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Coinbase Wallet – the self-custodial crypto wallet offered by the US-based pure-play exchange – is now supporting token swaps via two widely used blockchains in the ecosystem, the BNB Chain and Avalanche.
According to the company’s official press release, users will now be able to “trade thousands of tokens” via the company’s in-app decentralized exchange (DEX) which is now supporting four of the most popular networks in the ecosystem including the currently supported Ethereum and Polygon blockchains.
Coinbase appears to be embracing the power of decentralized finance (DeFi) as it estimated that $1 trillion were traded last year via DEXs – a figure that was 858% higher compared to 2020 volumes.
One of the most interesting features that Coinbase is incorporating into its wallet is that users will be able to compare the fees charged by the different exchanges in the DeFi ecosystem to help investors in reducing the cost of making swaps.
Moreover, the interface of the Coinbase Wallet was designed to make it as easy as possible for investors to execute trades via the mobile app or a browser extension. The company also informed users that it will continue to expand the number of networks supported by the self-custodial wallet while it will also start supporting network bridging, meaning that users will be able to transfer tokens from one blockchain to the other seamlessly.
Coinbase (COIN) stock remains unchanged as of this morning despite the announcement. So far this year, COIN stock has lost 74% of its value as the market capitalization of cryptocurrencies has declined sharply amid a shift in global macroeconomic conditions.
Other Prominent Brokerage Firms Seek to Expand Access to Web3
Coinbase’s announcement comes at a time when multiple “traditional” brokerage firms are expanding access to digital assets in the so-called web 3.0.
Last week, the Chief Executive of Robinhood – the popular US-based retail trading platform – teased the audience of a popular crypto event that took place in Florida with the upcoming launch of a “Web 3 crypto wallet” that would allow investors to move their digital assets in and out of the company’s trading app so they can access the entire crypto ecosystem via swaps.
Aside from just trading cryptocurrencies, users will also be able to trade and store non-fungible tokens (NFTs) and engage in certain lucrative activities such as staking and yield farming.
What Is the Difference Between Swapping and Trading?
In the crypto realm, the word swapping is frequently used to describe an operation in which a certain digital asset is exchanged for another one without the involvement of an intermediary.
Decentralized exchanges facilitate swapping by implementing automated market-making (AMM) via smart contracts. The success of this approach relies on the creation of liquidity pools for the different tokens supported by the exchange.
Liquidity providers are typically compensated for allowing DEXs to use their tokens to maintain a decent level of liquidity. The exchange itself is compensated similarly to traditional brokerage firms as they charge commissions and trading fees. Those fees are partially determined by the underlying network’s congestion and execution speed.
Compared to trading, swapping is different as DEXs facilitate the settling of peer-to-peer (P2P) transactions instead of acting as an intermediary. In this sense, DEXs are considered “permissionless” trading services.
In contrast, a centralized exchange such as Coinbase Global has to approve every transaction made by its registered users based on its policies and they are in charge of matching buy and sell orders from investors based on their respective bid/ask prices.
Cryptoassets are a highly volatile unregulated investment product. No UK or EU investor protection.
