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What sets Nillion, a decentralized "blind computation" network soon to be launched on Binance, apart?
Original Title: "Airdrop Sparks Discussion, Mainnet Countdown: What Sets Apart Nillion, the Blind Computing Network That Raised $50 Million?"
Original Source: DeepTech TechFlow
On March 20, 2025, the decentralized blind computing network Nillion unveiled the $NIL tokenomics, signaling the start of the TGE and mainnet countdown phase.
The first quarter of 2025 saw many blockbuster TGE projects, but Nillion's TGE still sparked significant discussion.
On one hand, former Uber founding engineer Conrad Whelan entered the Web3 space, positioning Nillion as a star project in the privacy + data + AI arena: in December 2022, it achieved a $180 million valuation and completed a $20 million seed round with Distributed Global as the lead investor; in October 2024, Nillion secured a new $25 million funding round led by Hack VC, bringing the total funding amount to over $50 million.
On the other hand, prior to the TGE, Nillion faced a whirlwind of controversy due to the premature leak of the airdrop plan and early supporters not being rewarded. In response to the uproar, Nillion promptly implemented a series of measures, including CMO Charlie Rogers publishing an article to address community concerns and swiftly releasing a new version of the airdrop lookup tool, demonstrating strong problem-solving abilities and a firm commitment to ensuring rewards truly belong to long-term supporters, ultimately turning the situation around and receiving widespread praise.
Privacy is a fundamental human right.
In the Web2 space, whether it's frequent unwanted calls/texts/emails or identity information, facial recognition data, or shopping records sold indiscriminately in related Telegram bots or groups, it's clear that the issue of privacy breaches has reached a critical point.
Therefore, the Web3 privacy track, which has always aimed to disrupt using decentralized power, has been under close scrutiny.
As a decentralized "blind computing" network, what sets Nillion apart?
With the TGE underway and the mainnet officially launched, will Nillion, entering a new stage of development, lead the innovation paradigm in the privacy track?
This article aims to delve into Nillion, exploring its specific operational logic and strong ecological performance, shedding light on the future development prospects of the project and the blind computation track.
Image Source: Twitter @nillionnetwork
Make Rules Transparent, Make Community Reassured: Nillion Airdrop to Launch Simultaneously with TGE on March 24
In the crypto world, whether an airdrop can proceed smoothly carries some meaning of "success or failure, it is what it is" for a project:
If the airdrop standard is unclear and scammers abound, the ecosystem will be in chaos, and the project will bear enormous public opinion pressure;
If the airdrop rules are transparent, rewards are truly distributed according to contributions, not only can a strong community be rallied, but it also lays a solid foundation for the project's ecosystem's effective circulation and long-term development.
Image Source: Nillion website
Unfortunately, Nillion's airdrop work encountered an unexpected twist at the beginning of its progress: on March 8, a leaked Nillion airdrop plan spread widely in the community ahead of time, and to the community's dissatisfaction, many early Nillion supporters found themselves not on this airdrop list.
Just as negative emotions began to brew, Nillion noticed this issue and quickly took a series of actions:
On the one hand, Nillion's CMO Charlie Rogers provided a detailed explanation of the airdrop rules in an article, including the airdrop's reward recipients, standard definition, and witch prevention, promptly addressing the community's concerns about the airdrop.
On the other hand, Nillion quickly released an updated version of the airdrop allocation checker within a short period, allowing community members to access the page, connect their wallets, and view specific airdrop results, including badges and airdrop levels. Eligible members will all receive a custom card:
· GOLD Level: 1,000 - 3,000 tokens
· DIAMOND Level: 3,000+ tokens
Image Source: Nillion Airdrop Allocation Checker
Meanwhile, Nillion has also canceled the original 90-day pre-staking lockup period. All pre-staking rewards will be unlockable on day one to demonstrate Nillion's commitment to rewarding the community.
In the face of community sentiment, Nillion's decisive and effective handling not only allowed the community to see the project's ample preparation for the airdrop work, but also, through CMO Charlie Rogers' article outlining clear airdrop rules, we felt the project's full respect for ecosystem participants.
Specifically, Nillion's airdrop audience mainly includes the following three major groups, covering both technical and non-technical contributors:
For each group, Nillion has also published specific criteria aimed at accurately identifying long-term participants and true contributors in the ecosystem, ensuring that rewards truly flow to members who bring positive value to the project.
Community Value
Image Source: Translated from Nillion CMO's Long-form Article "The Nillion Airdrop: Setting a New Standard"
Developers and Open Source Contribution
Image Source: Translated from Nillion CMO's Long-form Article "The Nillion Airdrop: Setting a New Standard"
Validator Engagement Plan
Image Source: Translated from Nillion CMO's Long-form Article "The Nillion Airdrop: Setting a New Standard"
And in the current trend of airdrops becoming industrialized and the ongoing issue of bot farming, Nillion has also introduced corresponding standards, committed to resisting those attempting to simplify the mining process through one-click node services, filtering out pure "freeloaders." According to the information currently released, two types of project participants will be ineligible for the airdrop:
· Low-engagement Secret Submitters: Only submitted 4 Secrets; did not stake any ETH; do not have any Discord roles (including reward roles); do not hold a Nill Pill NFT.
· Low-engagement Late Validators: Joined the validator program after September 14, 2024; did not stake any ETH; do not have any Discord roles (including reward roles); do not hold a Nill Pill NFT.
Although some professional bot farmers have raised doubts on social media, arguing that one-click node services can also be considered a form of ecosystem contribution and should not be excluded in this way, more people still appreciate the series of measures announced by Nillion: clear standards, transparent rules, and a focus on long-term value. Nillion is exploring a new standard for how the crypto community operates.
