Business Operations Business Models

How Does Coinbase Make Money (Business and Revenue Model)

The Coinbase business model

How Does Coinbase Make Money?
Here’s what you should know:
  • What is Coinbase, and how does it work?
  • How does Coinbase make money?
  • Brokerage Fees
  • Coinbase Ventures
  • Commission from Staking
  • Interest from Personal Loans
  • Coinbase Custody
  • Debit Card (Coinbase Card)
  • Coinbase’s profit and revenue
  • What is the Coinbase business and revenue model?
  • Coinbase’s funding and valuation

So you use Coinbase and wonder “How does Coinbase make money?” Here is a full, in-depth, breakdown of their six (6) revenue streams and the different products and services they offer, as well as the Coinbase business model, their year-over-year revenue, and how Coinbase works.

What is Coinbase, and how does it work?

Coinbase is an exchange platform to buy, sell, and trade cryptocurrencies.

Founded in 2012 by Brian Armstrong and Fred Ehrsam, Coinbase is now the largest cryptocurrency exchange in the United States with $445 billion in transactions.

How does Coinbase make money?

Coinbase has 56 million verified accounts on their platform and handled $445 billion in transactions in 2020.

So, how does Coinbase make money off of those $445 billion in transactions?

Below is a breakdown of how much money Coinbase makes and its revenue model. Including all revenue streams and how much they make off each service.

Here are the 6 ways of how Coinbase makes money (in 2021):

Coinbase has a revenue model that makes money in six (6) ways.

#1. Brokerage Fees (Buy/Sell Transactions)

Whenever a user buys or sells crypto on the Coinbase platform, they will incur a transaction fee. This will be either a flat fee or a variable percentage depending on the size of the transaction.

You can also see all Coinbase transaction fees, here.

Transaction Fee Cost:

  • $0.99 on transactions less than or equal to $10
  • $1.49 on transactions over $10 but less than or equal to $25
  • $1.99 on transactions over $25 but less than or equal to $50
  • $2.99 on transactions over $50 but less than or equal to $200
  • 1.49% on transactions over $200

Note: Another two crypto exchange platforms Coinbase has – Coinbase Pro (for advanced traders) and Coinbase Prime (for institutions) – both have their own set of fees ranging from 0.00% to 0.5%.

#2. Coinbase Ventures

Coinbase Ventures is the investment wing of Coinbase. Invested in and having more than 65 portfolio companies, Coinbase Ventures is a firm that has, to date, 2 successful exits – including Curv who was acquired by Paypal in March 2021.

Coinbase Ventures | Investments
Source: Coinbase

#3. Commission from Staking

When investors buy and hold crypto assets offering an APY% through Coinbase, they can earn interest on the money they invested in that crypto asset (the APY is set by the applicable asset protocol, not Coinbase).

The way it works is, Coinbase receives a 25% commission of the revenue a user makes when “staking” their crypto through the Coinbase platform.

#4. Interest from Personal Loans

Another Coinbase revenue model is their financial lending services. Users can borrow up to $100,000 from Coinbase at an 8% APR by borrowing against the Bitcoin they have in their Coinbase portfolio.

Learn more about borrowing from Coinbase, here.

How Does Coinbase Make Money | Coinbase Revenue and Business Model | Coinbase Borrow
Source: Coinbase

Note: Borrowers only have 1 year to pay the loan back and if payment isn’t received by the 15th of each month, Coinbase will sell enough Bitcoin collateral to cover the missed payment for that month.

#5. Coinbase Custody

Coinbase Custody is a service for business clients – offering an offline cold storage solution protected by insurance for clients with lots of digital assets.

Custody has about $90 billion under crypto asset management, controlling rougly 11% of the combined crypto asset market cap, as reported by Cointelegraph.

Some clients include venture capital firms like Grayscale, Polychain Capital, CoVenture, and Placeholder.

Coinbase Custody Pricing:

  • Implementation fee: $0 to $10,000
  • Minimum balance of at least $500,000
  • Custody fee: 0.5% (50 bps) annually*

Note: *Coinbase gets 0.5% of all client profit gains held in Custody, per year.

#6. Debit Card (Coinbase Card)

Coinbase has a Visa debit card that lets users connect and pay with their Coinbase portfolio assets. Cardholders will earn up to 4% back in rewards whenever they make a purchase.

No annual fee but other standard fees may apply.

Coinbase Revenue Model | Coinbase Card
Source: Coinbase

Note: Coinbase has not yet released this card.

Coinbase’s profit and revenue

In 2020, Coinbase reported a total of $1.3 billion in revenue and a profit of $322 million.

In Q1 of 2021 alone, Coinbase estimated $1.8 billion in revenue with a net income of roughly $730 million to $800 million.

Note: Because Coinbase is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Coinbase’s publicly released financial reporting through their investors portal on their website.

What is the Coinbase business and revenue model?

Coinbase makes money through a few revenue models that they combine within their company, they are:

  • Commission based business model
  • Mergers & acquisitions (M&A) business model

Coinbase’s funding and valuation

According to Coinbase’s Crunchbase profile, Coinbase has raised $547.3 million over 13 rounds and has a valuation of $8 billion according to PitchBook data in 2018 – though forecasted to reach $100 billion soon.

Co-founder, Brian Armstrong, received the companies first startup capital of a $150,000 cash infusion through Y Combinator.