Coinbase to Introduce ERC20 Support on its Platform

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The Coinbase cryptocurrency exchange has announced that it plans to introduce the ERC20 standard on its cryptocurrency trading platform over the next few months. This means that ERC20 assets will be supported across Coinbase products in the future.

The company made the announcement on Monday, March 26th, stating that despite the launch of ERC20 support, there were no specific assets or features being revealed at the time of the announcement. The cryptocurrency exchange also revealed that it was made both publicly and internally, in line with its process of bringing new assets on board.

What is ERC20:

ERC20 refers to the technical standard that is used to govern Ethereum smart contracts. ERC is the abbreviated form for “Ethereum Requests For Comments” and this is the protocol that is used to propose improvements or changes to the Ethereum network. The “20” in ERC20 represents the unique proposal ID.

The ERC20 protocol has been a critical in facilitating success in the cryptocurrency and blockchain industry through standardization ever since it was introduced in 2015. This has, in turn, led to faster development of many distributed applications (DAPPS). Prior to the existence of the ERC20 protocol, there was no standardization in the industry but now it has become the standardized platform upon which guides developers. The protocol also makes it possible for enterprises and developers to carry out crowdfunding and also tokenize their platform. This means that the ERC20 protocol has contributed significantly to the accomplishments that have so far been made in the cryptocurrency and blockchain industry.

ERC20 support for Coinbase:

The team of developers at Coinbase recently announced that they plan to introduce support for Ethereum ERC20 technical standards on the cryptocurrency exchange over the next few months. The aim of this move is to provide support for ERC20 assets in the products on the exchange. The company hinted that the support might be featured across all products although it did note that it was not revealing that it will initially include support for any specific assets. The announcement about Coinbase support comes after the addition of native support for the technical standard to Dapp browser called Toshi and Coinbase’s Ethereum wallet.

The difference between tokens on the Ethereum blockchain and standalone blockchain coins:

Tokens that are based on the Ethereum blockchain have value and this means they can be owned or controlled just like cryptos such as Ether, Bitcoin, and Litecoin among others. It also means they can be sent and received, since the value makes them viable for exchanging value. However, these tokens are different from standalone cryptocurrencies such as Bitcoin because ERC20 tokens rely on the Ethereum network. These tokens are sent via Ethereum transactions and are hosted by Ethereum addresses.

It is also worth noting that ERC20 is not the only protocol on which Ethereum smart contracts are based. The recent versions of the Ethereum Virtual Machines and Solidarity have ushered in new standards such as ERC223. The latter’s main feature is the ability to merge token transfer among different wallets and bring them together into one function called a “transfer.” It also offers backward compatibility meaning it is compatible with ERC20. This means that it will work with all the Dapps that support ERC20. However, the difference is that ERC223 does not allow the transfer of tokens to contracts that do not offer a withdraw feature.

Why it is a big deal:

Coinbase revealed that its Custody team is currently reviewing a set of assets that will support withdrawals and deposits. It also noted that custody will most likely offer support to more assets than to those that can be traded on Coinbase or GDAX in the near future. The company also stated that the GDAX team will wait for more regulatory guidance before deciding which ERC20 assets should be supported on GDAX. The announced support for ERC20 should also pave way for the recovery of ERC20 assets mistakenly sent by customers to GDAX Ethereum addresses. The move thus highlights the actions that the crypto exchange has been taking so as to provide better service to customers.

As for asset management on the exchange platform, Coinbase plans to add all the assets listed on GDAX to its Coinbase Index based on weighted market capitalization. Additionally, the crypto exchange will list assets only after they are listed by GDAX based on the previous guidelines. The company also stated that it may decide to add any ERC20 asset recently added to GDAX to the Coinbase platform only after carrying out an evaluation of factors such as price, stability, liquidity and other market metrics that are used to indicate the level of health.

Coinbase also claims that a listing on GDAX does not automatically guarantee that an asset will be listed on Coinase and this is why GDAX will most likely feature more assets compared to the number of assets listed on Coinbase.

The recent announcement about Coinbase adding ERC20 support is said to have caused an unusual effect in cryptocurrency price movements. Coinbase announcements as seen in the past usually attract a lot of retail investors and as a result, the prices tend to shoot up. This has even led to complaints about the possibility of market manipulation. However, the recent announcement which was made on Monday caused cryptocurrency prices to take dive across the board. It seems that the initiative has failed to provide any confidence to the market, thus the bearish cryptocurrency prices.

The Price of Ether, the native cryptocurrency for the Ethereum blockchain took a tumble on Monday, following the announcement of ERC20 support. The price of the cryptocurrency dropped from $533.17 and opened at $445.72 on Wednesday, although the price seems to be showing signs of recovery according to Coindesk charts. Bitcoin has also been on a bearish trend since Monday, with the price dropping from a high of $8,474 on the same day to a low of $7,771 on Tuesday. It opened on Wednesday at $7,784 and the price has since then recovered above the $8,000 mark.

References:

1) https://blog.coinbase.com/adding-erc20-support-to-coinbase-fe9cba6782b

2) https://www.ccn.com/coinbase-announces-it-will-add-erc20-support/

3) https://www.investopedia.com/news/what-erc20-and-what-does-it-mean-ethereum/

4) https://www.investopedia.com/news/what-erc20-and-what-does-it-mean-ethereum/

5) https://www.cryptoniam.com/what-is-erc20/

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