Currently, Nillion has released the economic model of $NIL, as the native token of the ecosystem, the $NIL token has utility for paying computational and storage fees, incentivizing validators, and may also become an important governance tool for the ecosystem in the future.
The total token supply of $NIL is 1 billion, with an initial circulation of 19.52% (approximately 195.15 million tokens), distributed as follows:
· Ecosystem and R&D: 29%
· Community: 20%
· Protocol Development: 10%
· Early Supporters: 21%
· Core Contributors: 20%
Image Source: Twitter @nillionnetwork
Meanwhile, the release of the $NIL token will coincide with the launch of the Nillion mainnet, Alpha mainnet with blind modules, and community airdrop on March 24. At launch, $NIL will be distributed to the community through airdrops and community round participants with unlocked tokens.
Of course, such a "transparent" airdrop rule has also attracted more attention to Nillion, a privacy track star project, prompting more people to want to delve deeper:
What exactly is Nillion's decentralized blind computation network? How is it different from other privacy solutions?
Focus on High-Value Data, Building a Super Privacy Tool: Stepping into the Nillion Blind Computation Network
A simple one-liner summary of Nillion's goal: High-value data is stored, transmitted, and processed in a fully encrypted state throughout.
This statement can be broken down into two parts:
First: High-Value Data.
The high-value data that Nillion focuses on refers to highly sensitive private data that is of great value to an organization or individual, often capable of significantly impacting a user's life, such as personal medical genetic data. The leakage of this data can often have serious consequences for the data owner, requiring a more robust security line of defense. After achieving "data usability without visibility," these data can further unlock more valuable application scenarios, building a fairer data ecosystem.
Second: Data storage, transmission, and processing in a fully encrypted state.
Many privacy solutions aim to achieve data storage, transmission, and processing in a fully encrypted state. Currently popular blockchain privacy technologies include Zero-Knowledge Proof (ZK), Multi-Party Computation (MPC), Fully Homomorphic Encryption (FHE), and Trusted Execution Environment (TEE).
However, Nillion aims to build a blind computation network where users do not need to trust anyone, and nodes can collaborate to perform calculations on the data. Yet, nodes cannot see the plaintext data locally and know nothing about the input data or output results.
So, what is "blind computation"?
It is actually a broad concept that can be described as various technologies and methods that can "perform calculations without exposing the input data." It is the product of the fusion and development of various cryptographic and secure computing technologies.
In our country's reform and opening up, there is a well-known slogan: It doesn't matter if it's a black cat or a white cat, as long as it catches mice, it's a good cat.
The Nillion blind computation concept has many similarities to this saying:
Various privacy computing methods have their unique advantages and applicable scenarios, but they also have their own dilemmas. For example, MPC often faces communication complexity, FHE faces challenges in breaking through computational overhead, and TEE is criticized for its trusted foundation. A single solution often faces computational complexity and performance limitations, making it difficult to balance efficiency, security, and scalability, and often cannot meet diverse privacy scenarios.
Therefore, Nillion is committed to building a flexible and efficient development environment that aggregates all privacy technologies. Faced with different needs in different scenarios, developers do not need to understand the specifics of privacy technologies. The Nillion compiler will help select the best combination of privacy technologies, thus helping developers easily build privacy-enabled applications.
In this "Blind Computation Network," Nillion adopts a parallel dual-layer architecture with Petnet and NilChain:
NilChain serves as the "scheduling center" and "incentive center" for the entire network:
NilChain is built on the Cosmos SDK and is mainly responsible for node management, task scheduling, inter-cluster coordination, and payment settlement, while also supporting IBC (Inter-Blockchain Communication Protocol) to achieve interoperability with other blockchains. For example, NilChain records node staking and reputation, allocates computing tasks to the appropriate Petnet node cluster, and handles user payments and node rewards.
On the other hand, Petnet is mainly responsible for data storage and computation, consisting of a distributed node network.
As the orchestration layer, Petnet's functionality relies on two key components:
· Compiler: Simplifies the use of privacy technologies by providing different levels of abstraction
· Computing Network: Performs secure computation and manages encrypted data
Image Source: Nillion Doc
Petnet integrates various privacy technologies, including ZK, MPC, FHE, and TEE, each running in its independent Blind Module as a core component to perform specific functions. Moreover, Nillion has also introduced a series of utility tools to further lower the privacy barrier and enhance the development experience.
The MPC protocol Curl is based on Linear Secret Sharing Scheme (LSSS), excelling in efficiently handling complex computations and is particularly suitable for addressing real-world issues such as supporting AI Agent development with privacy protection.
Privacy Technology Suite nilAI includes multiple modules such as AIVM, nada-AI, and nilTEE, focusing on supporting the development of Privacy AI.
Virtual Machine nilVM allows developers to use the Nada compiler to compile programs and then upload the compiled programs to the Nillion Network for execution. Nada is Nillion's Python-based open-source Domain Specific Language (DSL) and is developed using the Nillion Software Development Kit (SDK), including components such as nada-AI, nada-numpy, and nada-test, which can significantly reduce the threshold for building privacy applications.
Encrypted Distributed NoSQL database nilDB is designed for secure data storage and computation, enabling encrypted data to be distributed as Secret Shares to multiple nodes to eliminate reliance on a central authority. Furthermore, data owners can authorize others to run SQL-like queries, computation, and privacy-preserving aggregation on the stored data.
When facing complex privacy computation requirements, Petnet internally organizes nodes into clusters to perform specific tasks based on different requirements. Each cluster can be viewed as an independent blind computation unit, providing data sharding across multiple nodes.
