Coinbase

By Elke Karskens, Head of EMEA Marketing

Awards season is in full swing across Europe, and this week we were delighted to win Best Digital Asset Custodian 2022 in HFM Europe Services’ annual awards. This success further underlines both our integral role within the cryptoeconomy, particularly in terms of further enabling institutional engagement, and also the incredible team that we’re building here at Coinbase.

Over the past three years we’ve seen widespread adoption of cryptocurrencies across the world, with total crypto market capitalisation increasing nearly three-fold from the end of 2020. Indeed, a recent study showed that nearly 1 in 4 US households own crypto. However, it isn’t just the public realising the potential of digital assets. There has also been significant adoption among institutions, and this accelerated in 2021 as a broader range of clients sought to engage with crypto. Alongside a broad range of pension funds and asset managers, we’re proud to have Anheuser-Busch, Brex, Enfusion and Franklin Templeton on the Coinbase institutional platform.

Enabling this access to the cryptoeconomy for a wider range of institutions aligns with our mission to create an open financial system for the world. Digital assets allow for greater efficiency in the financial sector and offer a transformational level of financial empowerment for everyday people and institutions alike. The cryptoeconomy is rapidly evolving and there’s a wealth of opportunities yet to be discovered.

In a broader sense, the increasing adoption of cryptocurrency by institutions illustrates how digital assets continue to permeate into mainstream business and finance. Digital assets are becoming a worldwide phenomenon with governments, companies and countries competing to establish themselves as leaders in the space. Coinbase lies at the heart of this, and we would like to take this opportunity to publicly thank the company’s entire institutional team for their hard work and dedication.

Looking ahead, we hope to continue our role as the leading digital asset custodian supporting institutions of all kinds in their engagement with the world of cryptocurrency.

We’re always looking for smart people to help us continue to build. If that sounds like you, check out our jobs page here.

Coinbase wins Best Digital Asset Custodian Award was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

How Coinbase is using Relay and GraphQL to enable hypergrowth

By Chris Erickson and Terence Bezman

A little over a year ago, Coinbase completed the migration of our primary mobile application to React Native. During the migration, we realized that our existing approach to data (REST endpoints and a homebuilt REST data fetching library) was not going to keep up with the hypergrowth that we were experiencing as a company.

“Hypergrowth” is an overused buzzword, so let’s clarify what we mean in this context. In the 12 months after we migrated to the React Native app, our API traffic grew by 10x and we increased the number of supported assets by 5x. In the same timeframe, the number of monthly contributors on our core apps tripled to ~300. With these additions came a corresponding increase in new features and experiments, and we don’t see this growth slowing down any time soon (we’re looking to hire another 2,000 across Product, Engineering, and Design this year alone).

To manage this growth, we decided to migrate our applications to GraphQL and Relay. This shift has enabled us to holistically solve some of the biggest challenges that we were facing related to API evolution, nested pagination, and application architecture.

API evolution

GraphQL was initially proposed as an approach to help with API evolution and request aggregation.

Previously, in order to limit concurrent requests, we would create various endpoints to aggregate data for a particular view (e.g., the Dashboard). However, as features changed, these endpoints kept growing and fields that were no longer used could not safely be removed — as it was impossible to know if an old client was still using them.

In its end state, we were limited by an inefficient system, as illustrated by a few anecdotes:

1. An existing web dashboard endpoint was repurposed for a new home screen. This endpoint was responsible for 14% of our total backend load. Unfortunately, the new dashboard was only using this endpoint for a single, boolean field.
2. Our user endpoint had become so bloated that it was a nearly 8MB response — but no client actually needed all of this data.
3. The mobile app had to make 25 parallel API calls on startup, but at the time React Native was limiting us to 4 parallel calls, causing an unmitigatable waterfall.

Each of these could be solved in isolation using various techniques (better process, API versioning, etc.), which are challenging to implement while the company is growing at such a rapid rate.

Luckily, this is exactly what GraphQL was created for. With GraphQL, the client can make a single request, fetching only the data it needs for the view it is showing. (In fact, with Relay we can require they only request the data they need — more on that later.) This leads to faster requests, reduced network traffic, lower load on our backend services, and an overall faster application.

Nested pagination

When Coinbase supported 5 assets, the application was able to make a couple of requests: one to get the assets (5), and another to get the wallet addresses (up to 10) for those assets, and stitch them together on the client. However, this model doesn’t work well when a dataset gets large enough to need pagination. Either you have an unacceptably large page size (which reduces your API performance), or you are left with cumbersome APIs and waterfalling requests.

If you’re not familiar, a waterfall in this context happens when the client has to first ask for a page of assets (give me the first 10 supported assets), and then has to ask for the wallets for those assets (give me wallets for ‘BTC’, ‘ETH’, ‘LTC’, ‘DOGE’, ‘SOL’, …). Because the second request is dependent on the first, it creates a request waterfall. When these dependent requests are made from the client, their combined latency can lead to terrible performance.

This is another problem that GraphQL solves: it allows related data to be nested in the request, moving this waterfall to the backend server that can combine these requests with much lower latency.

Application architecture

We chose Relay as our GraphQL client library which has delivered a number of unexpected benefits. The migration has been challenging in that evolving our code to follow idiomatic Relay practices has taken longer than expected. However, the benefits of Relay (colocation, decoupling, elimination of client waterfalls, performance, and malleability) have had a much more positive impact than we’d ever predicted.

Simply put, Relay is unique among GraphQL client libraries in how it allows an application to scale to more contributors while remaining malleable and performant.

