Coinbase

Tl;dr: Coinbase’s goal is to provide a neutral marketplace where customers can engage with every safe and compliant crypto asset. As part of this effort, we have always ensured that listing an asset on Coinbase is completely free of all fees and prerequisite costs.

By Surojit Chatterjee

The goal of Coinbase’s exchange is to provide a neutral marketplace where customers can engage with every safe and compliant crypto asset. To support those assets transparently and equitably, we have spent years honing a consistent listing process that creates a level playing field for all the new assets being created in crypto.

As part of our efforts to level the playing field, listing an asset on Coinbase is, and has always been, free. We don’t charge listing or application fees to asset issuers. Unlike many exchanges, we also don’t charge prerequisite asset marketing fees or require issuers to adopt Coinbase’s other services. Some have speculated otherwise, but it is simply not true.

How our asset listing process works
Our philosophy is to list every safe and compliant asset — we’re not here to pick winners or losers. We are committed to protecting consumers, however, so we have a rigorous asset evaluation process in place to ensure assets meet our eligibility requirements. Here’s a quick summary of our fee-free asset evaluation and listing process:

1. Apply. Asset issuers start by creating an account in our Asset Hub and submitting an application with all relevant information about their asset.
2. Evaluate. Coinbase’s Digital Asset Listing Group (DALG) evaluates the information submitted via Asset Hub using our standard listing evaluation framework to ensure the asset meets the eligibility requirements for our legal, compliance, and technical security reviews.
3. List. Once approved by DALG and integrated with our platform, the asset can be listed on our exchange. Being listed on the exchange does not mean that Coinbase endorses the asset, but that it meets Coinbase’s listing requirements.
4. Monitor. We constantly monitor all assets on our exchange and may de-list assets if they stop meeting our requirements, or if new information becomes available.

Today, Coinbase offers over 212 assets for custody and 166 assets for trading. We are not in the business of providing investment advice, but we do believe education is critical to help the average investor decipher between the many assets on our platform. To help foster learning and education, Coinbase Earn is an invaluable tool for users to earn rewards and learn about different assets available on our platform.

How Coinbase Earn works

Once an asset is listed on Coinbase, asset issuers have the at-will opportunity to launch campaigns to educate users about their asset. Coinbase takes a small fee for facilitating these campaigns, but whether or not an Earn campaign is expected has no impact on whether or not the asset will be approved by our listing process. Here’s how it works:

1. Inquire. Asset issuers get in touch with our Earn team generally via our website or a referral, to learn more about how they can increase awareness and engagement for their asset.
2. Design. Coinbase and the asset issuer work together to design a bespoke educational campaign for users.
3. Launch. Coinbase launches the campaign on our website and in our retail app. Unlike direct marketing campaigns, Earn campaigns are passive, and users choose to interact at their own will.
4. Earn. When users engage with the campaign, Coinbase distributes funds to the engaging users. Coinbase receives a small proportional distribution fee when these funds are distributed.

Users have found great value in our Earn products, and we’ve seen tremendous traction with millions of users engaging with the educational content to date. Education is a key part of our efforts to build a more open, accessible financial system, and we will continue to innovate in this space as we work to list every safe and compliant crypto asset for our users.

Listing assets on Coinbase is free, and always has been was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Tl;dr: This report updates on what FACT0RN Blockchain, a Coinbase Crypto Community Fund grant recipient, has been working on to replace PoW hashing by work that is of interest to the private sector as well as to the academic community. Code for the FACT0RN Blockchain, which launched April 20, 2022, can be found here and the whitepaper can be found here.

By Escanor Liones (Github)

Proof-of-work (PoW) is the original scheme to secure blockchain technology introduced in 2009 by Satoshi Nakamoto through the Bitcoin whitepaper. An analysis done in late 2021 by the New York Times on the electricity usage of the Bitcoin network indicated that the lowest electricity consumption estimate was on par with the total electricity consumption of Washington State for a year — and more than 7 times as much as Google’s global operations.

Just this month, Forbes reported on a bill that is in the works in New York State, as well as leaked European Union Documents, that signal to ‘A De Facto Ban` on proof-of-work mining in general, for Bitcoin and otherwise. It is worth noting that by and large PoW blockchains are based on some form of hashing — a mathematical function that is easy to compute forward and hard to reverse given an output.

