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Comment by humanizersequel | Hacker News Reader

>Based on comments here, because they called it “staking as a service”.

You could reply to my comment instead of obliquely referencing it here.

>this very clear and explicit definition

This is a definition of an exchange (specifically a securities exchange), but nobody is contesting that Coinbase has an exchange product, just whether the assets for which they operate the exchange are securities or not.

Coinbase Earn is not "bringing together purchasers and sellers", because people staking their crypto are doing neither. Putting up some collateral in exchange for the privilege to validate blocks and collect a reward for doing so cannot possibly fall under a reasonable function "commonly performed by a stock exchange".

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Does Coinbase stake on the user's behalf? Do they take a cut? What is Coinbase doing with the staked crypto?

Don't regular banks turn your deposits into investments (securities) that provide returns which become your interest?

Is the idea here that Coinbase is doing nothing but passing your crypto to the 'investment banks' to trade with and earn your return, then just depositing that 'interest' back?

>Does Coinbase stake on the user's behalf?

Yes. While blockchains like Ethereum are open protocols and staking is permissionless, it isn't exactly easy if you aren't savvy and/or somewhat well off already. The value add here is an IT service.

>Do they take a cut?

Yes, between 15 and 35 percent.

>What is Coinbase doing with the staked crypto?

Nothing, staking involves "locking" your crypto in exchange for the privilege of running a validator. This is equivalent to "mining" in a proof-of-work protocol, and comes with similar rewards from the protocol in exchange for securing the network (with the risk that if you deviate from consensus, your staked crypto could be "slashed"). Coinbase operates the validator on your behalf.

>Don't regular banks turn your deposits into investments (securities) that provide returns which become your interest?

I'm not sure every investment is a security (some of them are just loans), but more or less.

>Is the idea here that Coinbase is doing nothing but passing your crypto to the 'investment banks' to trade with and earn your return, then just depositing that 'interest' back?

Lol no.

>This is equivalent to "mining" in a proof-of-work protocol, and comes with similar rewards from the protocol in exchange for securing the network (with the risk that if you deviate from consensus, your staked crypto could be "slashed"). Coinbase operates the validator on your behalf.

Using your analogy, if I send money to a Bitcoin mining company, they use the money to buy/run miners, and then send me a percentage of their profit, isn't that an investment in a common pool? Isn't the item they use to validate my share a security?

Bitcoin may not be a security but the middleman is a securitizing a service that involves bitcoin, right?

The analogy wasn't great, but I'm struggling to think of an accurate one — investing or giving a loan to a company is obviously different than having a company interact with a protocol on your behalf. Maybe it's more like email providers?

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