These benefits stem from Relay’s pattern of using fragments to colocate data dependencies within the components that render the data. If a component needs data, it has to be passed via a special kind of prop. These props are opaque (the parent component only knows that it needs to pass a {ChildComponentName}Fragment without knowing what it contains), which limits inter-component coupling. The fragments also ensure that a component only reads fields that it explicitly asked for, decreasing coupling with the underlying data. This increases malleability, safety, and performance. The Relay Compiler in turn is able to aggregate fragments into a single query, which avoids both client waterfalls and requesting the same data multiple times.

That’s all pretty abstract, so consider a simple React component that fetches data from a REST API and renders a list (This is similar to what you’d build using React Query, SWR, or even Apollo):

A few observations:

1. The AssetList component is going to cause a network request to occur, but this is opaque to the component that renders it. This makes it nearly impossible to pre-load this data using static analysis.
2. Likewise, AssetPriceAndBalance causes another network call, but will also cause a waterfall, as the request won’t be started until the parent components have finished fetching its data and rendering the list items. (The React team discusses this in when they discuss “fetch-on-render”)
3. AssetList and AssetListItem are tightly coupled — the AssetList must provide an asset object that contains all the fields required by the subtree. Also, AssetHeader requires an entire Asset to be passed in, while only using a single field.
4. Any time any data for a single asset changes, the entire list will be re-rendered.

While this is a trivial example, one can imagine how a few dozen components like this on a screen might interact to create a large number of component-loading data fetching waterfalls. Some approaches try to solve this by moving all of the data fetching calls to the top of the component tree (e.g., associate them with the route). However, this process is manual and error-prone, with the data dependencies being duplicated and likely to get out of sync. It also doesn’t solve the coupling and performance issues.

Relay solves these types of issues by design.

Let’s look at the same thing written with Relay:

How do our prior observations fare?

1. AssetList no longer has hidden data dependencies: it clearly exposes the fact that it requires data via its props.
2. Because the component is transparent about its need for data, all of the data requirements for a page can be grouped together and requested before rendering is ever started. This eliminates client waterfalls without engineers ever having to think about them.
3. While requiring the data to be passed through the tree as props, Relay allows this to be done in a way that does not create additional coupling (because the fields are only accessible by the child component). The AssetList knows that it needs to pass the AssetListItem an AssetListItemFragmentRef, without knowing what that contains. (Compare this to route-based data loading, where data requirements are duplicated on the components and the route, and must be kept in sync.)
4. This makes our code more malleable and easy to evolve — a list item can be changed in isolation without touching any other part of the application. If it needs new fields, it adds them to its fragment. When it stops needing a field, it removes it without having to be concerned that it will break another part of the app. All of this is enforced via type checking and lint rules. This also solves the API evolution problem mentioned at the beginning of this post: clients stop requesting data when it is no longer used, and eventually the fields can be removed from the schema.
5. Because the data dependencies are locally declared, React and Relay are able to optimize rendering: if the price for an asset changes, ONLY the components that actually show that price will need to be re-rendered.

While on a trivial application these benefits might not be a huge deal, it is difficult to overstate their impact on a large codebase with hundreds of weekly contributors. Perhaps it is best captured by this phrase from the recent ReactConf Relay talk: Relay lets you, “think locally, and optimize globally.”

Where do we go from here?

Migrating our applications to GraphQL and Relay is just the beginning. We have a lot more work to do to continue to flesh out GraphQL at Coinbase. Here are a few things on the roadmap:

Incremental delivery

Coinbase’s GraphQL API depends on many upstream services — some of which are slower than others. By default, GraphQL won’t send its response until all of the data is ready, meaning a query will be as slow as the slowest upstream service. This can be detrimental to application performance: a low-priority UI element that has a slow backend can degrade the performance of an entire page.

To solve this, the GraphQL community has been standardizing on a new directive called @defer. This allows sections of a query to be marked as “low priority”. The GraphQL server will send down the first chunk as soon as all of the required data is ready, and will stream the deferred parts down as they are available.

Live queries

Coinbase applications tend to have a lot of rapidly changing data (e.g. crypto prices and balances). Traditionally, we’ve used things like Pusher or other proprietary solutions to keep data up-to-date. With GraphQL, we can use Subscriptions for delivering live updates. However, we feel that Subscriptions are not an ideal tool for our needs, and plan to explore the use of Live Queries (more on this in a blog post down the road).

Edge caching

Coinbase is dedicated to increasing global economic freedom. To this end, we are working to make our products performant no matter where you live, including areas with slow data connections. To help make this a reality, we’d like to build and deploy a global, secure, reliable, and consistent edge caching layer to decrease total roundtrip time for all queries.

Collaboration with Relay

The Relay team has done a wonderful job and we’re incredibly grateful for the extra work they’ve done to let the world take advantage of their learnings at Meta. Going forward, we would like to turn this one-way relationship into a two-way relationship. Starting in Q2, Coinbase will be lending resources to help work on Relay OSS. We’re very excited to help push Relay forward!

Are you interested in solving big problems at an ever-growing scale? Come join us!

Rearchitecting apps for scale was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Darin Carter, Coinbase Giving Program Manager

What is the Innovation Challenge

This fall, Coinbase Giving launched the Blockchain Breakthroughs Innovation Challenge as a step to raise awareness about blockchain technology and make it more inclusive and accessible for everyone. The purpose of this challenge was to source innovative ideas for how to leverage the unique attributes of blockchain technology to solve some of our world’s most prominent problems. We saw participation from over 300 teams and heard some incredible ideas.

The goal of this challenge was not to ask these competitors to come up with a fully baked solution, but to incentivize the builders at the intersection of Web3 and social impact to try out many solutions, share results/progress, and build a better world together as a community, with their findings.

