The Coinbase IPO is a major confluence of Wall Street and the Cryptoverse. After next week's (April 14th) successful IPO, crypto companies will be tripping over themselves to list before this bull run ends. Think 2000 tech bubble. But market timing wasn't the only reason Coinbase had to go public right now:
Centralized exchanges (like Coinbase) are doomed
Since Bitcoin's inception, Decentralized Exchanges (Dex's) have been a hot topic. Why would anyone use decentralized money on a centralized system? The reason was never about crypto, it's about fiat.
Centralized exchanges are the bridge between traditional finance (TradFi) and decentralized finance (DeFi). If you want to convert your fiat dollarz into crypto, or vice versa, you needed a licensed, regulated, centralized entity to do it. It was the only (legal) way.
Two major innovations in the last few years changed everything:
- Automated Market Makers (AMM's)
Today, the only reasons I Coinbase is to:
- Convert USD into USDC
- Buy Bitcoin
The moment I convert into bitcoin and stablecoins, I withdraw them from the exchange to my hardware wallet and never look back. That's where my Stablecoin Lock-In Threory comes in.
Using Coinbase for Bitcoin is quickly becoming unnecessary too as DeFi is coming to Bitcoin with projects like Sovryn, Thorchain and many others, not to mention simply wrapping BTC in an ERC-20 token (like WBTC) and trading it on any Ethereum Dex.
The only reason to go back to Coinbase is to convert crypto back into fiat dollarz to use with my legacy bank account - but who does that anymore!? For everyday spending, I top up my crypto.com debit card with bitcoin or stablecoins and earn 5% back on every transaction. Legacy banking is a joke.
Stock exchanges and Centralized Crypto Exchanges (Cex's) like Coinbase use order books to match buyers and sellers. Initial attempts to create order book style Dex's (like Etherdelta) on Ethereum were a total face-plant. Slow, unstable and hardly usable, they left everyone wondering whether Dex's were even possible.
But in 2016 Vitalik proposed a model:
"My proposed solution is to use the style of "on-chain automated market maker" used in prediction markets in a decentralized exchange context."
The first big AMM was Bancor which raised $153M and became the biggest ICO of the 2017 bull run. Bancor works great, but requires every token to pair with their with their native BNT token. It wasn't until Nov 2018 (during crypto winter) that AMM adoption truly took off when Uniswap launched their AMM pairing every token with ETH.
Now there are dozens of AMM based Dex's like UNI, SUSHI, BAL, KNC even stablecoin specific AMM's like CRV and Dex aggregators like 1inch and Matcha which get you the best price by routing your trade through every Dex in town.
Binance, Coinbase's biggest competitor saw the writing on the wall. They knew Dex's were the future so they launched Binance Smart Chain (BSC) to disrupt themselves and BSC quickly become one of the largest smart contract platforms apparently doing more transaction volume than Ethereum in less than 6 months.
To put things in perspective, here's the past 24 hour volume across exchanges:
- Binance - $28B
- Coinbase - $2B
- Pancakeswap (BSC Dex) - $1.1B
- Uniswap (ETH Dex) - $875M
- Sushiswap (ETH Dex)- $191M
Today, Dex's represent ~6% of all crypto trading volume but that's quickly climbing as Binance users shift to BSC and more Dex's come online.
I'm sure the Coinbase IPO will do gangbusters, but only because Wall Street is bias and ignorant to everything happening with crypto, Dex's and DeFi.
Coinbase is IPOing because they're quickly becoming irrelevant - it's their last chance to cash out. The future of finance is decentralized and there's nothing Coinbase or Wall Street can do to stop it.
To the moon 🚀 — @GΞR฿Z Founder & Creator @ BitLift
Tweet of the Week
Following on-chain metrics for insights into what's happening this crypto bull market cycle is all the rage. The biggest companies to follow are Glassnode and Cryptoquant where Ki Young Ju is the CEO.