Coinbase Custody is a new service platform launched by Coinbase, geared to provide secure digital asset storage for institutional investors. This service is important for the fact that it opens a secure gateway for institutional investors and hedge funds to enter and operate in the cryptocurrency space.
Coinbase Custody intends to provide institutions with a safe and secure means to buy, store and most recently stake digital assets such as cryptocurrencies – with access to audit trails, withdrawal limits, and support for multiple signers.
What is Coinbase staking?
One of the offerings of Coinbase Custody is staking services to institutional clients, starting with Tezos. Staking in Tezos ecosystem is dubbed as baking and Coinbase’s 60 institutional clients will have an opportunity to use this service as of end March 2019.
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This is the the first full-service of this kind: regulated, comprehensively-insured, and 100% offline staking provider in crypto. In the coming weeks, Coinbase Custody will add governance support for the Maker (MKR) protocol.
Since staking requires some funds to be online all the time, making it a honey pot for potential hacking attacks, it is very important to note that client assets will remain inside Coinbase’s fully insured cold storage at all times, mitigating risk to investors as Coinbase will put up its own coins, assuming the risk.
Tezos is a novel blockchain, another “Ethereum killer” that was first proposed in a paper released in Aug. 2014 with more specifics announced in a whitepaper released in Sept. 2014. The Tezos blockchain is designed with a focus on on-chain governance, allowing token holders to vote for proposed changes to functionality in order to avoid forking the network.
Tezos blockchain uses a modified version of a delegated proof-of-stake (DPoS) system where stakers, called bakers within the network, can lock up their tokens in exchange for the ability to validate blocks. In Tezos more liquid DPoS system users are able to “delegate” tokens to bakers without transferring ownership. Rewards for validating blocks are distributed to bakers in the form of new XTZ tokens with a proportional amount of the reward distributed to wallets that have delegated tokens to the baker. This enables smaller token holders to participate in the validation (and reward) process if they hold less than the required amount to become a full baker.
Coinbase will of course charge fees for their services but clients can still expect a solid return of approximately 6.6% on XTZ staking.
What other coins will Coinbase stake?
Officially, they only support Tezos and will add support for Maker as well, soon. As for other staking coins like ADA, NEO, soon also ethereum – there is no official position or announcement from Coinbase about their inclusion on the platform. However, since Coinbase Custody is another revenue stream for Coinbase, it is reasonable to expect they include all other major staking coins into their offering.
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