How it worked

• In October 2021, Coinbase Giving and its partner Base 11 launched the Innovation challenge, in partnership with crowdsourcing website HeroX.com, at the Next Frontier Conference to highlight how blockchain technology can drive social impact.
• The Challenge was made accessible to students and early-career adults from across the country on Base 11’s free membership platform Base 11 Digital.
• In early January of 2022, our subject matter experts judged the first round of entries internally according to our innovation challenge scoring framework.
• Twelve finalists were invited to pitch their idea to our leadership team for consideration.
• After a final round of judging, Coinbase Giving and Base11 awarded $10,000 USD in prizes to winners which could be received in USD, BTC, or ETH.

Winning projects proposed how blockchain technology can be leveraged across the topics of renewable energy micro-grids, the debt crisis, global resource support, smart-contract life insurance, voting fraud, and much more. The full list of winners, with additional details on the projects and communities they serve, can be found here.

What we learned

• Innovation can come from anywhere: Our participants represented countries all over the world including New Zealand, Germany, the Philippines, Argentina, Colombia, and many more countries around the globe. We’re proud to say that the best ideas came from outside of the crypto industry. Our participants were teachers, doctors, dentists, psychologists, supply chain workers, community leaders, and more looking to share their amazing ideas for how blockchain can make a difference.
• Asking the right question can be powerful: By asking people from various backgrounds how blockchain can make an impact, specifically in areas like environmental sustainability, financial inclusion, healthcare and education, the people who are closest to the problems worth solving are able to surface ideas on how blockchain can be applied as a solution.
• Blockchain truly has the potential to change the world: As you can see from our winning entries mentioned above, there are many ways that blockchain can have a positive impact in the world.

The Coinbase Giving and Base 11 teams would like to thank all of the participants in this year’s Blockchain Breakthroughs Innovation Challenge for their ideas, hard work, and time. We are looking forward to the next Innovation Challenge and encourage everyone to start brainstorming ideas to pitch to the team.

Coinbase Giving: Insights From The Blockchain Breakthroughs for a Better Future Challenge 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 Josie, a Bitcoin CoreDev, and Coinbase Crypto Community Fund grant recipient, has been working on over the first part of their year-long Crypto development grant. This specifically covers their work on bitcoin transaction privacy.

Since late last year, I have been working with a group of researchers on a project centered around Bitcoin transactions with two or fewer outputs. While the research is still on-going, we identified an opportunity for improvement with respect to Bitcoin transaction privacy. This post details the motivation for the change and work completed thus far.

Privacy in Bitcoin transactions

When thinking about privacy in Bitcoin, I find the following definition helpful:

“Privacy is the power to selectively reveal oneself to the world” — Eric Hughes (1993)

This definition motivates the following statement, “Software should never reveal more information than necessary about a user’s activity.” Applied to Bitcoin transactions, this means we should attempt to keep the payment address and amount private between the payer and payee. One way to break this privacy today is through the “Payment to a different script type” heuristic.

In short, this heuristic works by inferring which of the outputs in a transaction is the change output by examining script types. If a transaction is funded with bech32 (native segwit) inputs and has two outputs, one P2SH and the other bech32, it is reasonable to infer the bech32 output is a change address generated by the payee’s wallet. This allows an outside observer to infer the payment value and change value with reasonable accuracy.

How big of a problem is this?

But how often does this happen? Is this worth improving at all or is it a rare edge case? Let’s look at some data!

Payments to different script types over time

In analyzing transactions from 2010 — present, we found this type of transaction first appearing after the 2012 activation of P2SH addresses, and growing significantly after the 2017 segwit activation. From 2018 onward, these types of transactions account for ~30% of all transactions on the Bitcoin blockchain. This is expected to continue to increase over time as we see increased taproot adoption, which introduces the new bech32m address encoding. This means that we have an opportunity to improve privacy for up to 30% of all Bitcoin transactions today if every wallet had a solution for this.

How can we improve this?

The first step to solve this problem is to match the payment address type when generating a change output. From our earlier example, this means our wallet should instead generate a P2SH address so that the transaction is now bech32 inputs to two P2SH outputs, effectively hiding which of the outputs is the payment and which is the change.

This was logic was merged into Bitcoin core in #23789 — meaning that our wallet will now have a mix of output types depending on our payment patterns. What happens when we spend these UTXOs? Is our privacy from the original transaction still preserved?

Mixing output types when funding a transaction

As it turns out, we might still leak information about our first transaction (txid: a) when spending the change output in a subsequent transaction. Consider the following scenario:

mixing input types in subsequent transactions

• Alice has a wallet with bech32 type UTXOs and pays Bob, who gives them a P2SH address
• Alice’s wallet generates a P2SH change output, preserving their privacy in txid: a
• Alice then pays Carol, who gives them a bech32 address
• Alice’s wallet combines the P2SH UTXO with a bech32 UTXO and txid: b has two bech32 outputs

From an outsider observer’s perspective, it is reasonable to infer that the P2SH Output in txid: b was the change from txid: a. To avoid leaking information about txid: a, Alice’s wallet should avoid mixing the P2SH output with other output types and either fund the transaction with only P2SH outputs or with only bech32 outputs. As a bonus, if txid: b can be funded with the P2SH output, the change from txid: b will be bech32, effectively cleaning the P2SH output out of the wallet by converting it to a payment and bech32 change.

Avoid mixing different output types during coin selection

I have been implementing this logic in Github with ongoing work and review..

If this topic is interesting to you, or if you are looking for ways to get involved with Bitcoin Core development, you can participate in the upcoming Bitcoin PR Review Club for #24584 (or read the logs from the meeting).

Ongoing work

If this logic is merged into Bitcoin Core, my hope is that other wallets will also implement both change address matching and avoid mixing output types during coin selection, improving privacy for all Bitcoin users.

