Popular U.S. cryptocurrency exchange Coinbase has announced that it is acquiring Paradex, a U.S.-based startup that offers an elite, peer-to-peer trading platform focused on speed, reliability and non-custodianship. Paradex is a startup with around 10 employees in New York, Chicago and San Francisco that enables trading of the ERC20 tokens that are based on the ethereum blockchain. (See also: Coinbase: What Is It and How Do You Use It?)
How Is Paradex a Fit for Coinbase?
Paradex’s has a unique offering since it does not hold the cryptocoins of its customers. The trading participants can simply move the crypto tokens from their digital wallet to the counterparty’s wallet for their trades executed through the Paradex platform. In contrast, Coinbase acts as a trusted custodian for all the digital assets that are traded by the market participants on its trading marketplace.
Integration of Paradex will allow Coinbase to offer the peer-to-peer trading to its customers. It will benefit by eliminating the need for any third-party custodianship requirements, the risks associated with security management, and the associated costs. At present, institutions holding coins on behalf of their clients are at risk of hacking attempts. Coinbase reportedly holds more than $20 billion in digital assets. With Paradex, the onus of security and storage of the cryptocoins lies with the end user as they retain their digital assets in their respective wallets.
Coinbase plans to integrate the Paradex platform into a new product called Coinbase Pro, a professional trading platform for individuals. Coinbase also announced that Coinbase Pro will evolve from the existing platform GDAX and will be specifically designed for individual crypto traders. GDAX and Coinbase Pro will exist in parallel till June 30, then all customers will then be moved to the newer Coinbase Pro.
Coinbase Targeting Institutional Clients
Amid increasing interest in the cryptocurrencies by the institutional clients, Coinbase is attempting to strengthen its portfolio of offerings to serve their needs and get a head start in that segment. It launched four new products last week called Coinbase Custody, Coinbase Markets, The Coinbase Institutional Coverage Group and Coinbase Prime specifically aimed at the institutional traders. The acquisition of Paradex is another step in that direction. (See also: Goldman Adds a Crypto Trading Operation.)
The integration will help Coinbase serve the customers who will then be able to trade a variety of ethereum-based cryptocoins, which usually follow the ERC20 standards. Ethereum as a platform allows for creation of a variety of cryptocoins. Coinbase currently offers trading in bitcoin, bitcoin cash, ether and litecoin, and this venture will help it expand beyond those limited number of coins. (See also: What Is ERC-20 and What Does It Mean for Ethereum?)
During the initial phase, only non-U.S. customers will be offered the access to Paradex, though Coinbase is "actively working toward" regulatory clearance for the product in the U.S., according to CNBC.
"This (acquisition) will significantly enhance the proposition for our customers in terms of what they want to trade, and how they want to trade it," said Asiff Hirji, Coinbase president and chief operating officer of Coinbase.