Surojit Chatterjee, Coinbase Chief Product Officer
A common saying in crypto is that bear markets are a great time to build the next set of mainstream products and applications. Coinbase, the largest crypto exchange in the U.S., wants to make sure that this development takes place on its platform.
“We saw the DeFi summer in 2020, we then witnessed the NFT spring in 2021. Next cycle it is going to be Web 3.0’s turn,” says Coinbase Chief Product Officer Surojit Chatterjee, referring to the concept of a more decentralized internet with reduced corporate control. “But we realized that to grow this ecosystem, we have to help developers because we cannot invent everything ourselves.”
In an exclusive interview with Forbes, Chatterjee explained that this help is coming in the form of a technology stack, called Node, that will help everyone from developers of non-fungible tokens (NFTs) and games to decentralized-finance entrepreneurs build applications that can automatically interact with blockchains such as Ethereum. “If you’re a developer, the first thing you have to do is to spin up a blockchain node so you can read/write to the blockchain, query data, and monitor your application. This is very complex and not everyone’s cup of tea. Node will empower developers to launch and manage nodes in a very simple and easy to use platform.
Here’s what all of this means: Imagine a developer wants to build an NFT trading platform. They will need to create a website and interface for users. However, since this is a blockchain-based application, it also needs a way to interact with the platform so that any transactions get published across the network. These functions can require completely different skill sets, and if the two platforms do not sync properly there could be lost tokens, poor user experiences or security vulnerabilities.
Node will start by supporting Ethereum, with the expectation of moving onto other blockchains.
For Coinbase, the launch of Node represents a new phase of Coinbase Cloud, a software platform that offers a complementary set of services to the trading business that dominates its revenue base. Originally launched as a staking platform geared towards institutions using crypto currency as collateral as they seek to earn more by supporting its blockchain, Coinbase Cloud is now aiming to be the launchpad for an entire suite of Web 3.0 applications.
In fact, it was one of five prioritized products listed by CEO Brian Armstrong during Coinbase’s Q2 analyst call last month–others include its self-hosted wallet and prime brokerage offering–when the company revealed that it had lost a massive $1.1 billion in the midst of the crypto downturn that has seen its stock fall 72.94% year to date.
COIN has lost almost 75% of its value this year.
However, one bright spot from the results was the growth in the exchange’s Subscription and Services products, which have grown 44% year over year. In fact, Subscription & Services revenue contributed 18% to total net revenue, up from 4% a year earlier. The company does not break out these numbers into specific business lines.
Chatterjee is optimistic about this trend continuing, but he is also preaching patience. He declined to provide any target financial or adoption targets and figures. “I think it’s too early to talk about those. First, we want to build a great product that delights the customers and then numbers and metrics will follow.”
Regarding those potential customers, it is also important to note that Coinbase is not developing this product in a vacuum. In fact, it is competing against two heavyweights in the industry. One is Alchemy, a $10.2 billion firm that supports eight different blockchains such as Ethereum and Solana, 10 million end users, and $100 billion in transaction volume. In addition, Ethereum-focused Infura, which is a linchpin of Ethereum.
To beat out this competition, Chatterjee is first putting his faith in Coinbase’s strong record for security and ease of use, along with the intuitive nature of its interlocking products. “It’s 1+1 = 10,” he said, citing such abilities as staking, custody and identity. “Plus, as a developer you can get access to millions of users.”
Long-term success may also depend on Coinbase’s ability to find the right balance between offering access to a centralized product suite that runs on top of decentralized blockchains, something that privacy-conscious users could find unsettling. “Blockchain compute data security models are decentralized, and we are not changing any of those. We are creating easy access to blockchain,” says Chatterjee. He also claims that the company will not collect individualized user or transaction data, a key point of concern for users of mainstream technology companies such as Facebook and Google.
This point is particularly relevant today after the U.S. Treasury’s Office of Foreign Asset Controls last month sanctioned Tornado Cash, an open-source platform that can be used to obfuscate and break financial transaction trails. Armstrong has pushed back against what he sees as governmental overreach, going so far as funding a lawsuit against the Treasury and claiming Coinbase would exit its Ethereum staking business if it was pressured by the U.S. government to block particular transactions.
When asked if Coinbase Cloud could allow the company to censor activities on applications empowered by its platform Chatterjee claims the company does not have the capability to take such actions. “It’s fundamentally different [from Tornado Cash]. We’re just an access layer.”
“I’m excited about the product. It’s a free service for developers to build Web 3.0 products within minutes.”
