— Coinbase (@coinbase) April 1, 2020
The contributions come from Coinbase’s Bootstrap Fund – an investment fund launched in September 2019 focused on growing USDC adoption and usage in DeFi. The first deposits from the Coinbase fund went towards Compound and dYdX back in late 2019.
It’s important to note that the deposits into Uniswap and PoolTogether (as well as Compound and dYdX) are not investments in the company but strictly deposits into the underlying pools in an effort to boost liquidity.
Coinbase deposited a majority of the capital ($1M USDC) into Uniswap’s USDC/ETH liquidity pool. The $1M deposit increased USDC’s total liquidity up to $3.5M, putting it into the top 5 most liquid pools on Uniswap today. The additional liquidity will significantly reduce slippage as the pool will now be able to support larger trade sizes and higher volumes.
While it may seem that $1M of USDC was deposited, Uniswap liquidity pools require 1 part token (i.e. USDC) and 1 part ETH. Therefore in practice, only ~$500K in USDC was deposited into Uniswap with the remaining ~$500K deposited via Ether for a total of $1M USD in liquid value.
The remaining $100,000 was deposited into PoolTogether’s sponsored pool for USDC daily prizes. The no-loss lottery recently launched their daily prizes after seeing an increasing amount of success with their weekly prize pool featuring Maker‘s Dai.
Capital deposited into the Sponsored Pool is never eligible for winning tickets and is strictly there for increasing the amount of interest generated for the underlying prize pool. The $100k deposit comes at a much needed time as the USDC daily prize pool continues to show marginal returns. As it stands today, PoolTogether’s USDC daily prize pool averages ~$2 in prizes with less than $2,000 distributed in total prizes.
Compared to the weekly DAI prize pool of over $400 in weekly prize and $14k in total prizes distributed (which also taken a hit in light of the recent DSR drop to 0%), the daily prize pool is struggling during a time of historically low-interest rates in DeFi. Luckily, the $100K in sponsored capital at the current supply rate of 0.45% APY on Compound will net a +50% increase in daily prizes.
The daily prize pool launched last week is already over $400,000 USDC and 500 unique players! The next prize is awarded in one hour, now is a great time to join! https://t.co/e5OktsMXd9
— PoolTogether (@PoolTogether_) February 13, 2020
Looking at the 30D average lending rates on USDC, the $100K in additional capital could be generating 1.52% APY or an additional $4.16 in daily prizes.
Coinbase Continues to Make Big Moves Into DeFi
The $1.1M in DeFi liquidity is signaling Coinbase’s position into becoming more DeFi-centric. Last week, we saw Coinbase Wallet integrate major DeFi lending protocols like Compound and dYdX into the non-custodial wallet. Coinbase Wallet users can now directly earn from these lending protocols, opening up both protocols to a new range of users.
Moreover, USDC is continuing to see success in DeFi adoption. The most notable event is MakerDAO’s support for USDC as collateral for its popular crypto-native stablecoin, Dai.
USDC can now be used to open Maker Vaults in order to generate Dai. It's the third collateral approved by Maker governance, along with ETH and BAT.
More info & USDC risk parameters: https://t.co/jYUtOfI1cX
— Maker (@MakerDAO) March 17, 2020
Since USDC’s integration as collateral, over $4.4M in Dai has been minted from USDC deposits or 4.15% of circulating DAI. The new collateral type quickly outpaced the only other alternative – BAT – as Brave’s attention token struggles to garner significant traction with less than 0.5% of circulating supply deriving from BAT. With that in mind, Ether still remains king as the predominant collateral type for the permissionless stablecoin.
Looking forward, we can expect Coinbase to continue making moves into the DeFi space as a whole. The liquidity deposits into Uniswap and PoolTogether may indicate future protocol integrations into Coinbase products (as seen with dYdX and Compound with Coinbase Wallet). With the USDC Boostrap Fund now supporting Compound, dYdX, Uniswap, and PoolTogether, it will be interesting to see what other applications or protocols the fund will target in the coming future.
Until then, make sure to follow Coinbase on Twitter for all updates surrounding the leading US-based exchange and its USDC Bootstrap Fund.
Analyst at Bankless – one of the leading resources for open finance. Lucas is an active contributor to the DeFi ecosystem with appearances in other notable DeFi outlets including The Defiant and Our Network. He has years of experience working with dozens blockchain and token startups where he focused on token economics, marketing, and growth.