This work has inspired a number of ideas for improving privacy in the Bitcoin Core wallet, as well as improving how we test and evaluate changes to coin selection. Many thanks to Coinbase for supporting my work — I hope to find other opportunities for improvement motivated by analysis as our research continues.

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

Improving Transaction Privacy on the Bitcoin Blockchain was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By L.J Brock, Chief People Officer

Overnight I saw the note from Brian Chesky announcing to Airbnb employees that they would be moving to a permanent remote-working model. I applaud Brian and his team. While it may sound simple in a post-pandemic era, the logistics can be anything but. I am ecstatic to see them join the growing ranks of remote-first companies because more people, more ideas, and more experiments will make remote work better for everyone. Redesigning the nature of work, is work that should not be done in isolation (no pun intended).

When we went remote-first in May 2020 we were not shy to admit that we did not have all the answers, and while we still don’t, there have been some important learnings along the way. As Airbnb starts off on their journey and in our crypto-mindset of being transparent and open source, here are some of our key learnings from operating a remote-first company over the last two years…

Flex on location, consistent on experience

One of the most obvious benefits that drew us to remote-first was the ability to give our people the flexibility to choose where they live and work, while also giving Coinbase access to a much broader talent market. What followed was that we needed to put the practices in place to protect those employee choices and ensure that you are neither privileged or punished for your choice. It’s one thing to say ‘you can choose to work from the office if you prefer’ and another to say ‘you will receive the same opportunities and experience regardless of where you chose to work’.

Some of the practices we’ve introduced include, ‘one person, one device’ meaning regardless of your location, all attendees should join from their own device — creating an equal experience for all. We also have deliberately tried to remove one standard time zone for all employees. Prior to going remote, we had a high density of employees on the west coast and knew that if this was the norm it would penalize those who had chosen to live and work elsewhere. Today we are completely decentralized, without a physical headquarters and we’ve worked hard to instill cultural norms where no standard hours exist. For some employees, this could look like adopting west coast hours and taking the mornings to themselves and for others it may be prioritizing synchronized work in common working hours and async work at other times.

Redesigning how we connect

Human connection is still core to the way we work and going remote-first meant redesigning the way our people connect. When it comes to connection we’ve learned that one-size does not fit all. As we sought to design centralized processes, we realized that our teams needed the flexibility and discretion to design experiences to fit their needs. What has resulted is a set of guidelines and guardrails.

Offsites play a big role in our approach to connection. Each org is designated a bi-annual offsite budget on a use-it-or-lose-it basis. In the past I think there has been pressure to prove ROI for offsites based on the cost of travel, accommodation etc, but we openly recognize that ~90% of the value of coming together is to build relationships. We have optimized our offsite guidance to recommend that teams include just 1–2 days of content, to focus on the most valuable in-person activities and avoid burnout.

Quarterly offsites alone can not carry the full weight of our need for connection, so we complement this approach with remote-first tactics to build connection between in-person meetings. Some tactics that have worked for us include all company virtual events, bi-weekly town halls, quarterly all hands, social neighborhood budgets (an individual discretionary budget to fund meet-ups with colleagues) and team connection budgets (a discretionary manager budget to drive connection within immediate teams).

Async norms

When we committed to remote-first for the long term we had to address some of the more complex realities of working apart, such as how we can make decisions efficiently and asynchronously. This was an important challenge for us to solve and one which Emilie Choi discussed on our blog last year (see ‘How we make decisions at Coinbase’). Having norms around a few types of decision making tool sets (Problem/Proposed Solution and RAPIDs) has made a huge difference in driving consistency, clarifying our thinking and understanding of each other, while being able to move quickly. Another key element of this framework for us has been the use of collaborative technology like Google Docs and the concept of a ‘DRI’ or Directly Responsible Individual for each action item.

Congratulations again, Airbnb. I look forward to continuing to share learnings as we each navigate a remote-first world, and seeing more companies take the leap.

Dear Airbnb: Congratulations and Some Lessons Learned was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Yuga Cohler, Staff Software Engineer at Coinbase

The Merge is coming. The long-awaited transition of the Ethereum network’s consensus mechanism from Proof-of-Work (PoW) to Proof-of-Stake (PoS) is expected to arrive sometime this year. After the Merge, the already-running Beacon Chain will begin validating Ethereum mainnet’s blockchain through a system based on rewards and penalties (i.e. “stake”) rather than the costs associated with computational intractability (i.e. “work”). Six years in the making, the Merge will be a milestone in the history of cryptocurrencies with both material and philosophical implications.

Perhaps the most heralded aspect of the Merge is its resulting efficiency: Ethereum’s shift to PoS will lead to a projected 99.95% reduction in energy consumption compared to PoW. This evolution will be a welcome development at a time when energy costs are surging across the world. Of course, there are legitimate counterarguments against PoS — for example, the concentration of wealth that PoS can facilitate as well as the lack of comparable at-scale testing. Nevertheless, given the existence of a peer-to-peer blockchain network that continues to operate on PoW — namely, Bitcoin — the Merge makes sense as a strategic next step for Ethereum and should garner the goodwill of the environmentally conscious.

The essential accomplishment of the Merge, however, is a more humanistic one than energy efficiency. The Merge has proven to be an extremely complex task with many challenges. Yet, its completion will be achieved not through the dictum of a central authority, but through the organic coordination of like-minded individuals. Fundamentally, a successful Merge will prove the viability of decentralization as a social organizing principle.

I have borne witness to this process through my periodic attendance at the biweekly Ethereum All-Core Developers meetings — a regular forum for Ethereum contributors to share their progress, present improvement proposals, and plan work. What is most remarkable to me about these meetings is how democratic they are. Thirty people — some anonymous, others not; most with their cameras off — convening to decide the fate of a $300 billion financial network. Anyone can propose a topic ahead of the meeting and anyone can contribute their opinion. The discussions are substantive, generally focusing on the engineering tasks at hand, but also spanning the many disciplines that underlie cryptocurrency networks — economics, mechanism design, governance, and culture.