There is a blockchain that uses finding prime constellations as its proof of work, and yet another searches for chains of prime numbers known as Cuningham Chains as its PoW. Vitalik Buterin published an article on July 7, 2013 on Bitcoin Magazine about the latter titled “Primecoin: The Cryptocurrency Whose Mining is Actually Useful” where he observed that “One of the disadvantages of Bitcoin that its proponents often gloss over is the fact that its mining algorithm has little real-world value. ”

The author of the PrimeCoin whitepaper in 2013 stated: “I would expect proof-of-work in cryptocurrency to gradually transition toward energy-multiuse, that is, providing both security and scientific computing values.” I would extend this to include commercial value in addition to security and scientific computing value.

Beyond Bitcoin

The digital security of banks, 500 Fortune companies, governments and many IoT devices depend on RSA — a cryptographic system whose security is provided by the difficulty of factoring integers into their prime factors, and in particular, the difficulty of factoring integers that only have two prime factors where both have exactly the same size in number of digits. These numbers are called strong semiprimes, and factoring them is the RSA problem.

It seems to me, after speaking with mathematicians, cryptographers, and random users on the internet, the reason a blockchain based on the RSA factoring problem has not been created until now is because no one could figure out how the blockchain could generate strong semiprimes for miners to factor without first knowing what the prime factors were.

My solution to this problem is simple: instead of generating strong semiprimes without knowing their factors a priori — which no one can figure out how to do — create conditions under which miners can find these strong semiprimes by way of factoring and reward them for finding them. In the process, tie the blockheader data to this process to secure the blockchain.

The essence of PoW is as follows: generate a random number by hashing the data in the block header of the block to be validated, give miners a range around this generated integer, and allow miners to factor all these integers. If they find a strong semiprime reward them accordingly. If they do not find a strong semiprime they can change the nonce and try again. The miners can generate as many random numbers as they want using nonces, but the search range allowed will always be about the same.

Who cares about integer factorization?

The RSA Challenge, created in 1991 by RSA Labs, has rewarded tens of thousands of dollars for factoring ever bigger integers into their prime factors. The largest such award was given to Jens Frenke in 2005 for factoring RSA-640 in the amount of $20,000 dollars.

As the Springer Encyclopedia of Cryptography and Security notes, “Starting in 1991, RSA Data Security offered a set of ‘challenges’ intended to measure the difficulty of integer factoring. The challenges consisted of a list of 41 RSA Numbers, each the product of two primes of approximately equal length, and another, larger list of Partition Numbers generated according to a recurrence.”

In addition to the interest from private industry there are more than a dozen active academic communities that factor integers as a hobby in the hopes of advancing our knowledge of mathematical theory in various areas. The Cunningham Project has been factoring integers to this end since 1925, yes 1925. The National Science Foundation in the United States funds this project, in part, through XSEDE resources provided by the Texas Advanced Computing Center, the San Diego Supercomputer Center, the National Center for Supercomputing Applications, and Purdue University under grant number TG-DMS100027.

The mersenne prime search project has been factoring in the quest to find ever bigger primes since the mid 90’s. There is a factoring project for Aliquot Sequences, Brilliant Numbers, and the list goes on and on. The factoring interest in the academic community cannot be understated.

The Future of PoW

The concern at large with the energy consumption of PoW mining for blockchain technology is not about the energy usage, but rather about the fact that the work for which the energy is used improves no other part of society or human endeavor in ways mere mortals can point to.

Increasingly, the areas of human endeavor that can benefit from computation in general only continue to grow. The demand for computation can clearly be seen by the success of cloud computing giants like Amazon Web Services (AWS), Google Cloud, Azure by Microsoft, and several other cloud services that are thriving today. There are no major concerns about the energy consumption of these enterprises because the work they do goes to support small business, hospitals, banks, universities, law firms, finance institutions, and every kind of organization you can imagine that need to compute to offer better services to serve society at large.

The issue is not PoW mining, but instead that until now the work in PoW has not gone to benefit any other enterprise but the mining itself. FACT0RN is the first PoW blockchain that seeks to drastically change this situation by replacing hashing by work that is of interest to the private sector as well as to the academic communities and whose success will propel significant funding for universities and mathematical research in general.

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Coinbase is officially seeking applications for our 2022 developer grants focused on blockchain developers who contribute directly to a blockchain codebase, or researchers producing whitepapers. Learn more about the call for applications here.

