Recently Coinbase announced it would be adding support for Ethereum ERC20 tokens “in the coming months”.
What are ERC20 tokens?
“ERC20 is a technical standard used for Ethereum smart contracts. ERC20 assets have become a popular way for teams to quickly build interoperable contracts/assets.”
In short, most ERC20 tokens have unique use cases that range from tokens supporting the buying and selling of distributed computing power (i.e. Golem project) to decentralized exchanges and interconnected blockchains. A vast range of exciting projects.
Why does this matter?
Historically, new assets listed on Coinbase benefited from access to Coinbase’s large customer base through price appreciation and project exposure.
So which ERC20 token is most likely to be listed on Coinbase?
Before we can build a framework to answer that question, we have to understand the Coinbase process:
- Coinbase will list assets according to the GDAX Digital Asset Framework (a separate exchange owned by Coinbase).
- Just because an asset satisfies the GDAX requirements, does not necessarily mean that Coinbase will list the asset. In my opinion, the reason for this is Coinbase is serious about protecting its brand as “the easiest and most trusted place to buy, sell, and manage your digital currency.”
The GDAX Digital Assets Framework is a four page document with six main sections and 13 subsections. Yet some of the sections are too subjective to build a reliable framework around. For example, does anyone know of a project that isn’t in violation of section 2.2 Team – Specialized Knowledge and Key People?
“The project leadership is not highly centralized or dependent on a small number of key persons. Specialized knowledge in this field is not limited to a small group of people.”
All ERC20 tokens are relatively small projects and would violate this requirement.
It becomes obvious that if we are to attempt predicting which ERC20 token is most likely to be added, then we must focus on section 4.1 Liquidity Standards (the life-force of any exchange) and cross reference that metric with the brand concerns of Coinbase.
Here we go…
To satisfy the “Global Market Capitalization” requirement, we filtered ERC20 tokens by the top 100 assets by market capitalization on CoinMarketCap. After filtering, 46 ERC20 tokens remained.
We then filtered those 46 tokens by 30 day trading volume over $1 billion, in order to gauge “Asset Velocity”. The nine tokens below remained:
We then vetted these tokens by Coinbase branding concerns.
We are not trying to pick sides or anger a particular crypto asset community. Just remember we are approaching this from the branding perspective of a company (Coinbase) trying to ensure that it remains “the easiest and most trusted place to buy, sell, and manage your digital currency.” Any scandal or negative headline will factor into Coinbase decision making.
Despite being the number six cryptocurrency by market capitalization we removed EOS from the list due to concerns over its promotional tactics. Just view the John Oliver youtube video around minute 19 and checkout out Brock Pierce’s antics.
TRON was removed for not having a working product and seeming to be more of a trading instrument than serious project.
Binance Coin was removed because it is an asset developed by a competing exchange.
Six ERC20 tokens remained.
DigixDAO (DGX) is a unique asset tied to gold. One DGX is worth one gram of gold. Nothing wrong with that, but we saw DGX as not satisfying a use case beyond a stable relationship to an existing commodity, so we removed it from the list.
The remaining assets (OmiseGo, ICON, VeChain, Status, and Storm) are all unique and exciting projects. Yet one stands out as the MOST likely (if we had to pick only one) asset to get added to Coinbase. In the Ethereum and crypto space nothing screams positive brand like Vitalik Buterin. He’s known for being level headed, and project NOT price focused.
OmiseGo is the only ERC20 token in the final 5 that counts Vitalik Buterin as an advisor. Recently OmiseGo and Vitalik announced a $1 million donation to refugees.
If Coinbase had to pick just one ERC20 token at this point in time, we believe it would be OmiseGO (OMG).
*Note- This is a prediction of the MOST likely ERC20 to be listed. As time passes, and volumes and market capitalizations change, any analysis would have to consider other assets. This article is seeking to provide you with a framework for conducting your own research and strategy. We also assume more than one ERC20 asset will be listed on Coinbase.