Coinbase has extended its wallet with a functionality that makes it easier for users to temporarily invest credit in crypto-currencies at a fixed interest rate. Initially this is limited to Ethereum (ETH) and ERC-20 tokens.
In the current uncertain times, it is becoming interesting for many investors to turn away from day trading and lend their crypto-currency balances at guaranteed interest rates. For example, interest rates have recently been increased for BlockFi, Bitcoin (BTC) will be available at up to 6.0 percent annual interest from April 1 and Ethereum (ETH) at up to 4.5 percent. The US crypto exchange Coinbase has now reacted to the trend and is linking its Coinbase Wallet with two providers offering such interest transactions. In a Blogpost the chief developer of the Coinbase Wallet justifies the step with the fact that already thousands of users close such deals, however, must proceed comparatively complicated.
How do interest transactions work with the Coinbase Wallet?
The offer is now available worldwide for users of the Coinbase Wallet in the iOS version. The version for Android will follow in the coming weeks. Coinbase explains and illustrates the new function in English, the procedure actually seems to be very simple and convenient:
1. first you decide which crypto currency you want to lend. At the start Ethereum (ETH) and various ERC-20 tokens such as USD Coin (USDC), Basic Attention Token (BAT) and DAI are supported.
2. In the second step, the Coinbase Wallet now shows you which provider offers which interest rate and under which conditions. Currently you have the choice between Compound and dYDX.
3. now you enter the amount you want to invest and conclude the deal directly.
From now on you can watch live in the Coinbase Wallet how your credit balance in the chosen crypto currency increases by interest. And of course you can also cancel the contract and deduct the credit plus interest if the agreed term does not contradict this.
These interest transactions are technically implemented by Smart Contracts, which are stored in the Ethereum block chain. They link your account on the Coinbase Wallet to the apps of the DeFi Branche. The deals are generally secured by deposits of the debtors. However, Coinbase also expressly points out that a code error in the Smart Contracts or in the apps of the providers can lead to losses. The contracts and credit balances are not legally regulated and your deposits are not insured.
Conclusion: Coinbase Wallet gains attractiveness through integrated interest transactions
You can’t expect absolute maximum interest rates with the offer from the Coinbase Wallet, but BlockFi is a small step ahead. But there is really no easier way than with the Coinbase Wallet, especially for ETH and leading ERC-20 tokens. In a special we have explained in detail how to earn interest with crypto currencies with providers other than Coinbase. The topic deserves attention, the market is developing rapidly and you should make sure that you only trust serious partners when making decisions.