Author: Thejaswini M A; Translator: BitpushNews
In different industries, different eras, and in every market that has ever existed, there is a recurring pattern. First comes explosive growth: a proliferation of options, each participant claiming to be better at a particular task than others. Experts proliferate, and utility tools multiply. Consumers are told "choice is freedom," "customization is power," and the future belongs to those disruptors who dismantle the monolithic giants.
Then, silently, the pendulum inevitably swings back.
This isn't because the experts were wrong, nor because the giants were so good. It's because fragmentation has an invisible compound cost. Each additional tool means another password to remember, another interface to learn, and another potential point of failure in the system you're responsible for maintaining. Autonomy begins to feel like "working for someone else," and freedom begins to feel like an "administrative burden."
In the integration phase, the ultimate winners aren't those who do everything perfectly. They're those who do so many things well enough that the friction costs of leaving (and rebuilding the entire system elsewhere) become insurmountable. They don't trap you with contracts or lock-up periods. They trap you with convenience. Through countless subtle integrations and small accumulations of efficiency, these small gains, though not worth sacrificing for any one of them, collectively form a moat. We've seen this in e-commerce. It's happened in cloud computing, in streaming media. Now, we're witnessing it in finance. Coinbase has just placed its bet on the phase of the cycle we're entering. Looking back, for most of its existence, Coinbase's positioning was clear. It was where Americans bought Bitcoin without worrying about appearing to be doing something vaguely criminal. It had regulatory licenses, a clean interface, and customer support that, while often criticized, was at least theoretically present. In 2021, the company went public at a valuation of $65 billion, its logic being that it was the "gateway to cryptocurrency." For a time, this logic held true. But by 2025, being the "gateway to cryptocurrency" began to look like a bad business. Spot trading fees were being squeezed. Retail trading volume exhibited dramatic cyclicality: soaring in bull markets and crashing in bear markets. Bitcoin believers (Maxis) were increasingly accustomed to using self-custodied wallets. Regulators were still suing the company. Meanwhile, Robinhood, which started as a stock trading platform and entered the crypto space, suddenly reached a market capitalization of $105 billion, almost twice that of Coinbase. In 2021, over 90% of Coinbase's revenue came from transaction commissions. By the second quarter of 2025, this proportion had fallen to below 55%. Therefore, Coinbase did what it should do when its core product is under pressure: it tried to be "everything else." The "Everything Exchange" hypothesis is a bet: aggregation trumps specialization. Stock trading means users can now react to Apple's earnings reports in USDC at midnight without leaving the app. Prediction markets mean they can check prices for "Will the Fed cut rates?" at lunchtime. Perpetual contracts mean they can leverage their Tesla positions up to 50x on Sundays. Every new feature is yet another reason to open the app and another opportunity to capture spreads, fees, or stablecoin interest from idle balances. Is this strategy "Let's become Robinhood," or "Make sure our users never need Robinhood"? There's an old adage in the fintech world: users want specialized apps. One for investment, one for banking, one for payments, and one for cryptocurrency. Coinbase is betting on the opposite conclusion: once you complete KYC (Know Your Customer) once and link your bank account once, you won't want to do the same thing nine more times elsewhere. This is the argument of "aggregation over specialization." This makes perfect sense in a world where underlying assets are increasingly becoming tokens on the blockchain. If stocks are tokens, prediction market contracts are tokens, and Meme Coin is a token, why shouldn't they all be traded in the same place? The mechanical logic is: you deposit dollars (or USDC), you trade everything, you withdraw dollars (or USDC). There are no cross-chain transfers between platforms, no minimum balance requirements for multiple accounts. There is only one pool of funds flowing between asset classes. The flywheel effect: the more Coinbase resembles a traditional brokerage, the more it needs to compete on traditional brokerage terms. Robinhood has 27 million funding accounts, while Coinbase has approximately 9 million monthly active traders. The competitive difference can't just be "we have stocks now," it has to be the underlying architecture (Rails). Its promise is 24/7 liquidity for everything. No market closures, no settlement delays. No need to wait for broker approval of your margin requests when the market moves against you. Does this matter to most users? Probably not yet. Most people don't need to trade Apple stock at 3 a.m. on Saturdays. But some people do. If you're the place that lets them do that, you get their