Coinbase Revenue Shows Uneven Growth in Ethereum, Solana, and Cardano Staking Cryptocurrency

Coinbase Revenue Shows Uneven Growth in Ethereum, Solana, and Cardano Staking Cryptocurrency

Coinbase still has a long way to go before becoming the “#1 staking provider”.

When Coinbase last reported quarterly results in August, the company told shareholders it had prioritized developing its staking products and had a long-term goal of becoming the #1 provider. .

When a user stakes their crypto assets, they are loaned to validators on blockchain networks. Validators use the funds to secure the network and process transactions. In return, users receive a portion of the validator’s rewards. It has become an increasingly popular product for Coinbase, which saw transaction revenue drop 44% in the third quarter.

While reporting his Third quarter results On Thursday, Coinbase (COIN) scored mixed results for its “blockchain rewards” category. It posted revenue of $63 million for the quarter, down 18% from $77 million in the same period last year.

Keep in mind that there are hardly any assets that compare favorably to this time last year, when crypto markets passed a market cap of $3 trillion and the price of the Coinbase stock closed at $337.05. Since then, global crypto markets have lost two-thirds of their value and COIN has fallen 83%, trading at $58.82 on Friday.

Comparing the first nine months of 2022 to the same period last year tells a different story.

In the first three quarters of 2021, Coinbase generated $120 million in revenue from blockchain rewards. In the same period this year, the company increased that figure by 77% to $213 million.

“In Q3, blockchain rewards benefited from increased staking participation, both in terms of user counts and an increase in the number of native units staked across all supported assets on our platform, compared to the second quarter,” the company wrote in its letter to shareholders. “Staking user growth was primarily driven by Solana, which we started supporting in June.”

The crypto exchange also noted that it added support for Cardano (ADA) staking in March. So there are signs that Coinbase has gained traction with some of its staking products, but perhaps not Ethereum.

“In Q3, we launched institutional staking for Ethereum globally and while adoption is still in its early stages, we are optimistic about the long-term opportunity,” the company wrote in the letter. .

Prior to the merger, Coinbase accounted for 15% of the 13.5 million ETH that had been staked, according to blockchain analytics firm Nansen. By beginning of October, the total had risen to 14 million, but Coinbase’s share remained the same. But over the past month, Coinbase has actually fallen and now accounts for 14% of Ethereum staked.

To be clear, this does not mean that Coinbase users have withdrawn their staked ETH. No one can withdraw the staked ETH until the developers implement the Shanghai Upgrade to the network, which is expected to launch in September 2023.

Instead, it’s a sign that people who have wanted to stake ETH in the past two weeks have opted to do so with providers other than Coinbase.

But Coinbase’s Ethereum staking business faces another potential challenge: When CEO Brian Armstrong was asked if he would censor transactions on the Ethereum network or pull out of ETH staking, he replied that he would. rather close it.

The question arose after the US Treasury Department’s Office of Foreign Assets Control added crypto wallet addresses connected to the Ethereum Tornado Cash mixer to its sanctions list. Traditional financial institutions, such as banks, face severe penalties if they do business with sanctioned individuals or entities.

There are no signs yet that federal regulators are pressuring Coinbase, or any other crypto firm, to exclude or blacklist sanctioned wallet addresses. Yet Coinbase has gone on the offensive.

In September, the company announced that it had supported a lawsuit against the US Treasury Department. The complaint called the department’s sanctioning of Ethereum mixer Tornado Cash an “unprecedented and overbroad action.”

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