Coinbase is one of America’s most popular crypto exchanges and based on a recent statement from its CEO, it wants to be the “Amazon Web Services of cryptocurrencies.”
That seems to be a short-term goal on the company’s list, but accomplishing that may prove to be a great challenge.
Amazon Web Services (AWS) is one of the biggest and most popular cloud service providers. Aiming to be a similar industry standard is reasonable for Coinbase, especially since the company wants to follow Amazon’s lead and create its own cloud infrastructure solution, Coinbase Cloud.
“We want to be the AWS of crypto,” said Surojit Chatterjee, Coinbase’s chief product officer. Chatterjee further explained that Coinbase Cloud should serve as a solution that helps developers create applications quicker in the crypto computing market.
Coinbase Cloud’s History
Coinbase Cloud was previously known as Bison Trails, being a cloud-based staking solution. Coinbase later bought Bison Trails for a rumored $80 million. Before, Bison Trails was a non-custodial platform, which means it did not manage clients’ staked assets; this was stated by Coinbase before.
Coinbase Cloud seems to be a vital product that Coinbase wants to offer. However, this wasn’t the case with Amazon, where the Amazon Web Service was often a side product, overshadowed by the original Amazon. This would change over time, with the 20+ year old AWS now being the company’s main profit source.
AWS profits were $13.5 billion in the year 2020 with base revenue of $45.3 billion, 63% of its parent company’s total.
Diversifying its Income Stream
Coinbase officials stated that they want to be the “Amazon of cryptocurrencies” as soon as they can. Still, most of its accolades result from its excellent listing history during the past few years. As a result, most of its income relies on transaction fees.
This is a standard move for companies with single concentration line items, where over time, they tend to focus on a single category of service. Examples of this include Facebook and Google; which rely on advertising to earn money, and as a result, their items have a high level of revenue concentration.
Excess concentration can prove to be a serious problem for Coinbase, which relies too much on market trading volumes, making it very vulnerable to periods of inactivity. In essence, Coinbase’s activity is connected to sharp price swings.
Right now, Coinbase is trying to minimize the risk by offering subscription services that are not as affected by market swings.
Additional services may include institutional custody, staking possibilities, and a learning portal that provides rewards for crypto users. Another route is an e-commerce checkout system that allows crypto users to supply visa debit cards for their clients. Providing subscribers with a plan that provides customers a trading allowance per month is another option.
According to Chatterjee, the acquisition of Bison Trails was a crucial step for Coinbase’s growth into a comprehensive financial system. The platform should now support different user types, such as crypto custodians, token holders, funds, and decentralized apps. The diversification is already attracting more high-profile customers, including Andreessen Horowitz (a16z), a New York-based Fintech Company.