flow. Once you have flow, you have data. With data, you can build a better product. With a better product, you get more flow. It's a flywheel, provided it gets spinning. Prediction Markets: The Game Theory Prediction markets are the most unusual, and perhaps most important, part of this "gift package." They are not "trades" in the traditional sense, but rather organized games of chance regarding binary outcomes: Will Trump win? Will the Fed raise interest rates? Will the Lakers make the playoffs? Contracts disappear after settlement, so there is no long-term holder community. Liquidity is event-driven, meaning it is explosive and unpredictable. However, platforms like Kalshi and Polymarket saw monthly trading volumes surge to over $7 billion in November. Why? Because prediction markets are social tools. They're a way to express your opinion with stakes. They're your reason to check your phone in the fourth quarter of a game or on election night. For Coinbase, prediction markets solve a specific problem: engagement. Cryptocurrencies get boring when prices are flat. Stocks get boring when your portfolio is just sitting there. But there are always events happening in the world that people care about. Integrating Kalshi gives users a reason to stay on the app even when Bitcoin isn't moving. This bet posits that users drawn to the election market will stay and trade stocks, and vice versa. More functional surface area equals higher user stickiness. The Essence of a Business Model: Profit Margins Stripped of the innovation narrative, what you really see is a company trying to monetize the same user in more ways: Trading fees from stock transactions; spreads on DEX (decentralized exchanges); interest on stablecoin balances; lending fees for crypto-secured loans; Coinbase One subscription revenue; infrastructure fees incurred by developers using the Base blockchain. This is not a criticism. This is how exchanges operate. The best exchanges aren't those with the lowest fees, but those that users can't leave—because leaving means rebuilding the entire system elsewhere. Coinbase is building a walled garden, but the walls are built on "convenience," not forced entry. You can still withdraw your cryptocurrency, and you can still transfer stocks to Fidelity. But you probably won't, because why bother? Base: The Real Killer App Coinbase's advantage should lie in its "on-chain" nature. It can offer tokenized stocks, instant settlement, and programmable funds. But currently, its stock trading looks similar to Robinhood, just with extended trading hours; its prediction market looks similar to Kalshi, just with a different app. The real differentiation must come from Base—the Layer 2 blockchain that Coinbase builds and controls. If stocks truly flow on-chain, if payments truly use stablecoins, and if AI agents truly begin autonomous trading using the x402 protocol, then Coinbase will have built something Robinhood cannot easily replicate. But this is a long-term story. In the short term, the key to competition lies in whose app has the most stickiness. Adding more features does not equate to increased stickiness. It can also make the app cluttered, confusing, and stressful for new users who just want to buy some Bitcoin. Scale vs. Purity A segment of crypto users will hate all this: the true believers. Those who want Coinbase to be the gateway to decentralized finance (DeFi), not a centralized "super app" that happens to have some DeFi features tucked into its submenus. Coinbase has clearly chosen scale over purity. It wants 1 billion users, not 1 million purists. It wants to be the default financial venue for the general public, not the exchange favored by those running their own nodes. This might be the right business decision. The mass market doesn't care about decentralization. The mass market prioritizes convenience, speed, and avoiding financial loss. If Coinbase can provide these, the underlying philosophy doesn't matter. But this does create a strange tension. Coinbase is trying to be both the infrastructure of the on-chain world and a centralized exchange competing with Schwab; it's trying to be a defender of cryptocurrency and a company dedicated to making it "invisible." It wants to be rebellious while complying with regulations. Perhaps this is achievable. Perhaps the future trend is a regulated on-chain exchange that feels like using Venmo. Or perhaps, trying to provide everything for everyone means you end up being no special to anyone. That's Amazon's strategy. Amazon isn't the best in any single area: it's not the best bookstore, not the best grocery store, and not the best streaming service. But it's "good enough" in all of them that most people don't bother going anywhere else. However, many companies have tried to build an "all-in-one app," and most have just built a messy one. If Coinbase can capture the entire closed loop of "earning, trading, hedging, lending, paying, and recycling," then whether a single feature is slightly inferior to its professional competitors becomes irrelevant. Switching costs and the hassle of managing multiple accounts will keep users within the ecosystem. That's all there is to Coinbase's "all-in-one exchange."