Through data sharding technology, data is fragmented into smaller pieces distributed across different nodes, and a single node cannot access the complete dataset. In addition, by introducing MPC and other privacy technologies, multiple nodes can perform collaborative computation without revealing private data, reducing inter-node communication, thereby significantly enhancing security, performance, efficiency, and scalability.
As a blockchain equipped with super privacy tools, the Nillion ecosystem has already taken shape during the testnet phase. The Nillion Blind Computation Network has further confirmed its technical feasibility through in-depth collaboration with major projects. With the upcoming airdrop in March 2025 and the official launch of the mainnet, the next round of growth in the Nillion ecosystem has become a focus of attention for many.
Mainnet Launch Countdown, Exclusive Look at Nillion's Rich Ecosystem Projects in the Privacy Scene
As the highly anticipated Privacy + Data + AI project, Nillion has made very solid preparations for its mainnet debut during the more than eight months of the testnet phase:
Nillion has gone through 200+ investor conference calls, 2 successful testnet iterations, 50+ social media and podcast events, and has posted thousands of tweets. It has also engaged with over 300+ developers and 178 Apps, aiming to further build a developer-friendly environment while closely engaging with the ecosystem and community.
In the previously launched Validator Program, validators will ensure the data integrity of the entire network, playing a key role in maintaining security and the mainnet launch. The program concluded on December 11, 2024, attracting over 500,000 validators in total, collectively processing around 195 million keys, and securing approximately 1050 GB of data.
Image Source: Twitter @nillionnetwork
Through the ecosystem overview released by Nillion, we also see Nillion's growing ecosystem map, as Nillion has already partnered with over 50 projects including Aptos, Near, Arbitrum, Mantle, Virtuals, Fractal, covering various sectors such as DeFi, AI, DeSci, public chains, DAOs, among others.
In the current AI-dominated landscape of both Web2 and Web3, Nillion's concept of blind computing naturally aligns with AI development:
Data serves as the fuel for AI development, and through protecting user data, promoting data sharing, optimizing model training, fulfilling ethical responsibilities, and driving technological innovation, Nillion's blind computing network will provide comprehensive support for the sustainable development of AI.
AI is currently a significant pillar of Nillion's ecosystem, with over a dozen AI projects enhancing privacy through collaboration with Nillion.
As the largest multimodal AI agent protocol and framework today, Virtuals Protocol established a partnership with Nillion in June 2024. By leveraging Nillion's secure computing infrastructure, it supports private training and inference of AI models. This ensures that users' private information is protected during interactions with AI agents, preventing sensitive conversations and data from being exposed.
In addition, the Nillion ecosystem AI project includes the decentralized open AI infrastructure network Ritual, the AI agent protocol Crush AI, and more.
Nillion focuses on high-value data, including financial investment data, personal medical data, etc., which also provides opportunities for Nillion in DeFi and DeSci development.
In the DeFi field, the powerful privacy features brought by Nillion not only protect users' data and asset security but will also play an important role in identity compliance, financial innovation, personalized financial services, and Kayra is a very typical case.
As a decentralized dark pool trading platform, Kayra, based on Multi-Party Computation (MPC) technology, aims to provide a privacy-protected trading experience. Currently operating on Aleo, Ethereum Sepolia, and the Nillion testnet, it is committed to providing users with a secure and private trading environment.
Meanwhile, in the field of DeSci (Decentralized Science), the healthcare sector is undoubtedly one of the most promising application scenarios.
Traditional medical research typically faces a prominent challenge: researchers need access to a wide range of diverse datasets to conduct health assessments and analyses, but most people are reluctant to share their health data due to privacy concerns. This not only limits the sample size but also slows down the research process.
Nillion's privacy computing solution provides an innovative answer to this problem: through its technology, researchers can analyze health data without revealing personal information, thereby eliminating trust issues in data sharing.
Currently, this technological feature of Nillion has attracted the attention and collaboration of various healthcare projects:
Space of Mind is a platform focused on providing affordable peer support for individuals experiencing post-traumatic stress disorder (PTSD). Through Nillion, the platform achieves patient data privacy and security management, ensuring that user information is not misused.
Monadic DNA focuses on the security and privacy of personal genomic data, aiming to help users own and manage their genetic information, avoiding the data leakage risks associated with traditional methods. Using Nillion's secure computation technology, users can securely process data and generate a DNA passport after uploading the raw DNA file, while ensuring data privacy is not compromised.
AgeRate is an online platform dedicated to helping people achieve a healthier, longer life. Users simply need to collect a small blood sample and send it back to receive a health score and personalized advice. Through a partnership with Nillion, AgeRate ensures that user privacy is not compromised, allowing users to have a more comprehensive understanding of their health.
Furthermore, Nillion's ecosystem extends to social, DAO, and other consumer applications:
For example, Aloha is an AI-driven dating app designed to help users authentically showcase themselves and efficiently find suitable matches. By integrating Nillion's secure computation technology, Aloha ensures the safety of user data and reduces the risk of data breaches.
Image Source: Twitter @nillionnetwork
The diverse ecosystem not only demonstrates the high demand for privacy in various niche tracks and the recognition of Nillion's privacy solution but also allows users to have a rich exploration experience early in the mainnet launch.
With Nillion's mainnet officially launching in March 2025, its ecosystem partnerships will further accelerate, bringing innovative privacy and security experiences to more users.
Conclusion
In the future, with the official launch of the mainnet and the start of the TGE, more of Nillion's roadmap plans will also be implemented.
