Coinbase and Its Monetization Strategies – A Look Into the Crypto Giant’s Monetization Strategies

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A Short Introduction To Crypto

We have a detailed discussion on Coinbase and Its Monetization Strategies. Whether you’re a novice to the concept or somebody who makes their living off it, everybody has heard of Bitcoin, Ether, or XRP.  You’ve also probably heard they’re different types of cryptocurrency. While that’s true, very few of us can actually put a definition to the term ‘cryptocurrency.’

Looking this up will prove to be confusing, but we can make it simple for you:  Essentially, cryptocurrency is an encrypted data string that acts as virtual currency. These data strings, called tokens, are tethered to something called a blockchain, which monitors the data strings and transactions they’re involved in. The blockchain has records of every time a token is sold, bought, or traded.

These tokens can be used for many things, like online transactions and payments.  Since they also hold value in real-world money, some tokens are also used as investments. It’s a simple concept: you buy low and sell high.

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All About Coinbase: An Introduction, Services, and Revenue Streams

What is Coinbase? There Are Many Answers To That Question.

The short answer (and the one fit for beginners and laymen) is that Coinbase is a famous crypto exchange platform that’s made a name for itself over years of problem-free service.

The long answer is that Coinbase is the world’s most famous exchange platform, standing at nothing less than an 11% share of the current market.

That means a whopping eleven percent, if not more, of all cryptocurrency trading, is done through Coinbase. And with how popular crypto trading is, that’s many thousands of trades every day!

What Services Does Coinbase Provide?

Founded in 2012’s San Francisco, Coinbase didn’t waste any time introducing its trading services to the general population, becoming one of the first exchanges and one of the most successful.

Many consider the most significant reason for Coinbase’s prolific success to be that, unlike almost any other exchange platform, Coinbase is a full-service platform.

If there’s anything you need related to crypto, chances are Coinbase already provides it, either for a nominal fee or completely free.

For example, Coinbase provides an exchange wallet like all other platforms. Surprisingly, it also hosts its own crypto wallet, known as the crypto wallet.

If we had to pick an online crypto wallet (which we know isn’t a good idea, but still), we’d choose the Coinbase wallet because it offers much better security than other online wallets.

Besides an exchange wallet and crypto wallet, this crypto exchange platform also provides many other services:

  • Developers can plug into the Coinbase API for real-time transaction data and use it to develop complex trading bots.
  • Coinbase provides the USDC, a stablecoin pegged to the dollar. This makes it easy to use for transactions.
  • You’ll find learners’ courses about crypto trading, storage security, and other topics on their websites.
  • The Coinbase Card is a physical Visa card allowing you to spend your crypto in the real world.
  • The Coinbase wallet is available as an app on mobile platforms like Android and iOS.
  • The company also offers USD loans from it or one of its many affiliates.
  • The same wallet also facilitates the exchange of goods and services. People can, for example, post jobs and pay through their Coinbase wallet.

The Question Hanging in the Air: How Does Coinbase Make Money?

Monetization Strategies Used by Coinbase

Coinbase Fees and the Spread: Biggest Sources of Revenue

How Does Coinbase Make Money?

We’re not going to keep you hanging here. The simplest way to answer that is that Coinbase makes money by charging fees for crypto trades made on the exchange.

There are many other ways Coinbase, the corporate entity, brings in money. Still, the spread from transactions on its platform remains its most significant source of revenue.

It’s equal for all transactions: 0.5% of crypto purchased and sold on the platform.

Besides that, there’s also the “Coinbase fee,” which is a fee separate from the spread. The Coinbase fee varies for users and is affected by factors like:

  • The user’s location,
  • The user’s payment method, along with some other factors.

A Complete List of Coinbase’s Revenue Streams

And now that we’re done explaining the two most significant sources of revenue for the company, we’re getting right to the point.

Below, you’ll find a complete list of Coinbase’s revenue factors, including things like:

1.     Buy and Sale Transactions

We’ve already explained this point, but we’ll revisit it.

Coinbase charges users a flat spread on the purchase and sale of cryptocurrency: 0.5% of the amount transacted.

Compared to the other platforms, that’s a medium price.

But if you think about it for a second, billions of dollars of crypto are traded on Coinbase every second. The spread from buy and sale transactions is the company’s single largest source of revenue.

2.     Transaction Fees

On top of the spread, Coinbase also charges users a flat 4% fee on the total transaction.

We’re talking about deposits, crypto sales, and purchases- the fee is attached to any type of transaction done through the Coinbase platform.

3.     Fees and Payments on Loans

You can get a USD loan from Coinbase or one of its affiliates.

Coinbase collects a fee from you (a flat 2% of the transaction value) and liquidates the user’s crypto as per the loan agreement.

4.     Commissions

Ever heard of “staking” your coins?

It effectively means storing your bitcoins on a particular exchange in return for interest payments, much like how it works in real-life banks.

Coinbase, which distributes the earnings, charges a flat 25% commission for processing the transaction.

5.     Coinbase Debit Card Fees

Coinbase provides a USDC Visa debit card that allows users to spend their USDC coins as payment for goods and services.

While the card itself comes with no fees, Coinbase itself charges a 2.49% transaction fee every time you use the card to make a purchase.

6.     Cryptocurrency-To-Fiat Conversion

Coinbase also charges users a fee of up to 2% every time they convert cryptocurrency into a fiat currency.

Coinbase’s Revenue Reports: A Conclusion

The crypto market is worth a little more than $1 trillion. That’s a lot of money.

Coinbase holds 11.2% of the entire crypto market, and with its suite of services only growing by the day, that number’s not going to go down any time soon.

In fact, here’s an example of Coinbase’s current revenue. The crypto giant reported revenue of $2.23 billion in the second quarter of 2021, with an earning of $3.25 per share adjusted for shareholders.

With a net profit of $1.6 billion in just that quarter, there’s no doubt Coinbase is one of the most profitable crypto exchanges out there.

Anup Karumanchi About Author

Anup Karumanchi was a blue-collar worker, carved his own path as a multi-skilled techie, by career pivoting and pursuing side-hustles for two decades, that helped him progress as a thriving solopreneur.

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