FACT0RN Blockchain: Integer Factorization as Proof-of-Work (PoW) was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By George Liu and Matthew Turk

Tl;dr: This blog analyzes centralized stablecoin lending yield for Compound Finance and shares our insights on performance, volatility, and factors that drive this yield on collateralized lending of stablecoins in DeFi. The analysis shows that this lending yield can outperform the risk-free yield in the TradFi market.

In part two of this quantitative research piece, we will examine stablecoin lending yield for the Compound Finance V2 decentralized finance (DeFi) protocol and share our insights on yield performance, volatility, and what factors are driving yield on collateralized lending of stablecoins through DeFi protocols. We also compare the “risk-free” yield in traditional finance (TradFi) to the concept of “low-risk” yield in DeFi, which we introduced in part one.

ACKNOWLEDGEMENT: While we are aware of the recent collapse of Terra’s algorithmic stablecoin TerraUSD (UST), our analysis here is on the area of collateralized lending yield for centralized stablecoins. We’re focused specifically on Compound for USDC and USDT (fiat-backed stablecoins), which have disparate risks and opportunities.

We conclude in this piece that using stablecoins for low-risk (within DeFi) collateralized lending could outperform the risk-free investment in the traditional financial market.

USDT/USDC Yield Analysis

As mentioned in part one of this blog post, a Compound user who has placed their assets into a liquidity pool can calculate total lending yield using exchangeRate, which is an indication of the value of the interest that the lender can expect to receive over time, and the return from time T1 to T2 can be simply obtained as

R(T1,T2)=exchangeRate(T2)/exchangeRate(T1)-1.

Additionally, annualized yield for this type of collateralized lending (assuming continuous compounding) can be calculated as

Y(T1,T2)=log(exchangeRate(T2)) — log(exchangeRate(T1))/(T2-T1)

While the Compound liquidity pools support many stablecoin assets such USDT, USDC, DAI, FEI etc, we are only going to analyze the top 2 stablecoins here, i.e USDT and USDC, which have a market capitalization of $80B and $53B respectively. Together, they make over 70% of the total market of the stablecoins.

Below are the plots of the annualized daily, weekly, monthly and biannual yields generated according to the formulas in the previous section. The daily yield is somewhat volatile, while the weekly, monthly and biannual yields are respectively the smoothed version of the prior granular plot. USDT and USDC have relatively similar patterns in the plot, as they both experience high yield and high volatility during the start of 2021. This indicates that there are some systematic factors that are affecting the stablecoin lending market as a whole.

Source: The Graph

One hypothesis of the systematic factors that could affect the lending yield are crypto market data (like the BTC/ETH prices) and its corresponding volatilities. When BTC and ETH are in an ascending trend, some bull-chasing investors may borrow from the stablecoin pools to buy BTC/ETH, and then use the purchased BTC/ETH as collateral to borrow more stablecoins and repeat this cycle until their leverage reaches the desired level. Additionally, when the market enters into a high volatility regime, there are more centralized and decentralized crypto transactions which could increase the demand for stablecoins as well.

Now, to check the relationship of the stablecoin yield and the crypto market data, we perform a simple linear regression analysis to see how much variation in the yield can be attributed to the price and volatility factors using the following formula:

To measure the magnitude of these factors’ contribution, we use the R-Squared score, which has a range of [0, 100%]. A score of 100% would mean that the yield is completely determined by the contributing factors.

Regression of USDC/USDT on the BTC market and the ETH market respectively lead us to the following R-Squared table:

ETH market data has a better explanatory power (18% & 17%) than the BTC market data (16% & 11%) in determining the yield of USDC and USDT. This is unsurprising, particularly due to ETH’s increased popularity and expanded footprint in the DeFi market since the start of 2021. As seen with these results, crypto price and volatility factors did not fully explain the yield in stablecoins. We can conclude that there must be other factors that help to improve the score from the basic model.

We performed further exploratory analysis by introducing the historical stablecoin supply data and MACD technical indicator price data to the model. The stablecoin supply (the total number of stablecoins supplied to Compound liquidity pools) should — intuitively — affect the availability/scarcity of the stablecoins and indirectly impact the yield. MACD is an important momentum trading signal (subtracting the 26 period EMA from the 12 period EMA — in this case on price) as it could help momentum investors to decide when to leverage and when to deleverage.