Routinely, Ethereum Founder Vitalik Buterin is in attendance for these meetings. Despite his superlative status in the cryptocurrency community, Vitalik is treated no differently than any other core contributor: with respect and intellectual honesty, but without especial deference for his position. Disagreements over engineering approaches are hashed out in an orderly manner, and challenging Vitalik is a matter of course if it was best for Ethereum as a whole.

In an industry known for individualistic billionaires wielding influence, Vitalik’s approachable disposition is notable. So, it makes sense that this ethos of democratic decentralization imbues not just the meetings, but every aspect of Ethereum. The financial protocols, the cultural products, the governance processes, and now, even the consensus mechanism of Ethereum, are all subservient to the principle of decentralization. Progress is made not through the fiat of a single sovereign, but through the good-faith coordination of unallied actors, none more entitled to power over another.

These ethics of Ethereum are the foundations of its credible neutrality — a property that will become only more valuable as time goes on. On one hand, traditional financial systems are increasingly vulnerable to the nation-states who control them for their own interests. On the other hand, even though alternative L1 blockchains might provide greater scalability, convenience, and agility, none can claim to be as objectively decentralized as Ethereum. Its commitment to axiomatic decentralization positions Ethereum to exist as one of the only systems allowing for the storage and transfer of value with a high level of security, but without a prejudice for intent or origin. The Merge will be the latest alternative to “the inherent weaknesses of the trust based model” that Satoshi Nakamoto pointed out in the Bitcoin whitepaper, made possible by the shared values of the Ethereum ecosystem.

The moral logic of the Merge is decidedly optimistic, and it should be. Teamwork, cooperation, humility, curiosity, honesty: these are values we do not intuitively ascribe to capital markets, and yet, they are the hallmarks of Ethereum that have allowed it to progress towards one of the greatest engineering feats in the history of financial technology. Understanding this ethical foundation of a decentralized democracy should give us a renewed appreciation for the upcoming Merge, and guide us as we chart a course for the future of the cryptoeconomy.

This material is the property of Coinbase, Inc., its parent and affiliates (“Coinbase”). The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Coinbase or its employees and summarizes information and articles with respect to cryptocurrencies or related topics that the author believes may be of interest. This material is for informational purposes only, and is not (i) an offer, or solicitation of an offer, to invest in, or to buy or sell, any interests or shares, or to participate in any investment or trading strategy, (ii) intended to provide accounting, legal, or tax advice, or investment recommendations or (iii) an official statement of Coinbase. No representation or warranty is made, expressed or implied, with respect to the accuracy or completeness of the information or to the future performance of any digital asset, financial instrument or other market or economic measure. The information is believed to be current as of the date indicated on the materials. Recipients should consult their advisors before making any investment decision. Coinbase may have financial interests in, or relationships with, some of the entities and/or publications discussed or otherwise referenced in the materials. Certain links that may be provided in the materials are provided for convenience and do not imply Coinbase’s endorsement, or approval of any third-party websites or their content. Coinbase, Inc. is not registered or licensed in any capacity with the U.S. Securities and Exchange Commission or the U.S. Commodity Futures Trading Commission.

The Merge and the Ethics of Ethereum was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Brian Armstrong, CEO and Cofounder

Tl;dr: We review assets as thoroughly and quickly as possible, and list everything that we can safely and legally. But there is always more we can do to improve our asset listing process.

Recently, members of the crypto community have told us that they don’t always understand why Coinbase lists certain assets and not others. We’ve also received reports of people appearing to buy certain assets right before we announced they’d be listed on Coinbase, allowing them to benefit from price movements that sometimes accompany our listing announcements.

These are two different issues, but they both relate to our asset listing process. So, I want to address both of them here, and talk about some additional improvements we’ll be putting in place.

At Coinbase, our goal is ​​to list every asset that is legal and safe to do so, so that our customers are protected but we also create a level playing field for all the new assets being created in crypto. The number of Web3 crypto assets are exploding, with a collective global market cap of ~$2 trillion, and we want to make sure we enable the important innovation happening in this industry. Some crypto startups just getting off the ground today will become major companies in the future. Customers benefit from these innovations, but we also have a role to play protecting customers from scams and fraud. On top of all this, we want to avoid getting in the business of picking winners and losers, because we are not investment advisors. So how does one navigate this tricky space? We do it by setting minimum listing requirements (tests for legality, security, compliance, etc), and after that letting the market decide. We may also de-list assets if they stop meeting our requirements, or new information becomes available.

This process of reviewing and listing assets is rigorous and time consuming. Some assets are easier to review and list than others, due to technical details. ERC-20 tokens, for example, are relatively simple to evaluate and integrate technically so we can generally do so fairly quickly. However, assets built on new chains are more technically complex and harder to support. We would like to list all chains that meet our listing standards, but if it requires more work to do so, they may not be listed in the order some customers expect.

To some, this looks like we’re playing favorites. In reality, we review assets as quickly as possible, and list everything we can — as long as we believe it’s safe and legal. We believe that the market will ascribe value over time.

We’re also aware of concerns that some market participants may be taking advantage of information from our listings process. Examples of this might include using on-chain data to detect when Coinbase might be testing new asset integrations or using small differences in Coinbase API responses to detect when assets might be configured, but not yet launched. While this is public data, it isn’t data that all customers can easily access, so we strive to remove these information asymmetries.

