With Amazon Web Services (AWS) being one of the most popular cloud service providers on the planet, it's no surprise that Coinbase, a cryptocurrency exchange based in the United States, is attempting to capitalize on its success by developing its own cloud infrastructure solution, Coinbase Cloud.
"We want to be the AWS of crypto," said Coinbase chief product officer Surojit Chatterjee in an exclusive interview with Forbes. "We are building this whole Coinbase Cloud suite of products that you can think of as crypto computing services to help developers build their applications faster."
Before becoming Coinbase Cloud, the service was named Bison Trails, a cloud-based staking infrastructure solution that Coinbase bought earlier this year for an undisclosed amount that was rumored to be above $80 million. According to Coinbase, Bison Trails is a non-custodial platform, which means it does not manage clients' staked assets.
Amazon Web Services (AWS) was once a secondary consideration for Amazon in Seattle, overshadowed by Amazon. Nevertheless, the Amazon subsidiary that debuted almost 20 years ago is now the firm's major profit engine. AWS earned $13.5 billion in annual operating earnings in 2020 on a revenue base of $45.3 billion, or 63% of its parent company's total.
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Coinbase officials have suggested that they need to become the "Amazon of cryptocurrencies" as soon as possible. The majority of its accolades are not due to its being the first major digital currency business to go public but to its achieving the greatest direct listing in history. As a result, its income stream is overly reliant on transaction fees.
This is often the case with line items that are dominated by a single category's revenue concentration. Facebook, for example, and Google are almost entirely reliant on advertising to make money. Therefore, their line items generally have this degree of revenue concentration.
However, due to their significant dependence on the market and overall trading volumes, Coinbase and other exchanges may be highly vulnerable. Because trading volumes are closely linked with price swings, such dependence can be a major drawback for crypto platforms like Coinbase or any other exchange.
Coinbase is seeking to boost trading income by providing subscription services that are more resistant to market swings to mitigate this risk. For example, it provides institutional custody services, staking possibilities, a learning portal that gives users crypto as a reward, an e-commerce checkout system and the ability to issue Visa debit cards to clients. It's also trying out a subscription plan that would give customers a monthly trading allowance for a set price.
The acquisition of Bison Trails, according to Chatterjee, was a critical step in Coinbase's transition to a more mature financial system. The platform supports crypto custodians, funds, decentralized apps and token holders. Some of its customers are Andreessen Horowitz (a16z), New York-based fintech firm Current and Turner Sports.
As of November 2021, Coinbase Cloud has $30 billion in crypto assets staked on its platform. Coinbase, one of the most popular cryptocurrency platforms, has more than 73 million genuine customers, 10,000 organizations and 185,000 ecosystem partners in more than 100 countries. According to Coinbase, since its founding, it has handled transactions worth over $700 billion.