We see a noticeable increase in R-Squared scores, as both USDC and USDT got a bump to a level around 60%-70% as shown below.

From this data we can conclude that stablecoin supply is a substantial contributing factor, as it alone is able to bring the score to around 60% for both stablecoins in any of the two markets. It seems to suggest that [supply] is a major factor in affecting the yield in the stablecoin lending market. This is very similar to the TradFi world, where credit supply by the Federal Reserve will affect the general interest rate of the whole system.

The introduction of MACD data (on BTC and ETH price) brings mixed improvement. In the case of the BTC market, its independent contribution is far less than the supply factor, and the marginal benefit over the shoulder of supply is only a few percentage points. We noticed in the ETH market, however, that MACD has a greater independent contribution to the R-Squared value as compared to the BTC market. This suggests that stablecoin lending yields are more correlated with momentum based trading activity in ETH than in BTC.

An example of the regression coefficients for USDC lending yield in the ETH market are displayed below. The table suggests that higher ETH prices, volatility and [stable coin supply] are generally associated with lower USDC lending yield. At the same time, the stronger the MACD signal is, the higher the yield would go.

Comparison to the Traditional Risk-Free Yield

While it is interesting to reveal what has driven the low-risk yield on stablecoin lending, it is also important to compare these yields with the counterpart in the TradFi market.

Because stablecoin lending yields are derived from the realized floating interest rates for collateralized loans on the Compound platform, we selected the General Collateral (GC) rate used in the traditional money market as the comparable risk-free rate, because it is also a floating rate with treasury debt as the loan collateral.

Below is a plot of the portfolio value of the investments that earn USDC lending yield, USDT lending yield, and GC rate yield respectively. The investments all start with $100 initial value on 2020–05–01, and end on 2022–05–01. As seen below, yield on USDT and USDC collateralized lending is higher than the GC rate by a large margin. On the other hand, risk-free investment that earns GC rate hardly grows for the same period.

The average interest rate in the table below also confirms that GC rate is on average around 0.08%, while USDC and USDT lending yields are respectively 3.71% and 4.51% for this period as seen below. (We also checked the 2Y term yield on the treasury debt on 2020–05–1 which is merely 0.2%)

For the foreseeable future, it is reasonable to conclude that the low-risk rate, within the crypto market at least, will continue to outperform the risk-free rate in the TradFi market. One reason for this is the smart contract risk, or liquidation risk mentioned in part one of this blog. However, a larger reason is the slower growth in the stablecoin supply relative to the growth in the crypto economy as a whole. By comparison, the TradFi market has seen major credit growth since the start of the Covid-19 pandemic, which has helped to drive the risk-free rate to historical lows (see Fed balance sheet growth below).

Conclusions

This blog provided a broadly indicative analysis of the low-risk yields available from collateralized lending of stablecoins through DeFi protocols. While these yields may be very volatile on a daily basis, their general trend can be explained relatively well by BTC/ETH prices, volatilities, stablecoin supply and MACD (momentum trading activities). We also compared these yields with the risk-free rate in the TradFi market where we see consistent outperformance in the crypto market. To reiterate, this is not financial advice.

Next steps

We, as part of the Data Science Quantitative Research team, aim to get a holistic understanding of this space from a quantitative perspective. We are looking for people that are passionate in this effort to join our growing team. If you are interested in Data Science and in particular Quantitative Research in crypto, come join us.

The analysis makes use of the Compound v2 subgraph made available through the Graph Protocol. Special thanks to Institutional Research Specialist, David Duong, for his contribution and feedback.

NOT INVESTMENT ADVICE

The content is for informational purposes only, is general in nature and should not be relied upon or construed as legal, tax, investment, financial, a promise, guarantee, or other advice. Nothing contained herein constitutes a solicitation, recommendation, endorsement, or offer by Coinbase or its affiliates to buy or sell any cryptocurrency or other instruments in any jurisdiction in which such solicitation or offer would be unlawful under the laws of such jurisdiction.

Part 2: Quantitative Crypto Insight: Stablecoins and Unstable Yield was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Coinbase is pleased to announce the international expansion of the Travel Rule Universal Solution Technology (TRUST), a global, industry-driven solution designed to comply with a requirement known as the Travel Rule while protecting the security and privacy of customers.

