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Every Fintech Firm Will Run Its Own Blockchain `in Next Five Years:’ Optimism
It’s only a matter of time until every cryptocurrency exchange and fintech firm is running its own blockchain, according to OP Labs, builder of Ethereum overlay protocol Optimism.
The logic is straightforward and simple, says OP Labs head of product, Sam McIngvale, pointing to the runaway success of Coinbase’s layer-2 (L2) network Base since its debut in 2023.
For a start, Base has accrued an incredible ecosystem of users and developers to back the exchange, McIngvale said. But the biggest no-brainer is how a system like Base, combined with Coinbase’s bitcoin-backed loans, allows dormant crypto assets sitting in custody to be monetized by lending them out, he added.
Base was built using Optimism’s OP Stack, a software product that helps users to develop layer-2 blockchains that work with Ethereum but provide faster, cheaper transactions. McIngvale said Base’s success, it’s the largest layer 2 by a number of metrics including total value locked, is an illustration of how the industry is likely to develop.
“I expect every crypto exchange and every fintech company to run their own blockchain in the next five years,” McIngvale said in an interview. “If you own bitcoin on Coinbase, in one button, they will take that bitcoin, move it to Base, which then lets you borrow USDC from it. And now you can go do whatever you want with that USDC.”
Both Optimism and rival Arbitrum assume a transaction is valid — hence “optimistic” — with potential fraud detected through permissionless fault proofs. Optimistic rollups boost the throughput of Ethereum’s base layer by processing transactions off-chain to reduce the computation load, deriving security by publishing transaction results on the underlying, or layer-1, blockchain. Another approach is to use zero-knowledge proofs to create rollups that publish cryptographic proofs of validity for off-chain transactions.
McIngvale, who was instrumental in building the custody business at Coinbase, makes the further point that simply holding crypto in cold storage on a platform works out relatively expensive.
“Traditionally, there’s been a cost to custody a lot of crypto, because of all the security implications,” McIngvale said. “Unlike custodying equities, where you don’t really pay for that, those equities are lent out and things happen to them under the hood. Crypto is still much more nascent, but it’s moving in that direction.”
There’s clearly been a bit of Base envy happening in crypto land. Global exchange Kraken has introduced Ink, a layer-2 blockchain that also uses Optimism, as have Bybit, Bitget and OKX. Fintech firms like Robinhood, for example, are also exploring their own L2s linked to Ethereum.
Optimism’s modular vision of an interoperable “Superchain” would ideally allow users to go from one blockchain to another just as their browser moves from one website to another, McIngvale said.
“Early adopters in crypto were way more willing to put up with kind of crappy UX,” McIngvale said. “People would wait 12 seconds for something to confirm and pay $50, because it was this new technology that they were exploring, probably akin to being online in the mid 90s. Like, it was painful.”
Shares of Nasdaq-listed cryptocurrency exchange Coinbase (COIN) rose 43% this month, making the firm the top performer in the S&P 500 since it joined the index at the end of last month.
June’s run is already the stock’s best since November and caps three straight monthly gains. Coinbase’s shares reached their highest level since their public debut.
COIN hit a $382 high this week before enduring a slight correction, ending the week at $353 and seeing a slight 0.7% drop in after-hours trading to $351.
The wider S&P 500 index rose roughly 5% in June as geopolitical tensions eased.
Washington’s progress on the GENIUS Act, Congress’s first rulebook for dollar-pegged stablecoins, helped shift investor focus from trading fees to stablecoin revenue.
The bill brightened the outlook for Circle, whose shares hit a record high and saw its market cap near that of Coinbase this week.
Coinbase keeps all yield on USDC balances held on its platform and nearly half of other USDC income, equal to about 99 percent of Circle’s revenue, giving shareholders indirect exposure at no added cost, CNBC reported Friday, citing analysts including Citizens’ head of financial technology research Devin Ryan.
Trading, however, remains subdued. Average daily volume on Coinbase has drifted lower since April.
Robinhood (HOOD) has introduced micro futures on bitcoin (BTC), solana (SOL) and XRP in the United States., expanding its existing crypto futures offering for its nearly 26 million funded accounts.
Micro contracts need far less collateral than full-size futures, letting traders take directional positions while committing a smaller slice of capital.
The contracts offer traders more flexibility to bet on a cryptocurrency’s future price direction or hedge current positions given their smaller size.
The launch rounds out a futures suite that began with BTC and ETH in January. It also comes weeks after the firm closed its $200 million purchase of Bitstamp and finalized a $179 million deal for Canada’s WonderFi.
Robinhood’s data shows that crypto notional volumes have exploded upward over time, reaching $11.7 billion in May. The figure marks a 36% rise month-over-month, and a 65% growth year-over-year.
XRP climbed 5.5% to $2.19 in the last 24 hours after a trio of catalysts converged to help the cryptocurrency outperform the wider cryptocurrency market.
One of the catalysts was launch of XRP micro futures on Robinhood. The contracts offer traders more flexibility to bet on the cryptocurrency’s future price direction or hedge current positions given their smaller size.
Regulatory fog also thinned. On Friday, Ripple withdrew its cross-appeal in its long-running U.S. Securities and Exchange Commission (SEC) lawsuit. The SEC sued Ripple back in 2020 over its XRP sales, alleging these violated securities laws. The SEC is expected to drop its own appeal, leaving last year’s ruling, ordering Ripple to pay a $125 million civil penalty to the SEC, intact. The move could lift a lid that had kept some investors on the sidelines.
On-chain data rounded out the bullish setup. The XRP Ledger logged over a 1.1 million active addresses over the past week according to crypto analyst Ali Martinez, who cited Glassnode data.
XRP’s rise saw it outperform the wider crypto market, with the broader CoinDesk 20 (CD20) index rising 1.7% in the last 24 hours.
Coinbase Outpaces S&P 500 With 43% June Rise as Stablecoin Narrative Grows: CNBC
Robinhood Launches Micro Bitcoin, Solana and XRP Futures Contracts
Why is XRP Up Today? Trio of Catalysts Sees Token Outperform Wider Crypto Market
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