be better than Bitcoin and Litecoin is fast. Ironically, Litecoin being fast is supposed to make people want to spend it without needing a central intermediary (like Coinbase).
Bitcoin Cash, or BCH. Again, aren’t you supposed to supposed to be able to spend this stuff without an intermediary? lol.
XRP, built by Ripple. Tons of huge corporations use Ripple for things like inventory management, but the price of XRP just never seems to go up. I guess this is one that you would want to spend?
ZRX, or 0x is a liquidity tool for Ethereum’s DeFi ecosystem. Developers admitted that their business model hasn’t worked out in the past, but they hope to change things with new updates. Right now it’s worth 20 cents, but with the hype around DeFi and how much decentralized exchanges need a liquidity solution, its future looks promising.
XLM, Stellar’s utility token, is required for every transaction in the network. Stellar is a cross border payment solution whose performance isn’t reflected by its price, much like XRP.
BAT, who hopes to replace the current advertisement business model for websites and content creators. This is actually kind of cool because you can earn it from viewing ads on the Brave Browser. Just a couple hundred minutes of Depends commercials and you can treat yourself to some nice Starbucks.
DAI, last but not least, is a stablecoin that is backed by mostly Ethereum and balanced by an algorithm of incentives. On Maker’s site, you can lock your Ethereum position up in exchange for a DAI loan that is paid back with interest. The Coinbase card is logical for this process. If you are going to spend your DAI loan, this is probably the most efficient way to do it.
Does using the Coinbase debit card make sense?
If you read the snarky commentary on all of the listed crypto, you’ll have an idea of why spending some crypto might make more sense than spending others. But in reality, spending crypto might not even be the point of this card.
Watching mainstream media cover Bitcoin, you’ll often come across people who ask, “but can you spend it?” Coinbase’s card allows people to answer which is good for the market, and in turn good for Coinbase.
So yes, coins like BAT and DAI actually make sense to spend in certain situations, but the rest are supposed to be investments. If they weren’t supposed to be investments, Coinbase wouldn’t name the place you manage coins, your “portfolio.”