Coinbase Earnings Shows Uneven Growth in Ethereum, Solana and Cardano Staking

Coinbase has a long way to go before it becomes the “number 1 betting provider”.

The last time Coinbase reported quarterly earnings, in August, the company told shareholders that it had prioritized the development of its staking products and had a long-term goal of becoming the top vendor.

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

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

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

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 earned $120 million in revenue from blockchain rewards. During the same period this year, the company increased that by 77% to $213 million.

“In Q3, blockchain rewards benefited from increased staking participation, both in terms of the number of users and an increase in the number of native units staked across all assets supported on our platform, compared to the second quarter,” the company wrote in its letter to shareholders. “The growth in staking users 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 with Ethereum.

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

Before 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 in the last month, Coinbase has actually dropped and now accounts for 14% of Ethereum staked.

To be clear, that does not mean that Coinbase users have withdrawn their staked ETH.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

Instead, it is a sign that people who have wanted to stake ETH over the past few weeks have chosen 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 opt out of ETH staking, he said 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 mixer Tornado Cash to its sanctions list. Traditional financial institutions, such as banks, face heavy penalties if they do business with sanctioned individuals or entities.

There has yet to be any sign of federal regulators putting pressure on Coinbase, or any other crypto firm, to exclude or blacklist sanctioned wallet addresses. Still, Coinbase has gone on the offensive.

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

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