Coinbase Launches Verified Pools for Secure DeFi Trading

Coinbase has introduced Verified Pools, a new tool designed to facilitate the swapping or trading of tokens over a decentralized finance (DeFi) network. This innovative feature requires liquidity providers to verify their identities, enhancing both security and transparency in the process. By integrating this verification step, Coinbase aims to address the inherent risks associated with anonymous liquidity providers in DeFi trading.

Verified Pools operates on Base, a layer 2 Ethereum blockchain, which functions as an online service. This setup adds an additional layer of security and transparency to the Coinbase exchange. The pools are noncustodial, meaning users retain full control over their funds, a significant advantage in the wake of recent high-profile exchange collapses, such as FTX.

Coinbase has developed Verified Pools from Uniswapv4, allowing for the creation of custom smart contracts that include verification data. These contracts run on Base, Coinbase’s layer 2 network, enabling faster and more cost-effective transactions. To ensure the reliability and security of these pools, Coinbase has engaged Gauntlet, a risk modeling company, to minimize potential risks for consumers.

Base, as a layer 2 blockchain, allows users to exchange tokens directly within the pools, reducing transaction times and verifying all users. This verification process increases market liquidity and provides users with complete control over their wallets. Coinbase’s approach combines the benefits of both centralized and decentralized technologies, offering a unique balance between trustless blockchains and centralized exchanges.

While Coinbase has announced the new technology, it has not provided a specific implementation date. The existing market for decentralized exchanges (DEX) presents a potential challenge for Coinbase. However, the promise of a noncustodial wallet, coupled with the enhanced security of verified identities, could attract users seeking a more secure trading environment.

Verified Pools will initially be available in select countries, including America, Singapore, and the Netherlands. Coinbase plans to expand its service to additional countries, add more trading pairs, and integrate the blockchains of more decentralized exchanges (DEX). This expansion aligns with Coinbase’s renewed focus on innovation and growth, following a more favorable regulatory environment in America.

Coinbase’s recent developments come at a time when the regulatory landscape for cryptocurrencies has become more supportive. The end of the ‘war on crypto’ and the SEC’s decision to drop its legal investigation into Coinbase have freed up resources for the exchange to invest in research and development. This shift in regulatory stance has provided Coinbase with the opportunity to innovate and expand its services, positioning itself as a leader in the DeFi space.