Coinbase diversifies as it wants to emulate AWS for blockchain
Coinbase, one of the largest crypto exchanges that are on an acquisition spree to diversify its products, has signaled its intent to become the AWS of the blockchain and crypto industry as it seeks to reduce its reliance on trading and transaction volumes to form the bulk of its business.
Amazon had started AWS around 2 decades back to provide developers with a solution on top of which they could build out their applications with reliability and security and now it forms the bulk of the revenue that the company makes, far outstripping its e-commerce platform for which it was known for.
Coinbase to Replicate AWS Model
Coinbase wants to replicate the same model and become the AWS of blockchains as it seeks to build out a big and reliable infrastructure on top of various blockchains so that the developers would be able to use its services to build out dApps in the knowledge that they are building it on a safe and secure environment.
“We want to be the AWS of crypto,” said Coinbase chief product officer Surojit Chatterjee. “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.”
Dependence on Trading Volume
Coinbase, like most other exchanges especially crypto, depends a lot on the trading volumes for much of its revenue. It is estimated that around 90% of its revenue depends on the trading volumes which are in turn dependent on price volatility. So, its revenues ebb and flow based on the price volatility, mainly of bitcoin, and they have some quarters that are great while other quarters see a large drop in revenue. As a publicly listed company and as a company that is supposed to provide investors with a hedge against crypto price volatility, Coinbase can ill-afford to have its share price and performance tightly tied to the price volatility of bitcoin. This is what they are trying to free themselves from, by diversifying their range of products.
But AWS was not built in a day and with blockchains, things become even more complex. There are already over 30 major blockchain networks with new blockchains coming up every few months and so it is a tough challenge to keep pace with the varied requirements that each of these networks has. This is the biggest challenge that the platform needs to overcome if it seeks to be the infrastructure of choice for the developers.