May 3, 2024 - Economy

Coinbase keys in on payments as next growth driver

Illustration of fireworks launching from inside an open wallet

Illustration: Annelise Capossela/Axios

Coinbase Global just showed how well it can perform when crypto markets are good with Thursday's earnings results, but comments from the C-suite point to what could become its next, more meaningful growth driver.

Why it matters: The U.S's largest crypto exchange is a barometer for how the industry is doing, and where it's going. Where it's going, it appears, is payments.

  • CEO Brian Armstrong said during the firm's first quarter earnings call last night: The overarching goal is to have the average transaction "take less than one second and cost less than 1 cent anywhere in the world."

Between the lines: Coinbase's effort in the area points to its partnership with stablecoin issuer Circle and dovetails with its rollout of Base, its layer-2 network built on the Ethereum blockchain.

  • Armstrong said Coinbase was integrating Circle's USDC across Coinbase products on Base, which stands to bolster its business in more ways than one. (Income earned on USDC reserves is a substantial chunk of revenue.)

Case in point: Transaction revenue related to payments and sequencer fees that Coinbase collects on Base were broken out in its earnings report as a separate category from consumer transaction sales.

  • "Our goal is to drive utility and experience with payments. And this new revenue transparency helps provide investors insight into that ambition," CFO Alesia Haas said yesterday in her opening remarks.

By the numbers: Transaction revenue was largely driven by consumers, with growth in that segment up 99% quarter-over-quarter to $935 million.

  • Other transaction revenue (the new breakout) came in at $56 million, up 137% q/q.

Flashback: Armstrong explained that the past cycle was about building decentralized finance (DeFi) and non-fungible tokens (NFTs) — things that require periodic, less constant transacting, for which consumers were more willing to pay higher fees.

  • Moving into applications like decentralized social networks, or gaming, which presents "daily, hourly, by-the-minute use-case" would require lower costs and confirmation times, he said.

What we're watching: "Layer 2 is probably the biggest piece that's coming down the pipe next," he said.

  • coinBASE.

Go deeper: Coinbase posts Q1 revenue beat with a boost from higher bitcoin prices

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