In February of this year, TRUST launched in the United States. Since that launch, TRUST has now gone live in Canada and Singapore, and is actively working to expand to other global jurisdictions, including Europe. As more countries begin to implement Travel Rules, TRUST is focused on providing its top-tier compliance services to virtual asset service providers (VASPs) around the globe, including its critical security safeguards.

Since its earlier announcement, TRUST has continued to add many new global entities to the TRUST membership. The TRUST coalition today has 36 members including: Amber Group, Anchorage, Balance, Binance US, BitGo, bitFlyer, Bittrex, BlockFi, BlocPal, Cake DeFi, Circle, Coinbase, Coinhako, Coinsmart, Coinsquare, Crypto.com, Custodia, Fidelity Digital Assetsˢᵐ, Gemini, Kraken, Netcoins, Nexo, Paxos, Robinhood, sFOX, Shakepay, Standard Custody & Trust, Symbridge, Tetra Trust, TradeStation, Unbanked, VirgoCX, Voyager, Wealthsimple, Zero Hash, and Zodia Custody.

TRUST is a global Travel Rule compliance solution. While the Travel Rule requirements in many jurisdictions can vary, TRUST is specifically designed with the flexibility to adapt to these different requirements, while delivering the following top-tier safeguards to customers’ privacy and security.

1. No central store of personal data: We never centrally store sensitive customer information where it could be targeted by an attacker or misused by a third party. The required information is only directly sent from one TRUST member to another, through end-to-end encrypted channels, and the receiver is required to safeguard it.
2. Proof of address ownership: TRUST includes a mechanism for the receiving VASP to prove that it’s the owner of the receiving crypto address before customer information is sent — to ensure the right information is sent to the right VASP.
3. Core security & privacy standards: We require all TRUST members to meet core anti-money laundering, security, and privacy requirements before joining the solution.

The rapid expansion of TRUST in the United States and internationally marks a significant milestone in the journey to become the industry-standard solution for Travel Rule compliance. And this is only the beginning. We anticipate that, over the coming year, TRUST will welcome many new members around the world.

If you are interested in joining TRUST, please contact us.

TRUST Expands its Global Footprint and is Now Live Internationally was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Tl;dr: Coinbase Wallet makes it simple to trade tokens on your choice of network. This month, we expanded our trading features to support token swaps on BNB Chain and Avalanche.

By Catherine Shyu Sullivan, Senior Product Manager

More than $1 trillion were traded on decentralized exchanges (DEXs) in 2021 — a staggering 858% increase from 2020. Coinbase Wallet brings the expansive world of DEX trading to your fingertips, where you can easily swap thousands of tokens, trade on your preferred network, and discover the lowest fees.

Today, we’re providing even more reasons to trade on Coinbase Wallet. In addition to making swaps on Ethereum and Polygon, you can now trade on BNB Chain (formerly Binance Smart Chain) and Avalanche, letting you swap a greater variety of tokens than most traditional centralized exchanges can offer.

One Wallet. Multiple Chains. Thousands of tokens.

Decentralized exchanges are peer-to-peer marketplaces that enable transactions to occur directly between users, fulfilling one of crypto’s core tenets of fostering financial freedom without banks, brokers, or other intermediaries. DEXs also provide access to the emerging world of web3 through tokens such as ApeCoin, JOE, PancakeSwap and others.

Coinbase Wallet’s in-app DEX makes it easy to access these types of tokens through its trading feature, which compares rates across multiple exchanges through the 0x API and saves you the extra steps along the way. Adding support for networks such as BNB Chain, Avalanche, and Polygon means you can trade more tokens, faster, and with more affordable network fees (read more about those here).

DEX trading made easy

It’s easy to get started with Coinbase Wallet’s built-in DEX trading feature. Tap the ‘trade’ button in your mobile app or click the ‘swap’ icon in the browser extension, pick the token you want to exchange and the token you’d like to exchange it for, tap ‘confirm’, and you’re all set — it’s that quick and easy.

To trade tokens on a different network, simply tap the network icon in the top right corner of the Wallet mobile app, or click the network name in your browser extension, and select the network you’d like to make your swap on. Before swapping on a network, make sure you have the native token of the network you wish to make a swap on in your wallet to cover the network fees. For example, for a swap on Avalanche, you will need some AVAX in your wallet.

For a more detailed overview of how to use the in-app DEX and commonly asked questions, check out this Help Center article.