Finally, there is always the possibility that someone inside Coinbase could, wittingly or unwittingly, leak information to outsiders engaging in illegal activity. We have zero tolerance for this and monitor for it, conducting investigations where appropriate with outside law firms. These firms review our listing systems and tools, leveraging blockchain forensic analysis to trace transactions, and search for possible social or professional links between Coinbase employees and those engaged in any front-running activity. If these investigations find that any Coinbase employee somehow aided or abetted any nefarious activity, those employees are immediately terminated and referred to relevant authorities (potentially for criminal prosecution).

Like all publicly traded companies, Coinbase has a trading policy in place that restricts when employees and other insiders can buy or sell company stock. But our trading policy goes well beyond this, and also prohibits employees and contractors from trading crypto assets on material non-public information, such as when a new asset will be added to our platform. 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. And we have a dedicated Trade Surveillance team that utilizes advanced software to investigate and stay ahead of possible abuse.

We know our asset listing process can always be better. So today I want to share some changes that we plan to implement over the next few quarters, in part based on feedback from the community:

Improving when we publish our decisions to list

Going forward, we plan to publish externally once a decision has been made to list an asset, but before any technical integration work begins, to try and prevent on-chain data giving signal to watchful traders. In addition, we plan to publish only once a decision has affirmatively been made to list, vs when we’ve decided to consider listing an asset.

Specially labeling newer and less proven assets on the platform

In March, we announced a new experimental label on asset pages and a disclosure when executing trades for some assets. Some assets are suitable only for more advanced traders, and we want to make sure customers know the potential risk involved. We’ll continue to develop labels and features that provide clarity for our customers.

Asset ratings and reviews

Coinbase already provides some basic information about each asset so customers can make informed decisions. Now we’re going to take it up a level by launching asset ratings and reviews so the community can share additional information on each asset, whether we list them or not.

Many consumer services today utilize the wisdom of crowds to help consumers make more informed buying decisions (Airbnb, Uber, Amazon, etc). We believe ratings and reviews can help create additional consumer protections in crypto, and ideally these can be decentralized in new protocols over time. We recognize that special care will be needed to avoid fake accounts or sybil attacks and to keep reviews high quality. We plan to launch a beta of this feature later this year.

Investing even more in screening assets and detecting potential frontrunning

We’re continuing to improve our capability to evaluate assets, by looking at the tokenomics of assets, and using on-chain forensic tools to evaluate each project. We’re also working to ensure we can move quickly to delist assets that appear to be experiencing bad activity.

***

We won’t catch everything, but these investments will help us get better, and we may be able to open source these approaches and standards to the industry over time so we can all learn from them together. We’d love to work more closely with other crypto companies to compare notes and develop best practices.

These are still early days for crypto, and it’s going to take time for us to figure everything out. What we can promise is that we’ll keep listening to our customers, keep looking for ways to improve, and keep holding ourselves to the highest standards as this space evolves. It’s always tricky to find the right balance on enabling innovation while simultaneously protecting customers from bad activity, but that is exactly the hard work that we need to do each day.

An update on our asset listing processes was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Darin Carter and Trent Fuenmayor, Coinbase Giving

Tl;dr: We continue to invest in high impact projects that advance economic freedom around the world. We’ve pledged $10M in Q1 and supported more than 20,000 people. More to do.

Coinbase Giving is the embodiment of our commitment to Pledge 1% of profits, equity, and employee time to philanthropic work that advances our mission to increase economic freedom in the world. In Dec 2021, we provided our last update. Here’s the latest and greatest on our efforts so far in 2022.

Where we are

Over the past three months, we have launched 14 new projects, supported 15 organizations, pledged over $10M in philanthropic grants, and are directly impacting the economic freedom of more than 20,000 people.

Areas of focus

In 2022, our focus has been to support high-impact work that aligns with four broad focus areas:

1. Crypto-Literacy: Increasing education and access to crypto
2. Infrastructure: Accelerating the development of open-source crypto protocols
3. Web3 Talent Development: Fostering the next generation of crypto talent, no matter who they are or where they are located
4. Global Development: Funding crypto-forward projects that advance global development, as defined by the United Nations Sustainable Development Goals.

Highlights

Investing in and increasing the levels of education and access to crypto

Blockchain curricula is starting to make its way into the classroom and Coinbase Giving has continued to invest in this vital work. To meet the tremendous demand for web3 talent, Coinbase Giving has decided to triple the number of community scholarships that we’re granting this year, from five to fifteen full-ride scholarships. In addition to funding the scholarship program, the Coinbase Giving team has provided grants to accelerate the work of incredible organizations operating at the center of web3. For example, UrbanTxt is building a model to verify skills on-chain via NFTs, allowing students to build an academic history that goes with them. Organizations like CryptoTutors are building educational resources to meet the American Library Association standards, while paving the way for crypto to reach the 160 million Americans who use the resources available at the public library. Finally, Ed3DAO is building DAOs for educators, with the aim of empowering teachers, schools, and school communities with new types of empowerment and creativity.

Accelerating the development of crypto protocols that underpin the cryptoeconomy

Regenerative Finance (Re-Fi) seeks to enable global coordination. One of the core benefits of blockchain is that it empowers any person or entity to coordinate toward a common goal, based on shared rules contained within the underlying protocol. We strive to empower founders and teams that are growing the benefits this space can offer. We are excited to officially announce our collaboration with Toucan, a public infrastructure project for carbon markets running on open blockchains. Their mission is to grow and strengthen the crypto ecosystem while addressing one of the most significant coordination failures of our time — our collective response to climate change. Our grant to Toucan will create a pool of funds available as developer grants to help builders create new sustainability-focused products and services atop Toucan’s protocols. If you would like to learn more or apply, please do so here.

