Coinbase Launches Verified Pools, a Tool to Swap or Trade Tokens

input: Coinbase has launched Verified Pools, a tool to swap or trade tokens over a DeFi network. However, with an added feature, liquidity providers must verify their identities.

Coinbase is launching Verified Pools, a product that allows users to swap or trade tokens over a decentralized network, with an added feature: liquidity providers must verify their identities.

This new offering, according to Coinbase, will increase security and transparency.

"Coinbase is excited to introduce Verified Pools, a trusted way to seamlessly trade and swap on-chain. Whether you’re an institution seeking to provide liquidity or a retail trader looking for an easy way to start trading onchain, Verified Pools is setting a new standard: compliance meets efficiency, and trust meets transparency,” said the exchange in a statement.

Coinbase's integration with Uniswapv4 allows the exchange to create a custom smart contract, including verification data, which runs on Base, Coinbase's layer 2 network, enabling faster and cheaper transactions.

Coinbase also contracted Gauntlet, a risk modelling company, to make sure the pools work correctly, and the exchange is minimizing risk for consumers.

Base, a layer 2 blockchain, allows users to exchange directly within the pools, minimizing transaction times and verifying all users, thus increasing the market’s liquidity. And on top of that, Coinbase claims that users have complete control of their funds. Such a balance between trustless blockchains and centralized exchanges, on paper at least, provides benefits from both approaches. In other words, Coinbase could be trying to have its cake and eat it by using both centralized and decentralized technology.

Coinbase, although announcing the new technology, has not provided a date for its implementation. Despite the use case for verified pools, a market for decentralized exchanges (DEX) already exists, providing a possible challenge for Coinbase. The promise of a noncustodial wallet also sounds very appealing, especially after the FTX exchange collapse. Yet whether the user has complete control over their wallet while required to verify their identity is yet to be seen.

“Decentralized finance (DeFi) has been one of the most exciting frontiers in crypto, offering innovative ways to engage in various onchain activities. Liquidity pools are a prime example, allowing users to trade digital assets without intermediaries,” wrote Coinbase.

However, liquidity pools have traditionally been opaque—it hasn’t always been clear who is providing funds, leading to potential risks. And while DeFi protocols are designed to be trustless, trust is still a factor when it comes to handling and managing digital assets.

Coinbase Verified Pools are available in select countries including America, Singapore, and the Netherlands. Moreover, Coinbase plans to extend its service to more countries, add more trading pairs, and integrate the blockchains of more Decentralized Exchanges (DEX).

Coinbase has been energized since Trump ended the ‘war on crypto’, taking him seriously when he said he wants America to be the ‘crypto capital of the world’, a complete reversal from the previous administration, and giving Coinbase a good reason to employ more staff and invest in research and development. Moreover, the SEC has dropped their legal investigation into Coinbase, freeing up time for the exchange to pursue more valuable activities. The watchdog of American securities behaves more like a security guard, a form of unproductive labor, than an institution aiming to promote fair trade and honest business.

“Coinbase Verified Pools change that. It’s a curated selection of liquidity pools by connecting your Prime Onchain Wallet, Coinbase Wallet, or another third-party wallet with the Coinbase Verifications credential, which serves as a trusted badge in the Onchain ecosystem. Verified Pools are currently open to users in the U.S., Singapore, Netherlands, British Virgin Islands, Cayman Islands, and the Channel Islands”.