Looking Ahead

We want to make it easier for you to engage in the world of decentralized finance (DeFi) and web3. In the months to come, we’ll be making it possible to conduct swaps on an even greater variety of networks. Not only will trading expand, but we’re also planning to add support for network bridging, allowing you to seamlessly move tokens across multiple networks. Make sure to follow us on Twitter for the latest Coinbase Wallet news and product updates.

Coinbase Wallet is a self-custody wallet providing software services subject to Coinbase Wallet Terms of Service and Privacy Policy. Coinbase Wallet is distinct from Coinbase.com, and private keys for Coinbase Wallet are stored directly by the user and not by Coinbase. Fees may apply. You do not need a Coinbase.com account to use Coinbase Wallet.

Trade thousands of tokens on your choice of network in Coinbase Wallet was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

by Surojit Chatterjee, Chief Product Officer, Coinbase

Tl;dr: This week I presented our vision for building for web3 at the Permissionless conference by Blockworks. Sharing my full presentation here.

My Permissionless presentation on how Coinbase is building for web3 was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

TL;DR: Coinbase is announcing its partnership and investment in the WNBA ecosystem.

Today, Coinbase is excited to announce our expanded investment within the Women’s National Basketball Association (WNBA) ecosystem. In addition to the League, our new partners include the Women’s National Basketball Players Association (“WNBPA” — the union which represents all players), two team partners, the New York Liberty and Seattle Storm, and two of the league’s biggest stars, Sue Bird and Jewell Loyd.

Coinbase believes the cryptoeconomy will be built by talented and creative women who are rewriting the rules and welcoming the future — just like those in and around the WNBA. While the WNBA is on a journey to transform their league long-term, having announced the largest-ever capital raise for a women’s sports property in February of this year, Coinbase continues to work towards its mission to create more economic freedom in the world and bring the next 100 million users to the cryptoeconomy.

Coinbase has accelerated opportunities to introduce crypto to our new partners and WNBA fans. At this year’s Rookie Orientation, we ran a crash course covering crypto and NFTs for the top rookies invited to the Draft. Thanks to the WNBPA, all 144 WNBA players will be set up with Coinbase accounts and crypto funds to further familiarize themselves with the space. New York Liberty and Seattle Storm fans will get the chance to earn crypto through giveaways and experience web3 through IRL activations. Fans of Sue Bird and Jewell Loyd will also see them make their mark in crypto and NFTs in the same way they’ve done for the game of basketball.

Coinbase, through its proud partnerships with the WNBA and WNBPA, wants to enable more participation in the cryptoeconomy and web3, and engaging more women and our new partners will allow us to do just that.

Why Coinbase and the WNBA are investing in the future together was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Paul Grewal, Chief Legal Officer

Tl;dr: At Coinbase, we take our responsibility to build a more open, accessible financial system very seriously. We’re deeply committed to our asset listing policies and processes, and we’ll continue to innovate as our dynamic space evolves.

A few weeks ago, we shared concerns about purchases of certain assets right before we announced they were being considered for listing on Coinbase — possibly using insider information. We take this issue very seriously and therefore wanted to share more about our efforts in this space.

The blockchain fundamentally drives greater transparency in financial transactions

First, it’s important to understand that tracking and disrupting bad actors using crypto is far more effective than if they were using traditional fiat currencies. This isn’t to say that it’s easy, but we do have an advantage because crypto transactions are recorded on a permanent and public blockchain, which gives our investigation teams — along with the public and law enforcement — visibility into the details of different transactions. With crypto, it’s possible to trace and map transactions across users and exchanges — creating a fuller picture of what happened with any given trade, and making it easier to identify things that look like possible market manipulation or trades using material nonpublic information.

We have an exceptional team dedicated to preventing and identifying financial crimes

We have more than a decade of experience tracking and disrupting illegal activity, and have built expert teams to support these efforts along the way, including many with substantial experience in the public and private sector. In addition to our Security, Trade Surveillance, Global Investigations, and Special Investigations teams, we have a dedicated Financial Crimes Legal team. This team is led and staffed by multiple former federal criminal prosecutors and overseen by a former federal judge. Many of these former prosecutors have been part of some of the largest cryptocurrency cases in history, and are charged with making sure we’re doing everything we can to detect and disrupt bad actors.

