In a press release dated March 26, 2018, Coinbase published a report on its intention to add Ethereum ERC20 support for its range of products. By supporting the Ethereum ERC20 technical standard, the US-based firm can add a lot of “altcoins” on its wallets and exchanges, thus opening the gates for a flood of new investors.
Adopting More Users with ERC20 Token
Whenever Coinbase makes an announcement, it generally causes an influx of new investors, as the company has a large and trusted user base around the world, but primarily in America.
While the announcement has had no significant impact on the market yet, attributing to the general bearish sentiment, the news is important in paving the way forward for an increased number of people purchasing, using, and trading cryptocurrencies apart from bitcoin and ether.
The Ethereum Foundation has set a standard for tokens which are built on its platform.
We’re excited to announce our intention to support the Ethereum ERC20 technical standard for Coinbase in the coming months.
— Coinbase (@coinbase) March 26, 2018
Unlike Bitcoin, Ethereum is a platform-based technology, which allows for several tokens and decentralized Applications (called dApps) to create smart-contract products via Ethereum’s blockchain.
Simply put, any token that is built atop Ethereum must comply with the ERC20 standard. To put things into perspective, there are a total of 62,196 smart contracts that are built on Ethereum, according to Etherscan.
Of this, a total of 400 tokens are available to purchase and trade.
Coinbase and Ethereum
An introduction of these standardized tokens on a popular cryptocurrency exchange would mean increased investor confidence for Ethereum, as well as the listed tokens.
If we go by historical data, ETH’s price should surge soon after that.
Coinbase has a diverse product line, and introducing ERC20 tokens could also equate to several investment avenues and real-world use cases.
A custody service for institutional investors by Coinbase provides storage and financial controls of sizeable digital currency holdings.
As per their website, they hold over $9 Billion in digital assets. The exact number of customers using Custody is unknown, but, it is the most significant digital asset custodian in the U.S.
Related, the introduction of ERC20 tokens would mean several other cryptocurrencies being bought and held in the custody service.
A surge in demand for altcoins, coupled with large amounts of altcoins being purchased by institutional investors, is what can be expected from the announcement.
The trading platform for cryptocurrencies, GDAX currently supports only BTC, ETH, LTC, and BCH. Now, the exchange is seeking regulatory clarity in listing ERC20 tokens on its exchange.
In the wake of America’s recent cryptocurrency regulations, its possible the company will wait before adding ERC20 tokens on its exchange.
Based on an individual token’s definition of what it is, along with whether it qualifies as a “security,” or a “commodity,” is what would make listing possible.
Coinbase Asset Management, the company’s index fund, would add tokens on a market capitalization basis as well.
What this means is the following: In case you invest $100,000 as part of this program, you own 65 percent BTC, 23 percent ETH, 7.5 percent BCH, and only four percent LTC, as per the allocations made by Coinbase.
Upon adding ERC20 tokens, Coinbase would allocate more weight to that token and thus, allocate some funds towards that asset.
For example, if Coinbase allocates ten percent to Token X, you would then own $10,000 worth of X. Increase in the price of X would increase the total value of your investment, but only for ten percent of your portfolio.
As per the announcement, Coinbase Commerce has no plans to include ERC20 tokens in its plans.
The commerce arm of Coinbase enables retailers and set up payment systems for their businesses, allowing for payments in BTC, ETH, LTC, and BCH. This announcement is not favorable for payment-based cryptocurrencies, like Nano (formerly RaiBlocks).