Coinbase continues to ramp up its support for decentralized finance (DeFi) applications, announcing a fresh $1.1 million investment via its USDC Bootstrap Fund for two projects in the field.
The USDC Bootstrap Fund — launched by Coinbase and Circle as part of the Centre Consortium in early fall 2019 — aims to encourage DeFi development by investing funds denominated in stablecoin USD Coin (USDC) directly into DeFi protocols.
As Coinbase revealed on April 1, the fund is investing $1 million in USDC for decentralized exchange Uniswap’s USDC/Ether (ETH) pool.
It is also contributing $100,000 in USDC to the daily prize offered by PoolTogether — a lossless lottery that offers users interest on the Dai (DAI) and USDC they deposit to buy tickets and compete.
The two projects
Ethereum-based Uniswap is a decentralized exchange that runs without an order book, instead relying on asset pairs with ETH as a fixed base currency. As reported, the exchange has recently announced plans to release a V2 update in Q2 2020, which will allow direct token-to-token swaps.
Coinbase notes that the project is emerging as one of the most liquid exchanges built on Ethereum, providing exchanges (also known as pools) for over 880 tokens. To help support the critical infrastructure and liquidity this provides for DeFi projects, the fund is injecting $1 million USDC to bolster UniSwap’s USDC/ETH pool.
PoolTogether — which uses the money market protocol Compound — is, as noted, a “lossless lottery.” The project enables users to deposit either DAI or USDC in respective pools, which generate interest. For each one stablecoin deposited, users receive a lottery ticket: each week, the interest collectively earned by each pool is awarded to the holder of the winning ticket.
The Fund’s contribution of $100,000 in USDC to the pool will therefore increase the lottery reward for all USDC depositors.
DeFi integration and investment
In late March, Coinbase revealed that the Coinbase Wallet would enable users to earn interest on deposited cryptocurrencies by integrating two DeFi apps — Compound, and dYdX. Both apps offer automated lending interest rates, with dYdX offering margin trading services on top of this.
Prior to this integration, Coinbase had provided $1 million in USDC to both Compound and dYdX when it first announced the creation of the USDC Bootstrap Fund.
As Coinbase and other industry actors have noted, there remains some concern that emerging DeFi apps and the smart contracts they deploy could contain security flaws in their interactions with users’ wallets.