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How Does Coinbase Work: Coinbase Business Model and Revenue Model Revealed

4164 Views | 1 min | Published On: June 22, 2022 Last Updated: June 29, 2023
Coinbase Business Model

Coinbase is a platform that is responsible for purchasing and selling cryptocurrencies. In addition to trading, the company provides services that let users store assets, pay with a Coinbase credit card, learn about cryptocurrencies, or enable crypto payments for your online store.

The transaction fees customers must pay for services like purchasing or selling on the site are the fundamental component of the Coinbase business model. The bitcoin exchange market has been a massive success for Coinbase, a relatively new business. Thus, we decided to do another business model analysis. This blog will provide a clear explanation of Coinbase’s business model.

Coinbase Stats & Facts: Funding & Major Milestones

The business, which was established in 2012 and is situated in San Francisco, has emerged as the first cryptocurrency firm that is extensively used. Here are some more facts about Coinbase:

  • Founders: Brain Armstrong and Fred Ehrsam
  • Launched in: June 2012
  • Headquarters: No headquarters
  • The number of app users: 89 million
  • Industry: Cryptocurrency
  • Total valuation: $86 billion
  • Funding amount: $549 million in 16 rounds

The success timeline of Coinbase has made a lot of business owners curious about the Coinbase business model. Here is a pictorial representation of the successes of the Coinbase platform:

Coinbase business model - success timeline

Coinbase Success Story

The CEO of Coinbase, Brian Armstrong, and Fred Ehrsam started the company in 2012. Armstrong was a software engineer at Airbnb before he founded Coinbase.

At that time, the business used a variety of financial networks to move $500 million in payments annually across 192 countries, with each network collecting a transaction fee. Bitcoin (and the underlying blockchain idea) only had a tiny, specialized community of financial aficionados and were just beginning to gain popularity.

Soon after, they were given the go-light to present their concept at Y Combinator, the most prominent startup accelerator program in the world. Unfortunately, the two argued right before Reeves was about to board his flight to San Francisco, which led to a breakup between the two parties.

Instead, Armstrong founded the business with former Goldman Sachs banker Ehrsam through Y Combinator. After a year, the business was generating monthly revenue of $1 million from the sale of Bitcoins.

The company expanded over the ensuing years to become the highest-valued bitcoin startup in the world, shattering numerous records for the biggest fundraising rounds at the time.

Despite many ups and downs, Coinbase saw significant growth in 2020. The company’s most prosperous year since conception was partly attributed to the rise of Bitcoin in late 2020.

Coinbase subsequently filed its IPO paperwork at the start of 2021. The company is anticipated to go public in March 2021 with a straight listing.

Today, Coinbase is regarded as the biggest and most effective platform for cryptocurrency-related business worldwide. The business claims to have over 600 employees and 35 million users.

How Does Coinbase Work: Coinbase Business Model Canvas

Consumers can trade several digital currencies on Coinbase, an online exchange. Users can explicitly buy and sell more than 20 different cryptocurrencies, such as XRP, Litecoin, Ether, Bitcoin plus a lot more. 

If that’s still not enough, institutional and individual clients can engage in more complex trading through the Coinbase Pro and Prime services. The Coinbase API allows traders to build programmatic trading bots and get real-time market data.

Customers have the option to sign up for the Coinbase Wallet in addition to the Coinbase trading platform (also known as an exchange wallet) (also referred to as a crypto wallet). On either Android or iOS, the Coinbase Wallet is accessible as a separate app.

The latter is a) more secure (by storing information on a user’s device instead of Coinbase servers) and b) enables the transfer of cryptocurrencies from one wallet to another. These are the two key distinctions between the exchange and cryptocurrency wallet.

A range of courses about cutting-edge cryptocurrencies, like Dai or EOS, are available through Coinbase. Users will get these currencies as a reward for finishing a course.

Users can also acquire the Coinbase Card, a physical VISA debit card. The card comes with an app that lets you keep tabs on your spending. Customers may essentially use the card to spend their accumulated cryptocurrency in the real world.

The business provides solutions for other businesses to accept payments in digital currencies under the Coinbase Commerce brand.

Coinbase has created plugins for all of the major eCommerce platforms, such as Shopify, WooCommerce, or Magento, much like other payment processors like Stripe or PayPal. A user only has to install the plugin once to get going.

Coinbase Business Model

Coinbase business model

Coinbase Revenue Model: How Does Coinbase Earn Money

We’ve done enough to spur the creation of bitcoin applications; now it’s time to concentrate on how to make money from apps like Coinbase. The Coinbase Revenue Model revealed the following key sources for us:

Coinbase revenue model

1. Trading Fees

The fees that cryptocurrency apps charge for purchasing and selling the currencies make up the majority of their income. They assessed a specific commission. Like Coinbase, you can create a revenue structure for your app’s earnings.

2. Membership Fees

This might be the pass for those who regularly do cryptocurrency exchanges for a living. They can purchase the special pass with additional value-added features for a specific price, including dedicated support, insurance, real-time data tracking, dedicated support, and more.

3. Interchange Fees

Users are charged a percentage when they use their credit cards to pay for transactions. On bitcoin transactions, you can also charge a portion of the commission payment through credit cards and make a nice profit.

4. Cashback

In the USA, software like Coinbase uses Stellar Lumens, and users are entitled to cashback benefits. while offering financial incentives for utilizing a specific product. The app must be charging some promotional fees for a cause, of course.

5. Interest on Cash

The money that customers deposit in Coinbase is used for many things, just like it would in a regular bank. This is something your cryptocurrency software can also accomplish. Give the money to needy financial institutions and charge them interest.

6. Course Earn

You must operate your software like Coinbase to get a good income. They run unique programs. The user can gain knowledge from the courses that cover money management and wise investments. The user receives some payment in the form of cash upon learning them. Enrolling in such courses will increase earnings as well.

7. Security Hold

This allows your bitcoin app to act as a custodian for third parties’ cryptocurrency holdings. similar to a locker room. Additionally, businesses can collect holding fees while maintaining cryptocurrency security internally.

8. Personal Hold

With this feature, you may allow your users to lend a portion of their bitcoin balance at a predetermined interest rate. 30 percent of the bitcoin amount can be lent via an app like Coinbase. Interest on loans might also bring in considerable money for your app.

Wrapping Up

The primary source of income for Coinbase’s current business model is transaction fees, but this cryptocurrency-focused company is always developing fresh upgrades to both its platform and business model.

Even Coinbase is considering creating its NFT market. What does this entail for Coinbase’s business strategy and how will it monetize this NFT marketplace?

You can grow your own business with a cryptocurrency app like Coinbase. Find out more about the Coinbase business model!

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