According to its official roadmap, in the early Project Development phase, Nillion will focus on launching the mainnet, followed by driving the coordination and optimization of the secure computation module to achieve the early launch of the universal computing layer to support a wider range of application scenarios.
In the second phase, Nillion's key efforts will focus on initiating the validator plan to ensure the network's security and reliability, continuously enhancing the decentralization of the network, while actively advancing integration with other blockchain projects or ecosystems.
By the third phase, Nillion will center on an audit and certification mechanism, continually enhancing the network's credibility and transparency. In the final fourth phase, Nillion will focus on expanding the ecosystem's scale, aiming to achieve permissionless network expansion to support more users and applications, while launching an ecosystem exploration plan to drive more innovative applications and implementations.
Image Source: Twitter @nillionnetwork
As a privacy project supported by Uber's senior executives and top VCs, we see in Nillion's past performance its foresight in product design, ecosystem expansion, and community building.
Through end-to-end encryption of high-value data storage, transmission, and processing, Nillion aims to build the next-generation privacy infrastructure and is committed to driving secure, efficient, and rapid development in various fields including AI, DeFi, DeSci, and more.
The handling of the airdrop controversy this time and the CMO's publication of a long article addressing community concerns in detail, introducing airdrop rules, have also strengthened the community's confidence in the project's long-term healthy development.
In an era where privacy and data value are equally important, privacy exemplified by Nillion will become a significant force driving the prosperity of the Web3 ecosystem. With the Nillion mainnet officially launched and entering a new stage of ecosystem development, we look forward to Nillion serving as a key player in the Web3 development wave, accelerating the arrival of the privacy era.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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Key Market Intelligence on May 14th, how much did you miss out on?
1.Binance Alpha Launches HIPPO, BLUE, and Other Tokens
2.Believe Ecosystem Tokens See General Rise, LAUNCHCOIN Surges Over 250% in 24 Hours
3.Tiger Securities Introduces Cryptocurrency Deposit and Withdrawal Service, Supports Mainstream Cryptocurrencies such as BTC and ETH
4.Current Bitcoin Rally Possibly Driven by Institutions, Retail Traders Yet to Join
5.Binance Wallet's New TGE Privasea AI Participation Requires a 198 Point Threshold, with a Point Consumption of 15
Source: Overheard on CT (tg: @overheardonct), Kaito
PUMP: Today's discussions about PUMP focus on its new creator revenue-sharing model: the platform will allocate 50% of PumpSwap revenue to token creators, sparking varied reactions from users. Some criticize the move as insufficient or even misleading, while others view it as a positive step the platform is taking to reward creators. Meanwhile, PUMP faces market pressure from emerging competitors like LetsBONKfun and Raydium, which are rapidly gaining market share. Users also express concerns about PUMP's sustainability and potential regulatory risks in the U.S., with discussions extending to the platform's impact on the entire memecoin ecosystem.
COINBASE: Today, Coinbase became the first crypto company to join the S&P 500 Index, replacing Discover Financial Services, sparking widespread industry attention. The entire crypto community views this milestone as a significant development, signaling that crypto assets are further integrating into the mainstream financial system. The news has sparked lively discussions on Twitter, with many users pointing out that this may attract more institutional investors to enter the Bitcoin and other cryptocurrency markets.
XRP: XRP became the focal point of today's crypto discussion, with its significant market movements and strategic advances drawing attention. XRP has surpassed USDT to become the third-largest cryptocurrency by market capitalization, sparking market excitement and discussions about its future potential. The surge in market capitalization and price is believed to be related to increasing institutional interest, deepening strategic partnerships, and its role in the crypto ecosystem. Additionally, XRP's integration into multiple financial systems and its potential as a macro asset class are also seen as key factors driving the current market sentiment.
DYDX: Today's discussions about DYDX mainly focused on the dYdX Yapper Leaderboard launched by KaitoAI. The leaderboard aims to identify the most active community participants, with a total of $150,000 in rewards to be distributed over the first three seasons. This initiative has sparked broad community participation, with many users discussing the potential rewards and the incentive effect on the DYDX ecosystem. Meanwhile, progress on the ethDYDX to dYdX native chain migration and historical airdrop events have also been topics of discussion.
1. "What Is 'ICM'? Holding Up the $4 Billion Market Cap Solana's New Narrative"
Overnight, the hottest narrative in the crypto space has become "Internet Capital Markets," with a host of crypto projects and founders, led by the Solana ecosystem's new Launchpad platform Believe, releasing this phrase. Together with "Believe in something," it has become the new slogan heralding the onset of a bull market. What exactly is the so-called "Internet Capital Market," will it become a short-lived hype phrase like the Base ecosystem's previous Content Coin, and what related targets are available for selection?2.《LaunchCoin Surges 20x in One Day, How Did Believe Create a $200M Market Cap Shiba Inu After Going to Zero?｜100x Retrospective》
LAUNCHCOIN broke through a $200 million market cap today, with the long-lost liquidity and such a high market cap "Memecoin" almost bringing half of the on-chain crypto community CT into the fray. The community is crazily discussing this token, with half of it being FOMO and the other half being FUD. This token, originally issued by Believe founder Ben Pasternak under his personal identity, transformed into a new platform token after a renaming. From once going to zero to a $200 million market cap, what happened in between?May 14 On-chain Fund Flow
Within 24 hours, GOONC's market cap soared to 70 million, could GOONC be the next billion-dollar dog on the Believe platform?
Bitcoin has broken $100,000, Ethereum has surpassed 2500, and is Solana's hot streak about to make a comeback?
