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Coinbase launches 'USDC Bootstrap Fund' to invest in DeFi protocols Compound, dYdX

Coinbase, Inc. [Public domain]

Wed, 11 Sep 2019, 05:43 am UTC

Crypto exchange Coinbase is depositing 1 million USDC each in lending and borrowing money protocol Compound and margin trading protocol dYdX, as it aims to grow the decentralized finance (DeFi) ecosystem.

Dubbed as the USDC Boostrap Fund, the new initiative will reportedly support developers by “investing USDC directly in the protocol,” as per a press release. It will invest in DeFi-related projects, by stumping up a number of USDC and help the project’s team to assess their protocol’s strategy and usability.

Notably, the move differs in significant ways from typical investments made by Coinbase Ventures, which invests in startups and takes equity stakes. The bootstrap fund adds to protocols’ lending pools and returns interest when borrowed by counterparties. The generated interest will be contributed back to the pools.

The USDC tokens we deposit cannot be used for items like salaries or user acquisition. It simply provides more liquidity in the protocol, making it easier to attract borrowers (for decentralized lending protocols) and takers (for decentralized exchanges),” Nemil Dalal, Coinbase product manager, said, as quoted by CoinDesk.

Zhuoxun Yin, the head of operations of dYdX, noted that luring borrowing demand is one of the challenges in developing a DeFi protocol. Coinbase is hoping that introducing USDC in the lending pools will increase its supply, reduce the interest rate, and encourage more stablecoin borrowers.

Dalal also stressed that any investment via the USDC Bootstrap Fund should not be considered as a recommendation of the DeFi protocol in question.

All investors in their protocol should conduct their own diligence before depositing tokens into a decentralized finance protocol,” Dala said.

Just recently, Coinbase together with Ripple failed to secure spots in the LinkedIn’s top 10 startups list for 2019. Both were considered two of the best crypto startups in 2018, ranking at 3rd and 7th, respectively. But the updated list showed the two slid down to the 29th and 28th places, respectively.

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