Coinbase, the leading cryptocurrency exchange in the United States, is diversifying its income streams beyond trading fees in response to the ongoing crypto market downturn, as revealed in a recent report by blockchain analytics firm Coin Metrics. A notable area of growth in Coinbase’s portfolio is its Ethereum staking service.
Coinbase’s staking service enables customers to stake their ETH, converting it into a token known as cbETH. Despite facing scrutiny from regulatory bodies like the SEC, the supply of cbETH has surged to 1.3 million tokens, driven by heightened staking demand following the Merge.
According to the report, the 25% commission that Coinbase levies on cbETH staking contributed 4% of the company’s total revenue in the second quarter of 2022. While trading volumes continue to serve as Coinbase’s primary source of revenue, staking and other ancillary services are gradually assuming a more significant share of the overall income.
Kyle Waters, an analyst at Coin Metrics, commented, “The adoption of cbETH and Base are evidence of a commitment to an on-chain future beyond the exchange.”
In a separate development, Coinbase recently introduced its own layer-2 network called Base. Although in its early stages, Base aims to provide Ethereum developers with a cost-effective environment for their projects, along with seamless integration capabilities with the Coinbase exchange.
However, the operation of a layer 2 (L2) network comes with associated expenses, such as posting transaction data to the Ethereum network, which can result in substantial gas fees. As an Ethereum Virtual Machine (EVM) layer 2 solution, Base must periodically write batches of transactions to the Ethereum blockchain as part of its operations. Some days have seen the gas fees incurred by these Layer 1 (L1) data batches exceed 1% of the total fees paid on the Ethereum network.
