Coinbase’s NFT Marketplace
Last week, Coinbase launched its social NFT marketplace. Coinbase NFT is available in beta to a small number of users taken from a waitlist that opened in October 2021. Users can create a profile for buying and selling NFTs using non-Coinbase wallets, such as MetaMask. But Coinbase NFT will require a know your customer (KYC) process, where users will have to doxx themselves to join the platform. Other blockchain integrations are expected soon.
Coinbase NFT also only supports payments with ETH, which is odd considering Coinbase is one of America's favorite fiat on-ramps. But ETH is easy to purchase on Coinbase, so it's probably not a big deal.
Coinbase NFT says it will not charge transaction fees for a while. Coinbase chose the 0x protocol for operating the marketplace to keep fees low, and Coinbase VP of Product, Sanchan Saxena, says Coinbase will eventually charge a "low single-digit fee" for transactions.
Is This Web3 Social Media?
Is this Coinbase’s take on web3 social media? Coinbase NFT includes social features that early users are likening to a web3 Instagram. Coinbase hopes to capture the NFT community engagement that's currently spread across several platforms, such as Twitter and Discord, by keeping everyone's interactions in one place. I struggle to see how a KYC platform can compete with Twitter and Discord in the crypto space, but as crypto becomes more mainstream, maybe people won't see a problem with sharing their ID before they can share a frog meme.
Coinbase also claims it will only remove content that's illegal. Saxena says Coinbase is "not in the business of judging what’s right or wrong." To me, it's hard to imagine a $30B company that makes its money as a fiat onramp and crypto exchange, displaying openly racist or sexist content in its NFT marketplace's social media feed.
The Stock Market Doesn’t React
Since announcing its NFT marketplace, Coinbase's stock (NASDAQ: COIN) has fallen roughly 50%. The market for high-risk assets, such as crypto and tech stocks, has not been strong since Coinbase announced its NFT marketplace in Ffall 2021. Coinbase, as a major holder of BTC and a publicly traded tech company, has not fared well.
Coinbase's stock hit an all-time low on Friday, just days after launching its NFT marketplace. The stock continued to fall over the weekend. Stock analyst John Todaro says the market is not responding to the Coinbase NFT launch because the launch has been expected for a while. What matters now is "can you really scale it, can it do volume, can it really compete with Open Sea," Todaro said.
To me, a KYC-required social marketplace for NFTs seems like a risky proposition, but Coinbase plays the long game. The next wave of crypto adoption could include a higher proportion of normal people, who tend not to care as much about privacy. Perhaps over time, as the intellectual property used to make the NFTs becomes more mainstream, so too will KYC'd NFT marketplaces. For instance, NBA Top Shot requires collectors to sign in, as do several other officially licensed NFT marketplaces.