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How Does Coinbase Make Money? [The Coinbase Business Model]

    How Does Coinbase Make Money

    We all are curious about various businesses and their business modules. And, “how does Coinbase make money” is one such curious question. There is so much to a business that adds up in generating revenue than you see.

    How does Coinbase make money?

    Before knowing how Coinbase makes money, let’s begin with what is Coinbase.

    What is Coinbase?

    Coinbase, Inc. is a provider of digital currency wallets. It offers a platform for Bitcoin transactions, as well as a global digital asset exchange and merchant services. Customers, merchants, and cryptocurrency exchanges can use the platform to purchase, trade, and store Bitcoin, Ethereum, and Litecoin.

    The company also operates the Global Digital Asset Exchange, a crypto exchange platform for Bitcoin, Ethereum, and Litecoin. An Application Programming Interface (API) establishing Bitcoin addresses and wallets comes in-built.

    History of Coinbase

    Brian Armstrong and Fred Ehrsa created Coinbase in June 2012 in San Francisco. In October 2012, Coinbase began offering services to purchase and sell bitcoin via bank transfers, followed by the introduction of Coinbase Exchange in 2015. Stripe, Braintree, and Paypal are among the traditional payment providers that have introduced bitcoin payment processing capabilities. Coinbase got a BitLicense to trade Ethereum and Litecoin in March 2017.

    Coinbase secured $100 million in Series D fundraising in the same year, with a valuation of $1.6 billion, making it the first crypto asset business to become a unicorn company. The firm was valued at $8 billion in December 2018 after raising $525.3 million in fundraising across ten rounds from 53 investors.

    How Coinbase makes money?

    Coinbase’s revenue in 2020 was $1.3 billion. However, this pales in contrast to the company’s financial results in 2021. In Q2 2021, the firm recorded $2.2 billion in sales and $1.6 billion in net profits.

    The primary source of funds is transaction income from retail and institutional investors. Transaction costs range from 0.5 percent to 3.99 percent, depending on the payment method, the user’s country of residence, account type, transaction size, and other factors. Coinbase reported $1.8 billion in retail transaction fees and $102.4 million in institutional transaction fees in the second quarter of 2021.

    When traders purchase and sell bitcoins, Coinbase charges a margin. For all cryptocurrency purchases and sales made through the Coinbase platform, the margin is 0.5 percent. Coinbase will seek to fulfill orders for crypto transactions through its trading platform, Coinbase Pro.

    Trading costs on Coinbase are generally determined by the user’s location, payment type, and other factors. For transactions to and from bank accounts, Coinbase may levy extra fees.

    Any outstanding Coinbase fees are always communicated to Coinbase clients, but not for margin trades in margin accounts. After processing transaction charges through its platform, the firm issues receipt.

    Coinbase’s Premium services

    Coinbase Pro and Prime are designed for professional traders who work with cryptocurrencies on a daily basis. As a result, the items include a plethora of extra features, such as:

    To access real-time market data and construct trading algorithms, there are advanced filtering options as well as a full trade history API. In the event of a hacking attack, insurance cover for digital assets is available.

    Coinbase debit card

    Coinbase has launched its Visa debit card. Previously, card membership was limited to Europe and the United Kingdom. Cashback incentives are available to debit cardholders in the United States. You may earn up to 4% in Stellar Lumens or 1% in Bitcoin, according to the companies.

    Today, many firms provide cashback without charging a fee. Instead, the incentive is funded by advertising partners who cover the expenditures. Coinbase also provides customers a specific Coinbase debit card that can spend as a USDC. The card is free, but any transactions made with it are subject to a fixed 2.49 percent transaction fee from Coinbase.

    Personal Loans

    Users might apply for personal loans using Coinbase’s lending platform. Cryptocurrencies act as an asset. Customers in a few states in the United States can now use the service. Users can borrow up to $100,000 (minimum volume is $2,000) and up to 30% of their Bitcoin balance.

    The interest that Coinbase charges on these loans is how it generates money. The company’s loans have an annual percentage rate of 8%. Users have one year to pay it back.

    Coinbase Custody

    Coinbase Inc. entirely owns the Coinbase custody. New York Department of Financial Services (NYDFS) regulates the custody services.

    To become a member of the custody service, users must deposit a minimum of $1 million. The $10,000 implementation fee is how Coinbase generates money. A custody fee charge is of 50 basis points, by the corporation.

    Coinbase Market Share

    Coinbase has a market share of 11% of the $1 trillion crypto industry, which is still growing. It is seeing rising competition from rival exchanges. It operates in a market apart from deregulated exchanges like Kraken and Binance. As the US regulates this exchange.

    Coinbase sees future development opportunities in the influx of new crypto investors, consolidation of the 300-strong crypto exchange sector, and the addition of additional cryptocurrencies.

    Summary

    So, this is all about how does Coinbase make money. Coinbase is a cryptocurrency trading and storage platform on the internet. Transaction fees, subscriptions, commissions made on custodial funds, and interest gained on these assets are all ways it generates money.

    The Coinbase technology platform functions as a crypto asset search and discovery engine. Developers, merchants, and other institutional partners can use the platform’s features as well.

    The platform has a flywheel. This flywheel has a wide range of crypto assets. These are attracting retail customers drawn to a well-known brand that is safe and secure to trade.

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