The current market is in a state of macro euphoria, with GOONC riding the wave today, skyrocketing 10x in just a few hours, reaching a market cap of tens of millions of dollars, trading volume soaring past 50 million, and rumors swirling that the developer may be from OpenAI (unconfirmed but intriguing enough).
A ludicrous and absurd Solana meme that some actually buy into.
GOONC is a meme coin that has sprouted from the "gooning" subculture, offering no technological innovation or practical use, its sole function being speculation.
It takes inspiration from an NSFW term "gooning," which refers to a person being deeply immersed in certain content (you know what), eventually entering a nearly religious-like trance.
In Reddit (such as r/GOONED, r/GoonCaves) and some counterculture media outlets (such as MEL Magazine in 2020), "gooning" has gradually transitioned from an adult label to a meme-addicted, digital content and virtual self-indulgence synonym, arguably the epitome of Degen spirit.
GOONC is playing around with this concept, packaging the addictive nature, uselessness, and irony of gooning into a tradable financial product. The project team has made it clear: "We do not solve blockchain problems, we only trade absurdity." Blunt but oddly genuine.
GOONC launched on May 13, 2025, using the meme coin launch platform Believe App's LaunchCoin module on Solana. This tool is highly Degen: zero technical barriers, a few clicks to create a coin, perfect for projects like GOONC that can come up with ideas out of the blue.
The mastermind behind GOONC is also quite something and is the most talked-about, with KOL @basedalexandoor on X platform (alias "Pata van Goon") personally involved. His profile even caught the attention of Marc Andreessen, co-founder of a16z, making onlookers unable to resist speculating if GOONC has a hint of OpenAI lineage.
While this 'OpenAI Endorsement' is currently just community speculation, it is definitely a good card to play to fuel hype. Saying "we are pure speculation" on one hand, while tagging a few "AI + a16z" on the other.
GOONC took off as soon as it launched. After its launch on May 13, 2025, its market capitalization skyrocketed to $22 million within 4 hours, with a trading volume exceeding $25.6 million in 24 hours. According to platform data, the first day of trading saw an astonishing +41,100% surge, soaring from $0.0000001 to $0.02, becoming a "missed-the-boat" situation.
GOONC quickly formed an active trading community post-launch, with a lot of discussion and trading signals appearing on X platform (such as the 292x return signal provided by DeBot). Liquidity pools on exchanges like Raydium and Meteora grew rapidly, supporting high trading volumes and price increases.
The real climax occurred between May 13 and May 14, with the market cap rising to $5.5 million in the morning and directly surpassing $55 million in the afternoon. By the 14th, it briefly approached a $70 million market cap, with the trading volume soaring to $59 million. Some community members even posted screenshots claiming an increase of +85,000%, creating a new myth out of the ruins.
As of 1:30 pm on May 14, the price stabilized around $0.039, with a total market cap and FDV both around $39.6 million, and a 24-hour trading volume of $5.43 million. Active platforms include XT.COM, LBank, Meteora, and others.
Although there was a slight pullback from the peak ($0.07), the coin's popularity remains strong. For a coin that relies purely on "irony + community + X post" to thrive, this performance is already at a stellar level.
Currently, the background of the token's development team is not transparent, increasing the potential risk of a rug pull. Rugcheck.xyz warns that the creator of the GOONC contract may have permission to modify the contract (e.g., change fees or mint additional tokens), posing certain security risks.
Community members speculate that the meteoric rise of GOONC may be the "last hurrah".
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After Surging 40%, Has Ethereum Price Peaked Upon Exiting the Craze?
Whether you are an insider or an outsider, these days you must be familiar with the news about Ethereum. The reason is simple, causing Ethereum enthusiasts to sigh with emotion and almost throwing off-guard those who defend Ethereum, Ethereum, with a "3-day surge of 40%," climbed to the top of the Douyin Hot List.
As we all know, Ethereum launched the Pectra upgrade on May 7th. This most significant network upgrade since early 2024 integrates the Prague execution layer hard fork and the Electra consensus layer upgrade, significantly improving Ethereum's performance through 11 improvement proposals. The account abstraction feature (EIP-7702) allows users to flexibly manage wallets through social media accounts or multi-signature schemes, reducing the user threshold, attracting more users and developers. The staking mechanism optimization increases the validator ETH cap from 32ETH to 2048ETH and introduces a flexible withdrawal method, making it easier for institutions and individuals to participate in network security, enhancing the market's confidence in Ethereum's long-term value.
At the same time, Pectra optimized the interaction efficiency of Layer 2 networks such as Arbitrum and Optimism, making transactions faster and cheaper, leading to a surge in on-chain activity. As a crucial step for Ethereum's transition from "2G" to "5G," the Pectra upgrade not only enhances network vitality but also "recharges confidence" in the market, directly driving the price increase.
Related Reading: "Ethereum Skyrockets 22% in One Day, E Enthusiasts Rejoice"
It's not just Ethereum itself, as Wall Street also brought important bullish news.
The world's largest asset management company, BlackRock, proposed to the SEC allowing Ethereum ETFs for staking. This proposal is expected to elevate Ethereum ETFs from a mere investment tool to a bond-like "interest-bearing asset," bringing investors both capital appreciation and passive income, igniting market optimism about Ethereum's future potential.
Specifically, BlackRock has proposed to amend its S-1 filing to allow investors to create and redeem ETF shares directly with Ethereum instead of the U.S. dollar (i.e., in-kind redemption). This move, combined with its $2.9 billion BUIDL Fund launched in March 2024, aims to deepen the integration of traditional finance with blockchain. The BUIDL Fund is a tokenized fund operating on the Ethereum network, investing in traditional assets such as U.S. Treasury bonds. This setup is highly attractive to institutional investors, as they can not only benefit from Ethereum's price appreciation but also earn stable cash flow through staking.