Fostering the next generation of crypto talent, no matter where they are located

Organizations like Code to Inspire, Crypto Kids Camp, Qala, and Summer of Bitcoin are embracing blockchain and web3 technology education, and bringing it to their communities. Code to Inspire and Crypto Kids Camp are teaching girls in Afghanistan and children in South LA respectively. They’re focused on developing coding talent and effectively using crypto as a tool of the future. Qala and Summer of Bitcoin are doing the same for university students in Sub-Saharan Africa and India respectively. And, finally, DreamDAO and Artemis Academy are two more programs that are providing community and job opportunities for the next generation of web3 talent. We couldn’t be more excited and proud to support their missions.

Funding projects that advance global development

Emerging Impact and Mercy Corps are evolving how humanitarian aid is delivered. In Haiti, we partnered with Hope 4 Haiti and Emerging Impact to positively impact roughly 1,500 Haitian citizens by piloting a new model for on-chain humanitarian aid. The pilot program will educate and onboard families to crypto via a digital wallet and a physical card. The impacted individuals will be able to use the funds for goods and services at more than 30 participating merchants in Haiti. Similarly, in Uganda, we are partnering with MercyCorps and Crypto Savannah to build blockchain-enabled digital IDs and crypto transfers for 35,000 refugees over two years. Given the broad range of emerging use cases for blockchain to support unbanked/underbanked and displaced communities, all of these solutions represent major potential for catalytic change, and we’re excited to see our trusted partners pilot them.

Learnings

1. ReFi — Regenerative Finance — is heating up. Coinbase Giving was delighted to attend ETH Denver and Celo Connect, where we met many builders in the ReFi space. But it’s not just carbon credits on new chains that are interesting. Blockchain technology is addressing other sustainability issues, such as water pollution and biodiversity, as well as enabling circular giving and improving economic access. This is an emerging area of best practice and we are excited to support its growth.
2. Off-ramps remain integral to social impact. We are seeing increased appetite to distribute aid in crypto, including the over $100M donated by the crypto communication to the humanitarian response in Ukraine. But ways to spend this crypto aid remain crucial, particular for refugees or populations that live in areas without easy access to financial services and fiat rails. We are excited to see initiatives like Connect the World take off, but more needs to be done, such as development on lightweight wallets and working with local merchants to accept crypto.
3. Crypto-powered Universal Basic Income (UBI) has enormous potential. Projects such as ImpactMarket are bringing UBI to crypto. Making donations or purchasing tokens enables recipients all around the world to be guaranteed a basic income via monthly crypto transfers and can provide the foundation for recipients to invest via DeFi or other projects.
4. Builders from all backgrounds contribute to the ecosystem. Our recent Innovation Challenge proved that the best ideas can often come from outside of the crypto industry. Our participants were teachers, doctors, dentists, psychologists, supply chain workers, and community leaders from all over the world. Unsurprisingly, we found that the people who are closest to the problems worth solving are able to surface the best solutions. You can learn more about our winners here.

We’ll keep you updated on all of our work and please follow @coinbase to provide feedback and input on Coinbase Giving and what we should focus on.

Coinbase Giving: Q1 2022 Review was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

As crypto becomes increasingly mainstream, our mission to bring economic freedom to the world by powering a crypto ecosystem accessible to all is more important than ever. A crucial factor to accessibility is helping ensure everyone can safely and appropriately participate in the cryptoeconomy while also keeping pace with evolving global regulations — a challenge Coinbase is particularly experienced with.

The trust of our users relies on the application of compliance standards designed to meet the expectations of regulators. As a result, we’ve spent years engineering solutions that assist with our compliance obligations; many of these same needs are shared by our clients.

Today, we are excited to share some of the tools we’ve developed in an effort to address the compliance needs of financial institutions, crypto businesses, law enforcement agencies, and corporations new to crypto. Coinbase Intelligence is our growing suite of products dedicated to crypto compliance that are designed to help secure the crypto economy from bad actors. As part of this suite, we are introducing a new product, Coinbase Know Your Transaction (KYT) and providing an update of our existing product, Coinbase Analytics.

Introducing Coinbase KYT (Know Your Transaction)

As the largest regulated exchange in the US, it has been critical for us to work on the development of safeguards against bad actors. After years of collecting signals about how to determine if an entity or transaction is facilitating illegal activity, we developed Coinbase KYT to help businesses and institutions better mitigate risk on their own platforms through our API. Coinbase KYT is a transaction screening tool that financial institutions and crypto businesses can use to proactively manage risk based on our proprietary risk scoring system.

Using Coinbase KYT API, businesses can:

• Automate real-time transaction monitoring for millions of transactions by generating risk scores for addresses
• Receive alerts to enable proactive risk management if there are changes to risk profiles
• Easily configure rule engines and unique risk insights into existing third party case management tools
• Screen transactions for anti terror financing and other AML-related flags at scale

To learn more about Coinbase KYT, contact our sales team for a demo.

Coinbase Analytics is now Coinbase Tracer

Coinbase Analytics was originally utilized as an internal tool to help leverage our first-party transactions data and strong analytics capabilities to mitigate risk on our own exchange as we scaled our business. Today, it remains a cornerstone in our compliance team’s day-to-day operations and is widely used by governments and law enforcement due to its industry leading nature. Experiencing the challenges of crypto compliance firsthand has pushed our teams to build a product we’re confident offering to other scaled organizations.

Here are a few key features:

• Link activity to real-world entities and visualize the flow of funds using public attribution data
• Reduce fraud, demystify counterparty risk, and help flag AML risks with sophisticated risk scores and alerts
• Identify action points for intervention with seamless integrations with other case management tools and transaction monitoring systems
• Utilize product capabilities designed in partnership with our world-class investigations team

After many evolutions, we realized Coinbase Analytics is capable of analysis and much more, which is why we’re changing the name to Coinbase Tracer. We’ve also updated our user interface to be more user friendly, visually engaging, and in-line with our other Coinbase products. We look forward to working with our clients to continue building a world-class investigations solution with more updates coming soon.

