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The biggest threat to Coinbase are decentralized exchanges like Uniswap & Sushiswap. During the peak of DeFi summer, Uniswap handled more trading volume than Co
by eruleman 6y ago
The biggest threat to Coinbase are decentralized exchanges like Uniswap & Sushiswap. During the peak of DeFi summer, Uniswap handled more trading volume than Coinbase. [0]
Uniswap airdropped its token $UNI to all users on Sept 17, 2020. Uniswap is already at a $17 billion market cap. Coinbase is expected to IPO at ~$100 billion.
[0] https://www.theblockcrypto.com/data/decentralized-finance/dex-non-custodial/uniswap-vs-coinbase-and-binance-trade-volume-7dma https://www.theblockcrypto.com/data/decentralized-finance/de...
- gbasin 6y agoI would argue the biggest threat to coinbase is another crypto winter where volumes fall by 90%! And eventually the asset class becoming mature, so fees also fall by another 90%
- gruez 6y ago>And eventually the asset class becoming mature, so fees also fall by another 90% Are we talking fees for coinbase pro, or the spot price offered by coinbase on their website? The prices for the former are already pretty low, with most exchanges charging around 0.2% on their lowest volume tier. The prices for the latter might be high, but I can totally imagine it staying high considering that forex rates at your local bank is equally as bad (around 1-2%). As a point of comparison for both, transferwise charges 0.4% for converting euro to usd.
- gbasin 6y agoThe fees. 0.2% is not low compared to any mature market for trading. As a point of reference, Robinhood is free. Interactive Brokers will charge you a fraction of a cent in commissions, so on a $30 stocks that's about 0.01%
- mandelbrotwurst 6y agoSure, although you are comparing the rate to that of stock trades while the person you’re replying to is comparing to currency exchanges.
- gruez 6y agoStock trading is cheap for a variety of factors that's not applicable to crypto (eg. payment for order flow, stock lending [1]). A stock brokerage can also skimp on security because the legacy financial system has an undo button for oopsies. Finally, a 0.2% fee is relatively competitive with a "reasonable" commission of $5-10/trade (the going rate before brokerages became commission-free) as long the trade is below a few thousand dollars. [1] https://news.ycombinator.com/item?id=20276551 https://news.ycombinator.com/item?id=20276551
- deleted 6y ago[deleted]
- mquander 6y agoWhy will those factors not be applicable to crypto? (People taking custody of their own cryptoassets may mean that the exchange can't lend them out, but as exchanges continue to pass the test of time more and more people may be willing to leave assets on exchanges.)
- gruez 6y agoAFAIK the only reason why there's a market for lending stocks is because the SEC prohibits naked short-selling. If you want to short-sell, you need to locate a share somewhere and "borrow" it, which leads to brokerages offering to do that for a price. For crypto this isn't required because you can short using CME bitcoin futures, which is cash settled and therefore doesn't require you to locate/borrow anything.
- dannyw 6y agoFor non-cash-settled transactions there is still a desire to borrow crypto. For example, pledging bitcoin to borrow ETH to purchase a NFT.
- anonymoushn 6y agoOn crypto venues you can spot borrow crypto but there you're right that there is not much demand for this, and as a result lenders don't get paid much.
- mancerayder 6y agoDidn't Coinbase already survive that 2 years ago?
- hanniabu 6y agoYes, and before that.
- geniium 6y agoThat’s what we call a strong correction. Or even a « capitulation ». It’s pretty healthy if u ask me. Market cycles. It will happen again. The question is when? After what BTCUSD price? We’ll probably run the bull a few more months and then crash. And then start all again.
- syzygyhack 6y agoNah. High frequency trading on L1 is too expensive, especially long term as state grows. Biggest threat is L2 exchanges. CEX-style speed and convenience and DEX-style non-custodiality. My money is on Nash since they went the legal path plus fiat on-ramping, i.e. actually competes with Coinbase's main source of profit.
- brianvli 6y agoCoinbase is more about turning non-crypto currencies into crypto currencies while UNI/SUSHI are more about turning crypto currencies into different crypto currencies. In my POV, there's only two ways to get into crypto: - Centralized exchanges with KYC - Mining Coinbase is a KYC centralized exchange and enables people to turn their bank account $$s into crypto. Uniswap and Sushiswap are only relevant once someone has crypto and needs to exchange between various tokens.
- noman-land 6y agoDon't forget working for it by doing stuff and receiving payment in them. That's my personal philosophical favorite.
- littlestymaar 6y agoTrue, though in practice “stuff” means “drug dealing”. \s
- gruez 6y agoHow's the liquidity/UX/fees on decentralized exchanges these days? Last I heard they were pretty lacking in those aspects.