Robert Mitchnick, BlackRock's Head of Digital Assets, stated in a CNBC interview in March 2025 that the addition of staking functionality will significantly enhance the appeal of the Ethereum ETF. He admitted that when the Ethereum spot ETF was launched in July 2024 without staking functionality, the market demand was lackluster, and staking could be the key to reversing this trend.
Meanwhile, the SEC's shifting stance on cryptocurrency regulation has also fueled this upward trend. During the tenure of the previous SEC chairman, the regulatory approach was tough, and staking was strictly viewed through the Howey test as a potential unregistered security. Therefore, when approving the Ethereum spot ETF in May 2024, staking functionality was explicitly prohibited.
However, with Trump back in the White House and Paul Atkins taking over the SEC, there has been a noticeable relaxation in crypto regulation. Apart from BlackRock, ETF issuers such as Invesco Galaxy, VanEck, WisdomTree, and 21Shares have also submitted applications for similar staking and in-kind redemption.
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If staking ETFs are approved, the benefits are likely to go beyond price appreciation. The introduction of staking functionality could redefine the role of crypto assets, making them more similar to traditional financial products that provide returns and value appreciation, thereby driving Ethereum closer to mainstream finance.
Currently, the SEC still needs to address several decisions related to crypto ETFs, including whether to approve ETFs for Solana, XRP, Litecoin, and even Dogecoin. With the calls for an "altcoin season" growing louder, Ethereum's strong performance may just be the beginning of a larger crypto market frenzy.
In addition, the Trump family-related DeFi project WLFI is also bullish on this wave of rise, with frequent on-chain activities. According to on-chain data analyst @ai_9684xtpa's monitoring, a WLFI-related address is currently borrowing coins to go long on ETH, borrowing 4 million U from Aave to buy 1590 ETH at an average price of $2515 per ETH.
For this epic surge of Ethereum after half a year of silence, the community has indeed gained more confidence and hope, which has also led to a revival of the entire altcoin market. However, amidst the joy, there are also voices of pessimism. Below is a summary conducted by BlockBeats based on community discussions.
The optimists point out that the current market structure is similar to the eve of the bull markets in 2016 and 2020, predicting a life-changing surge in the next 3-6 months, where some altcoins may even achieve astonishing single-day gains of up to 40%.
@liuwei16602825 stated that this surge signifies the return of the bull market as a sure thing. There is no need to worry about a pullback. The driving force behind the surge uses a high-cost isolated operation, fearing a drop more than any retail investor and will definitely do everything to support the price.
Related Reading: "Ethereum Leads the Surge Triggering the 'Altcoin Season' Speculation, How Do Traders View the Future Market?"
The bears mainly believe that this surge is different from the bull market of 2021, as the current market lacks the confidence of large-scale retail investors entering and holding positions for the long term, with funds rotating too quickly.
@market_beggar observed that a Bitfinex E/B whale has started to close positions and believes that if this whale maintains its high-speed position-closing operation for the next few days, it can be inferred that the whale no longer sees the upside potential of ETH, preparing to take profits and exit. The closing time will be a key focus going forward.
@FLS_OTC stated that there are still many uncertainties at the macro level, and the liquidity cannot support a major bull market. At this stage, it is a "last hurrah," not a complete reversal, and will continue to remain in a short position.
@off_thetarget believes that after ETH transitioned from POW to POS, it lost the "gold standard" of mining machine power cost support. The staking economic model led to a breakdown in value anchoring. Additionally, the L2 ecosystem (such as Starknet, zkSync, etc.) suffered from liquidity fragmentation, failing to establish an effective capital inflow mechanism, causing the collapse of the split disc pattern. Furthermore, the ETH community's excessive pursuit of technical narratives divorced from real-world needs resulted in a weak ecosystem growth. Therefore, he believes that ETH's intrinsic value system has crumbled, and the price is bound to plummet to the 800-1200 range, with a decisive short position at 1800.
@Airdrop_Guard, based on the core logic of the "High Probability Trading Strategy," where three sets of underlying logic different trading systems (such as volume depletion, price supply-demand, long/short position funding rate, etc.) simultaneously issue a short signal at the same point (2580), creating a high-probability trading opportunity. He emphasizes that these systems must be based on different algorithms and logics (rather than mere technical indicator overlays). The current ETH trend aligns with the short conditions in multiple independent dimensions of his trading system, hence the decision to short.
Overall, Bitcoin still maintains over 54% market dominance, and institutional funds' continued preference for it may limit the altcoin's upward potential. The market's future direction will depend on multiple factors, such as Bitcoin's price trend, global macroeconomic conditions, and whether funds can effectively rotate from Bitcoin to the altcoin sector.
Although Ethereum's recent leadership in the market has brought about optimistic sentiment, investors still need to remain rational as different sectors of altcoins are likely to show divergence in trends. Whether this round of Ethereum's rise will usher in a true altcoin frenzy may require more time and conducive conditions.
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$COIN Joins S&P 500, but Coinbase Isn't Celebrating
On May 13, S&P Dow Jones Indices announced that Coinbase would officially replace Discover Financial Services in the S&P 500 on May 19. While other companies like Block and MicroStrategy, closely tied to Bitcoin, were already part of the S&P 500, Coinbase became the first cryptocurrency exchange whose primary business is in the index. This also signifies that cryptocurrency is gradually moving from the fringes to the mainstream in the U.S.