Frontrunning can happen through technical or human means

Technical

The primary way we’ve seen information about possible asset listings become public before any announcement is through technical signals. For example, sometimes before onboarding an asset, we have to test it in ways that show up on the blockchain. These signals are not obvious to most, but are nevertheless accessible to all and may be detected if someone is looking hard enough for it, by examining on-chain data. That’s why we take steps to minimize this type of risk, including:

• Announcing planned asset launches once a decision has been made to list an asset, but before key technical integration work begins, so everyone has access to the same information.
• Exploring new ways of integrating and testing asset launches (including off-chain sandbox testing).
• Building and deploying industry-first analysis tools to test our systems using a wide range of techniques based on observed real-world behavior.
• Using a variety of best-in-class security tools to monitor and control access to sensitive listing information.

Human Sharing/Frontrunning

Information can obviously get out when people share it. Coinbase has gone above and beyond what a traditional financial institution can do to track and address this kind of bad behavior:

• Our Trade Surveillance and other teams leverage the public blockchain to detect prohibited or suspicious transactions and then trace those funds across wallets, users, and exchanges (in a way traditional finance can’t) to see who profited and understand their connections.
• We mandate that all employees trade crypto only on Coinbase’s trading platforms (where the asset is supported) so we can look out for prohibited trading activities.

In addition to Trade Surveillance, we also have more than 50 employees across various teams supporting the detection and prevention of illicit activity and misconduct, both on our platform and within the broader crypto ecosystem.

As we’ve stated multiple times, if an investigation finds that a Coinbase employee was involved in misuse of company information related to asset listings, we will not hesitate to terminate them — and, when appropriate, refer them to relevant law enforcement authorities.

We measure impact to drive accountability

It takes time to notice the effect of some of these changes, but we’re already seeing positive early indications of their impact on new asset launches.

Conclusion

To us, success is all market participants trading on the same information. That’s our goal. Crypto is a dynamic environment, so we are continually looking for additional ways to protect the confidentiality of information about our asset listings.

That’s why steps like these are so important. And while there’s always more work to do, I’m confident that we have the teams, resources, and experience to make Coinbase the most innovative and trusted way for people everywhere to access the cryptoeconomy.

Building a more open financial System: How Coinbase detects bad actors was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Kate Rouch, Chief Marketing Officer

This week Coinbase celebrated a milestone of 10 years in business by doing what we do best — building! Just this week: Coinbase unveiled our web3 mobile dapp and DeFi wallet and browser, announced our Primer Commerce integration and introduced Coinbase Institute. CMO Kate Rouch explains how Coinbase used this milestone moment to shine a light on all those who remain focused on building the future.

COINBASE: The crypto market has taken a downturn. How is your team thinking about this?

Volatility is painful, and can be scary. Nobody likes to lose money in the short term — whether in crypto, or the stock market more broadly. That said, volatility is also natural for emerging technological breakthroughs like crypto. At Coinbase, we’re inspired by the long term view and the spirit of those who continue to keep innovating no matter the external environment.

COINBASE: Where does the confidence in a crypto “rebound” come from?

Coinbase was founded 10 years ago this week into a “crypto winter.” After founding, we quickly entered 3 wrenching downturn years. Being in crypto during this time was incredibly challenging and lonely. But Coinbase and the crypto economy more broadly emerged stronger for it. A lot of new and exciting projects, entrepreneurs, and communities formed during that time.

COINBASE: What do you think Coinbase has learned from past crypto winters?

Crypto has exited every winter stronger than it entered. This is true across all key metrics. Regardless of how long it lasts or how severe it gets, we believe this cycle will be no different. This is the opportunity for the defining companies of Web3 to emerge.

COINBASE: What should folks take away from this new spot?

Builders build, and have a long term view. That’s core to Coinbase’s DNA, and the attitude that will ultimately move us all forward. It’s easy to write an obituary. It’s hard to bring something new to life. We hope this ad inspires people who have been through these types of challenges before — whether in crypto or beyond — to share their wisdom, and inspiration. #buildersbuild

Zoom out. Keep shipping. And — long live crypto.

-Kate

Long Live Crypto was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

Introducing the Coinbase Institute: Advancing the policy debate around crypto and the future of web3

By: Hermine Wong, Director of the Coinbase Institute

Tl;dr: Today signals the launch of the Coinbase Institute, a global crypto-native think tank. Our mission is to accelerate rigorous, novel research, and to bring together the best minds across disciplines to fuel progress on decentralization, web3, and the future of finance.