To learn more about Coinbase Tracer, contact our sales team for a demo.

The cryptoeconomy is growing at an incredible pace, and only continues to accelerate. At Coinbase, we’ve championed the importance of growing the crypto market in a fair and compliant manner in order to fuel innovation and expand economic freedom for everyone. We look forward to meeting the compliance opportunities of the future with more products and features that help to ensure that everyone can securely participate in the crypto economy.

Legal disclosures

This website contains links to third-party websites or other content for information purposes only (“Third-Party Sites”). The Third-Party Sites are not under the control of Coinbase, Inc., and its affiliates (“Coinbase”), and Coinbase is not responsible for the content of any Third-Party Site, including without limitation any link contained in a Third-Party Site, or any changes or updates to a Third-Party Site. Coinbase is not responsible for webcasting or any other form of transmission received from any Third-Party Site. Coinbase is providing these links to you only as a convenience, and the inclusion of any link does not imply endorsement, approval or recommendation by Coinbase of the site or any association with its operators.

Crypto is a new type of asset. Besides potential day to day or hour to hour volatility, each crypto asset has unique features. Make sure you research and understand individual assets before you transact.

All images provided herein are by Coinbase.

Introducing Coinbase Intelligence: crypto compliance at scale was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.

By Joe Lallouz, Head of Coinbase Cloud

Coinbase Cloud is pleased to announce support of liquid staking through a collaboration with the Acala Foundation, starting with KSM liquid staking on Karura.

Liquid staking lets token holders stake their tokens while still putting them to work in DeFi — without being subject to unbonding periods. This offers token holders more opportunities to participate in the crypto economy.

Liquid staking is an important initiative that has the potential to bring even more participants into the growing Polkadot DeFi ecosystem, help unlock more value for token holders, and onboard more users into web3.

The significance of liquid staking

In traditional proof-of-stake networks, users who stake their assets are subject to an unbonding period where they cannot withdraw their tokens before a given time period. This time period is different for each protocol, such as 28 days for Polkadot and 7 days for Kusama. Additionally, even though users are earning rewards on their staked tokens, they are unable to use staked tokens in other applications.

Liquid staking changes that — It lets users earn both staking rewards as well as any rewards that would accrue from using their tokens in DeFi applications.

Through this process of liquid staking, users can stake their tokens and receive a representative L-Token in exchange (e.g. stake DOT and receive LDOT). The L-token represents both the principal staked asset as well as the staking yield that continues to accrue. L-Assets are tradable across all chains on the Polkadot and Kusama networks and are redeemable for the underlying asset at any time. Therefore, stakers are able to maximize their potential rewards. We must note that, like many other proof-of-stake networks, users also risk losing a portion of their tokens in the event that a validator is slashed.

Liquid staking launched for Karura in 2021, which allows users to stake KSM tokens on Karura in exchange for LKSM. To support the initiative, Coinbase Cloud is powering allowlisted validators that receive delegations from the community. LKSM offers liquidity for staked KSM, as users are not subject to an unbonding period and can unbond at any time for a small fee. This newfound liquidity will enable users to use their LKSM to earn yield in other use cases, such as to earn yield on Anchor Protocol in Acala’s recently announced integration. Early unbonding allows users to instantly exit staking positions, instead of waiting for the standard seven days unbonding period, eliminating the opportunity cost of the unbonding period.

Once live, the mechanism for liquid staking on Acala will function in the same way. Users can stake DOT and receive LDOT in return.

Liquid staking is set to lay the foundation for a number of new use cases, including minting aUSD (the native stablecoin of the Polkadot and Kusama ecosystem), creating new synthetic assets, and additional yield opportunities for aUSD and L-tokens. As the crypto and Polkadot DeFi ecosystem continue to grow, initiatives like liquid staking create opportunities to unlock additional value for token holders and help the network grow and scale securely through increased participation.

What’s Next?

Running high-performance validators with uptime is critical to helping protocols scale and ensuring that those who have staked their tokens continue to earn rewards. Coinbase Cloud has deep expertise in decentralized infrastructure and the Polkadot ecosystem, which positions us as an ideal infrastructure provider for the liquid staking initiative.

Coinbase Cloud has been closely involved with the Substrate ecosystem, having worked on Polkadot and Kusama since their earlier testnets and offering web3 builders a comprehensive solution of infrastructure solutions for Substrate.

For those looking to participate and build in Polkadot, Kusama, Acala, and Karura more broadly, check out our protocol guides for Polkadot, Acala and Karura. Or, visit our secure read/write infrastructure solutions for builders. Get in touch with our team to learn more.

Token holders looking to participate in the Polkadot DeFi ecosystem can participate in Acala liquid staking today. Visit the Karura Wiki for more information.

*This document and the information contained herein is not a recommendation or endorsement of any digital asset, protocol, network, or project. However, Coinbase may have, or may in the future have, a significant financial interest in, and may receive compensation for services related to one or more of the digital assets, protocols, networks, entities, projects, and/or ventures discussed herein. The risk of loss in cryptocurrency, including staking, can be substantial and nothing herein is intended to be a guarantee against the possibility of loss.

This document and the content contained herein are based on information which is believed to be reliable and has been obtained from sources believed to be reliable, but Coinbase makes no representation or warranty, express, or implied, as to the fairness, accuracy, adequacy, reasonableness, or completeness of such information, and, without limiting the foregoing or anything else in this disclaimer, all information provided herein is subject to modification by the underlying protocol network.

Coinbase Cloud Works with Acala Foundation to Support Liquid Staking was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.