On the day of the announcement, Coinbase's stock price surged by 23%, surpassing the $250 mark. However, just 3 days later, Coinbase was hit by two consecutive events: a hack where employees were bribed to steal customer data and a demand for a $20 million ransom, and an investigation by the U.S. Securities and Exchange Commission (SEC) into the authenticity of its claim of having over 100 million "verified users" in its securities filings and marketing materials. These two events acted as mini-bombs, and at the time of writing, Coinbase's stock had already dropped by over 7.3%.
Coincidentally, Discover Financial Services, being replaced by Coinbase, can also be considered the "Coinbase" of the previous payment era. Discover is a U.S.-based digital banking and payment services company headquartered in Illinois, founded in 1960. Its payment network, Discover Network, is the fourth largest payment network apart from Visa, Mastercard, and American Express.
In April, after the approval of the acquisition of Discover by the sixth-largest U.S. bank, Capital One, this well-established digital banking company of over 60 years smoothly handed over its S&P 500 "seat" to this emerging cryptocurrency "bank." This unexpected coincidence also portrayed the handover between the new and old eras in Coinbase's entry into the S&P 500, resembling a relay race scene. However, this relay baton also brought Coinbase's accumulated "external troubles and internal strife" to a tipping point.
Over the past decade, cryptocurrency exchanges have been the most stable "profit machines." They play a role in providing liquidity to the entire industry and rely on trading fees to sustain their operations. However, with the comprehensive rollout of ETF products in the U.S. market, this profit model is facing unprecedented challenges. As the leader in the "American stack," with over 80% of its business coming from the U.S., Coinbase is most affected by this.
Starting from the approval of Bitcoin and Ethereum spot ETFs, traditional financial capital has significantly onboarded users and funds that originally belonged to exchanges in a more cost-effective, compliant, and transparent manner. The transaction fee revenue of cryptocurrency exchanges has started to decline, and this trend may further intensify in the coming months.
According to Coinbase's 2024 Q4 financial report, the platform's total trading revenue was $417 million, a 45% year-on-year decrease. The contribution of BTC and ETH's trading revenue dropped from 65% in the same period last year to less than 50%.
This decline is not a result of a decrease in market enthusiasm. In fact, since the approval of the Bitcoin ETF in January 2024, the inflow of BTC into the U.S. market has continued to reach new highs, with asset management giants like BlackRock and Fidelity rapidly expanding their management scale. Data shows that BlackRock's iShares Bitcoin ETF (IBIT) alone has surpassed $17 billion in assets under management. As of mid-May 2025, the cumulative net inflow of 11 major institutional Bitcoin spot ETFs on the market has exceeded $41.5 billion, with a total net asset value of $1214.69 billion, accounting for approximately 5.91% of the total Bitcoin market capitalization.
Institutional investors and some retail investors are shifting towards ETF products, partly due to compliance and tax considerations. On one hand, ETFs have much lower trading costs compared to cryptocurrency exchanges. While Coinbase's spot trading fee rate varies annually in a tiered manner but averages around 1.49%, for example, the management fee for IBIT ETF is only 0.25%, and the majority of ETF institution fees fluctuate around 0.15% to 0.25%.
In other words, the more rational users are, the more likely they are to move from exchanges to ETF products, especially for investors aiming for long-term holdings.
According to multiple sources, several institutions, including VanEck and Grayscale, have submitted applications to the SEC for a Solana (SOL) ETF, with some institutions also planning to submit an XRP ETF proposal. Once approved, this may trigger a new round of fund migration. According to a report submitted by Coinbase to the SEC, as of April, the platform's trading revenue from XRP and Solana accounted for 18% and 10%, nearly one-third of the platform's fee revenue.
However, the Bitcoin and Ethereum ETFs passed in 2024 also reduced the fees for these two tokens on Coinbase from 30% and 15% to 26% and 10%, respectively. If the SOL and XRP ETFs are approved, it will further undermine the core fee revenue of exchanges like Coinbase.
The expansion of ETF products is gradually weakening the financial intermediary status of cryptocurrency exchanges. From their original roles as matchmakers and clearers to now gradually becoming mere "on-ramps and off-ramps" for funds, exchanges are seeing their marginal value squeezed by ETFs.
On May 12, 2025, SEC Chairman Paul S. Atkins gave a keynote speech at the Tokenization and Cryptocurrency Working Group roundtable. The theme of his speech revolved around "It is a new day at the SEC," where he indicated that the SEC would not approach enforcement and regulation the same way as before but would instead pave the way for cryptocurrency assets in the U.S. market.
With signs of cryptocurrency compliance such as the SEC's "NEW DAY" declaration, an increasing number of traditional brokerages are attempting to enter the cryptocurrency industry. One of the most representative cases is the well-known U.S. brokerage Robinhood, which began expanding its crypto business in 2018. By the time of its IPO in 2021, Robinhood's crypto business revenue accounted for over 50% of the company, with a significant boost from the Dogecoin "moonshot" promoted by Musk.
In Q1 2025 earnings report, Robinhood showcased strong growth, especially in revenue from cryptocurrency and options trading. Fueled by Trump's Memecoin, cryptocurrency-related revenue reached $250 million, nearly doubling year-over-year. Consequently, Robinhood Gold subscription users reached 3.5 million, a 90% increase from the previous year, with the rapid growth of Robinhood Gold providing the company with a stable source of income.
Meanwhile, RobinHood is actively pursuing acquisitions in the cryptocurrency space. In 2024, it announced a $2 billion acquisition of the long-standing European cryptocurrency exchange Bitstamp. Additionally, Canada's largest cryptocurrency CEX, WonderFi, which recently went public on the Toronto Stock Exchange, also announced its integration with RobinHood Crypto. After obtaining virtual asset licenses in the UK, Canada, Singapore, and other markets, RobinHood has taken a proactive approach in the compliant cryptocurrency trading market.