Today, we’re launching the Coinbase Institute — a global crypto-native think tank grounded in evidence-based research. Our mission is to accelerate rigorous, novel research, and to bring together the best minds across disciplines to fuel progress on decentralization, web3, and the future of finance. Our work will cut across many disciplines and provide expert analysis and insights about what’s happening in the global cryptoeconomy.

The Coinbase Institute’s mission will be anchored around four core pillars of work:

1. Conducting and publishing rigorous, cutting-edge crypto & web3 research;
2. Convening collaborative discussions with thought leaders, academics, policymakers, and the crypto community;
3. Forging partnerships with academic institutions and think tanks to accelerate early-stage research and technical innovation;
4. Building an interdisciplinary in-house team to advance public knowledge and awareness of crypto and web3.

What’s launching today?

• Our Coinbase Primers series, starting with Crypto and the Climate. Our primers are designed to unpack high-profile concepts around crypto and web3. News in this space moves quickly — it can be challenging to understand the technology and data underlying the headlines. Our primers will break through the noise to provide clear explanations of key issues along with the latest numbers and analysis.
• Our first Coinbase Institute Monthly Insights Report on digital asset markets. This month, we focus on providing a real-time comparative analysis of market movements in the cryptoeconomy and traditional finance. Each month, we’ll provide real-time trends and insights on particular themes of the cryptoeconomy, and over time, we will return to these themes to reflect the changing nature of the issues we cover.
• Our first academic partnership with the University of Michigan, with whom we will kick off the first comprehensive annual survey of U.S. households’ adoption of and sentiments toward crypto. The University of Michigan Survey Research Center conducts some of the most widely cited and influential studies in the world, including survey work for the U.S. Census Bureau and the Department of Defense.

Leadership & Advisory Board

Our Leadership Team:

• Hermine Wong is the Director of the Coinbase Institute and a Director of Policy at Coinbase. Previously, Hermine served in the U.S. Securities and Exchange Commission at their Division of Economic and Risk Analysis. She also worked at the Office of Management and Budget’s Office of Information and Regulatory Affairs (OIRA) within the Executive Office of the President, and at the U.S. Department of State.
• Dr. Cesare Fracassi joins us as our first Director of Economic Research and Chief Economist of the Coinbase Institute. Cesare is also a member of the State of Texas Work Group on Blockchain Matters. Before joining Coinbase, he was an associate professor of finance at the McCombs School of Business at the University of Texas at Austin, where he was the Director of the Blockchain Initiative and the Fintech Research Lab.

Our Advisory Board:

• Christian Catalini, founder of the MIT Cryptoeconomics Lab, Research Scientist at the MIT Sloan School, and co-creator of Diem (formerly Libra). His research focuses on crypto and blockchain technology.
• Marco Di Maggio, faculty member in the Finance Unit at Harvard Business School and a faculty research fellow at the National Bureau of Economic Research. His research focuses on financial intermediation, with a particular interest in the disruption of financial markets by new technologies.
• Vikramaditya S. Khanna, Professor of Law at the University of Michigan William W. Cook Law School and Research Member of the European Corporate Governance Institute. His research includes corporate and securities laws, global business and law practice, law and technology, and law and economics.
• Nagpurnanand Prabhala, Francis J. Carey, Jr. Endowed Professor in Business and Professor of Finance at the Johns Hopkins University Carey School of Business. His primary research interests are in empirical corporate finance and financial intermediation.
• Manju Puri, J.B. Fuqua Professor of Finance at the Duke University Fuqua School of Business. She is an authority in the field of empirical corporate finance, with particular expertise in financial intermediation.

What’s next?

We’re still at the early stages of the cryptoeconomy’s evolution, and it’s here to stay. In the future, the Coinbase Institute plans to publish more original research papers and to convene thoughtful discussions around our four pillars. Despite the recent market noise, comprehensive data and analysis about crypto’s adoption over time will provide the public, policymakers, regulators, and academics with a better understanding of crypto’s diversity and interconnection to the overall economy.

In the meantime, do you have feedback on our work or new topics to suggest? Visit us at our website to join the discussion, explore our research, and learn more about our advisors, partnerships, and events to come. Follow @coinbase and join the conversation.

Introducing the Coinbase Institute: Advancing the policy debate around crypto and the future of… was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.