- vmception 6y agoAMMs are quite a different beast than posted-order exchanges. These are more like ballast systems, yes, as seen in large ships, than anything else I could describe. It has revolutionized trading and liquidity without exactly being a panacea, but its pretty damn close. They’re pretty good, and it is an active area of development to be better. Transaction fees can range from $.01 to $150.
- gruez 6y ago>These are more like ballast systems, yes, as seen in large ships, than anything else I could describe. can you elaborate on this?
- vmception 6y agoThe basic form of AMMs involve "liquidity pools" that contain two assets. The equivalent amount of AssetA and AssetB by value, this value ratio is set by the initial pool creator but if its out of line with market expectations people will buy and sell until it is corrected. For illustrative purposes lets just say Ether (Ethereum native token) and Link (from the Chainlink project). So this pool is really two pools, in the ballast analogy think of each as two separate silos next to each other filled with liquid evenly. When someone outside of this wants the LINK token, they must bring Ether, which adds Ether to the Ether silo, and subtracts Link from the Link silo. Despite the quantity changing, value wise the remaining Link has gone up in value proportionally, which is kept track of simply because the system understands that the ratio has changed. The ratio winds up matching market prices everywhere. It will match the price of Link priced in Ether priced in dollars on all the other price tracking services. So that's pretty genius. User experience wise, every order is essentially a market order, as there is no way to have different sized orders at certain price levels get matched. (you have to understand how posted-order exchanges work to understand that sentence, in traditional markets, volume has nothing to do with price movements it simply winds up having a 99% correlation by coincidence.) In AMM systems every trade moves the ratios based on the size of the order, and how big the silos are to begin with. But that's where there is the permissionless nature of anyone being able to join the liquidity pool, and earn a portion of all trades that pass through it. So this aspect is more advanced than requiring professional market makers (or pretending they don't exist in crypto while being extorted by all centralized exchanges to contract with them, but never admitting to your community that they're there so that the regulators don't curb stomp you and your project). So now, any community that wants liquidity can just create a liquidity pool, instead of begging exchanges to list their token and spamming Coinbase and Binance's twitter and telegram all day forever. It is completely permissionless, but now you've reached the edge of what that system can do. The further advances are all external, for example, you absolutely can create limit orders by just monitoring the ratio of a liquidity pool, the ABI of those smart contracts have a convenience function you can call. And also joining liquidity pools are incentivized by third parties, and this is what yield farming is. It is all the craze because it is intrinsically linked to the growth of AMM system's liquidity and volume. When you join a liquidity pool, you receive a liquidity pool share which is a new token that represents your % of the pool. The "LP" acronym is ironically the exact same function as a Limited Partner in a pe/hedge fund. This share is a bearer asset which can be deposited in other places that let you earn third party tokens that have their own utility and price. This is farming. You plant your share and earn a yield. The final thing to point out is that the liquidity pools have cross liquidity pool routing. So back to our example, Lets say you have Tether instead of Ether. The AMM systems will take your tether, route it through an existing Tether/Ether liquidity pool, your the Ether through the Ether/Link liquidity pool and give you Link. They will do 4-5 hops or more and judge the most liquid route. So yet again, more advanced than posted-order exchanges because you don't have to beg for any particular trading pair, and you don't have to switch assets in advance manually. If you understand this then you've made it to last summer. Where we are at now is that there are plenty of services that let you trade using liquidity between multiple AMMs, 1inch exchange is the most popular for that, the current developments are the ability to trade across multiple AMMs on multiple blockchains. But note, individuals build their own bots to do it whether a big project has made this easy for others or not.
- dehrmann 6y agoThe biggest threat is Bitcoin (and other popular cryptocurrencies) stop going up or experience a crash. Sure, there are true believers, but I suspect most people are just looking for an asset that's going up. It could be gold, Nikes, NFTs, Pokemon cards, or bitcoin. Or stocks, I suppose, but at least they have revenue.
- epx 6y agoBitcoin skeptic is the new politically incorrect
- smeej 6y agoThe biggest risk to the world financial system is that people are going to realize the dollar isn't backed by anything, lose confidence in it, and it's going to crash. I don't know what you want to be holding if/when that happens, but I'd like to own some provably scarce resource that can be transmitted digitally.
- adyus 6y agoThe (U.S.) dollar is backed by the U.S. Army and always will be. Confidence decreases? The U.S. will likely start a war with the country whose currency tries to replace it (on "national security" reasons). Fiat will always be backed by military force.
- smeej 6y agoWell there's your problem: Assuming it will be a country's currency.