Furthermore, an increasing number of brokerage firms are exploring the same path. Futu Securities, Tiger Brokers, and others are also dipping their toes into cryptocurrency trading, with some having applied for or obtained the VA license from the Hong Kong SFC. Although their user bases are currently small, traditional brokerages have a natural advantage in user trust, regulatory licenses, and low fee structures. This could pose a threat to native cryptocurrency platforms in the future.
In April 2025, security researchers discovered that some Coinbase user data was leaked on the dark web. While the platform initially responded by attributing it to a "technical misinformation," it still raised concerns among users regarding its security and privacy protection. Just two days before Dow Jones Indexes announced Coinbase's addition to the S&P 500 Index, on May 11, 2025, Coinbase received an email from an unknown threat actor claiming to have obtained customer account information and internal documents, demanding a $20 million ransom to keep the data private. Subsequent investigations confirmed the data breach.
Cybercriminals obtained the data by bribing overseas customer service agents and support staff, mainly in "non-U.S. regions such as India." These agents abused their access to Coinbase's internal customer support system and stole customer data. As early as February this year, blockchain detective ZachXBT revealed on X platform that between December 2024 and January 2025, Coinbase users lost over $65 million to social engineering scams, with the actual amount potentially higher.
Among the victims was a well-known figure, 67-year-old Ed Suman, an established artist in the art world for nearly two decades, having been involved in the creation of artworks such as Jeff Koons' "Balloon Dog" sculpture. Earlier this year, he fell victim to an impersonation scam involving fake Coinbase customer support, resulting in a loss of over $2 million in cryptocurrency. ZachXBT critiqued Coinbase for its inadequate handling of such scams, noting that other major exchanges have not faced similar issues and recommending Coinbase to enhance its security measures.
Amidst a series of ongoing social engineering incidents, although there has not been any impact on user assets at the technical level so far, it has raised concerns among many retail and institutional investors. Especially institutions holding massive assets on Coinbase. Just considering the U.S. BTC ETF institutions, as of mid-May 2025, they collectively hold nearly 840,000 BTC, and 75% of these are custodied by Coinbase. If we price BTC at $100,000, this amount reaches a staggering $63 billion, which is equivalent to the nominal GDP of two Iceland in the year 2024.
In addition, Coinbase Custody also serves over 300 institutional clients, including hedge funds, family offices, pension funds, and endowments. As of the Q1 2025 financial report, Coinbase's total assets under management (including institutional and retail clients) reached $404 billion. The specific amount of institutional custodied assets was not explicitly disclosed in the latest report, but it should still be over 50% based on the Q4 2024 report.
Once this security barrier is breached, not only could the rate of user attrition far exceed expectations, but more importantly, institutional trust in it would undermine the foundation of its business. Therefore, after a hacking event, Coinbase's stock price plummeted significantly.
Facing a decline in spot trading fee revenue, Coinbase is also accelerating its transformation, attempting to find growth opportunities in derivatives and emerging assets. Coinbase acquired a stake in the options platform Deribit at the end of 2024 and announced the official launch of perpetual contract products in 2025. This acquisition fills in Coinbase's gap in options trading and its relatively small global market share.
Deribit has a strong presence in non-U.S. markets, especially in Asia and Europe. The acquisition has enabled Coinbase to gain a dominant position in bitcoin and ethereum options trading on Deribit, accounting for approximately 80% of the global options trading volume, with daily trading volume remaining above $2 billion.
Meanwhile, 80-90% of Deribit's customer base consists of institutional investors, with their professionalism and liquidity in the Bitcoin and Ethereum options market highly favored by institutions. Coinbase's compliance advantage, coupled with its already robust institutional ecosystem, makes it even more suitable. By using institutions as an entry point, it can face the squeeze from giants like Binance and OKX in the derivatives market.
Facing a similar dilemma is Kraken, which is attempting to replicate Binance Futures' model in non-U.S. markets. Since the derivatives market relies more on professional users, fee rates are relatively higher and stickiness is stronger, making it a significant source of revenue for exchanges. In the first half of 2025, Kraken completed the acquisition of TradeStation Crypto and a futures exchange, aiming to build a complete derivatives trading ecosystem to hedge the risk of declining spot transaction fee income.
With the surge of Memecoin in 2024, Binance, OKX, and various CEX platforms began massively listing small-market-cap, highly volatile tokens to activate active trading users. Due to the wealth effect and trading activity of Memecoins, Coinbase was also forced to join the battle, successively listing popular tokens from the Solana ecosystem such as BOOK OF MEME and Dogwifhat. Although these coins are controversial, they are frequently traded, with fee rates several times higher than mainstream coins, serving as a "blood-boosting" method for spot trading.
However, due to its status as a publicly traded company, this practice is a riskier endeavor for Coinbase. Even in the current crypto-friendly environment, the SEC is still investigating whether tokens like SOL, ADA, and SAND constitute securities.
In addition to the forced transformation strategies carried out by the aforementioned CEXs, they are also starting to lay out RWAs and the most talked-about stablecoin payment fields, such as the PYUSD launched through a collaboration between Coinbase and Paypal, Coinbase's support for the Euro stablecoin EURC by Circle that complies with EU MiCA regulatory requirements, or the USD1 launched through a collaboration between Binance and WIFL. In the increasingly crowded trading field, many CEXs have shifted their focus from just the trading market to the application field.
The golden age of transaction fees has quietly ended, and the second half of the crypto exchange platform game has silently begun.
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