2 ms·

> Is Coinbase "loaning" out the Bitcoin users have deposited in it? Maybe not Bitcoin, because I don't know if Bitcoin has any staking protocols in it. But th

> Is Coinbase "loaning" out the Bitcoin users have deposited in it? Maybe not Bitcoin, because I don't know if Bitcoin has any staking protocols in it. But things like Anchor / UST / Luna participated in a staking scheme, where if you promised not to sell UST, you'd get 20% APY gains (measured in UST of course, not US-dollars). Coinbase could be participating in those schemes in a group wallet-setting. Ex: UST holdings at Coinbase would be staked, so that Coinbase would get those gains. Or with other coins with such benefits?? I'm mostly pulling this out of my ass btw. I don't know the structure of Coinbase. But I can see the "incentivizing" from the various cryptocoins on the market or the various "protocols" that allow for exponential growth (as long as you "lend" or "stake" your coins somewhere else).

freefolks 5y ago
There are many issues here. First is all the crypto that coinbase must hold in order to facilitate trades. If they do not have the inventory, they must source elsewhere. Second is customer funds (cash) which is what they need to facilitate a fiat exchange for crypto for their markets. I'm not exactly sure how their operations work but in a regular stock brokerage, these are segregated from their own cash although in 2010 an incident was shown that even segregated customer funds are not so segregated. The risk here is always the same. Liquidity in terms of cash. I dont believe there is any regulation stopping coinbase from using or investing customer cash or anything preventing them from acting as a hedgefund (leveraging that cash) to make investments using customer funds. The real risk is there. If they are using crypto as collateral to make investments that are tanking in value, while crypto is tanking in value, they'll be forced to post more collateral in the form of cash or be forced liquidated to take a loss. Insolvency leads to bankrupcy.

freefolks 5y ago

There are many issues here. First is all the crypto that coinbase must hold in order to facilitate trades. If they do not have the inventory, they must source elsewhere. Second is customer funds (cash) which is what they need to facilitate a fiat exchange for crypto for their markets. I'm not exactly sure how their operations work but in a regular stock brokerage, these are segregated from their own cash although in 2010 an incident was shown that even segregated customer funds are not so segregated. The risk here is always the same. Liquidity in terms of cash. I dont believe there is any regulation stopping coinbase from using or investing customer cash or anything preventing them from acting as a hedgefund (leveraging that cash) to make investments using customer funds. The real risk is there. If they are using crypto as collateral to make investments that are tanking in value, while crypto is tanking in value, they'll be forced to post more collateral in the form of cash or be forced liquidated to take a loss. Insolvency leads to bankrupcy.