- adyus 6y agoIn that scenario, trust shifts to somewhere the U.S. cannot easily regulate. In case of crypto, that can just be banned and rendered useless, as long as the rest of the world is USD-bound. If a crypocurrency becomes popular in another country using another currency to on- and off-board, see my comment. It would take a miracle for cryptocurrencies to suddenly replace fiat without being bound to any fiat currency. Essentially, all the world would need to switch trust at once.
- agumonkey 6y agoOne thing with the eth/uni world.. it seems like fluffy unicorn land. It's full of new lingo and bits to assemble (metamask etc) to maybe get something working. The crowd for this might be very small.
- dannyw 6y agoMetamask is an app and browser extension. It's basically a crypto browser. The same way the internet needs a browser. Your argument can easily be used to dismiss the early internet.
- agumonkey 6y agoMetamask is the only name I could remember, when you listen to people discuss how to use uniswap, the amount of step to do is quite random and it's full of lingo and basically, it feels like setting up the latest js toolchain, a big shiney blur. Then they'll go on and talk about other systems, like polka dot and its parachains and its another universe, then you have multichains, and oracles and whatever. It's more like early TCP where you have to install and set up the whole network stack of the month than early WWW to me.
- smeej 6y agoSo is your critique that the tech is just in its early stages of development and hard to use for non-techies right now? Or are you seeing some reason it can't eventually become as easy to use as the internet, even though that was also really complex and hard to use in its first decades?
- agumonkey 6y agoNo it's randomly chaotic and disguised as cute systems and their little world to play with finances.. there's a dissonance to me here. Also I don't think even the earliest of networking was as weird (but I could be wrong).
- 6y ago
- benreesman 6y agoWithout personally taking a position one way or the other I think it’s fair to point out that perspectives on DeFi in general and AMMs in range from “the future of finance” to “scammy ICOs with Solidity code and a whitepaper”, even among people who are into crypto.
- dannyw 6y agoUniswap isn't a scammy ICO. They launched with no tokens, but were forced to by SushiSwap.
- granzymes 6y agoCorrect me if I am wrong, but those decentralized exchanges don't seem to allow converting a token to dollars/euros/other currencies or vice versa. At some point the ecosystem needs to interact with banks for on and off ramps, and that is where Coinbase excels.
- sprash 6y agoBisq does exactly that and looks quiet promising.
- tootahe45 6y agoThe only promise of bisq is to be woken up at 6am one day with police kicking down your door. That's where criminals go to offload their non-privacy coins for Monero and to drain grandma's bank account.
- dannyw 6y agoYou can convert to USD stablecoins, which is still an off ramp, but has the benefit of no AML on decentralised exchanges.
- granzymes 6y agoI can't pay my mortgage with stablecoins, though. They also aren't an on ramp.
- tootahe45 6y agoYou can redeem stable-coins like True USD or PAX to a US bank account after passing KYC, with 1 token=1 USD. You can redeem up to 60k/day on PAXOS for a $20 flat fee per redemption, on tier 1 KYC. It also works the other way, so they are an on-ramp, just with a slightly higher fee. However i wouldn't 100% rely on these regulated stable coins as an off-ramp if the crypto market implodes and everybody runs for the exit.
- 6y ago
- xienze 6y ago> The biggest threat to Coinbase are decentralized exchanges like Uniswap & Sushiswap. Yeah, assuming gas fees ever come down to something halfway sensible. A _minimum_ of $50 both ways to trade is a tough pill to swallow.
- hanniabu 6y agoOptimism L2 it's having its public release on the 15th. Uniswap is expected to launch on Optimism with their V3 update not long after.
- baby 6y ago1) considering the astronomical fees of uniswap currently I think Coinbase is fine. Even when fees will be fixed you still can only swap erc20 tokens and ether, not currencies from other cryptos. Projects like Axelar might change that though as they’ll be able to support cross swaps between different blockchains. 2) Coinbase do on/off ramp which you can’t do with uniswap
- purple_ferret 6y ago>The biggest threat to Coinbase are decentralized exchanges like Uniswap & Sushiswap. This is like saying the biggest threat to Microsoft is Linux.
- gge 6y agoAre you agreeing or disagreeing that it is a threat? Linux did take a ton of market share from Microsoft on the server side. Linux is also not a good analogy IMO, because Uniswap has a lot of direct retail/consumer usage whereas Linux isnt used directly by the average person.
- scsilver 6y agoThey are more mutually beneficial to each other than existential competitors.
- vangelis 6y agoUniswap is cool until you have to pay those tx fees.
- simonebrunozzi 6y agoSushiswap is mostly a joke / ripoff. The Uniswap team has been able to consistently deliver good stuff, while Sushiswap has been trying to selfishly extract value from the trend.