There's probably no other topic within the cryptocurrency space that has received more attention than non-fungible tokens (NFTs). These digital goods, ranging from artwork and music to video game items and even sports highlights, demonstrate a legitimate use case for cryptocurrencies.
One of the top crypto stocks out there, Coinbase (COIN -0.23%), announced plans last October to launch Coinbase NFT, a marketplace to mint, purchase, showcase, and discover the digital collectibles. This strategic move fits perfectly with the company's overarching goal of increasing economic freedom in the world.
Instead of trying your hand at buying individual NFTs, an extremely speculative and risky activity, you might want to consider owning Coinbase shares. Here's why.
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It's all about the user experience
Since its founding in 2012, Coinbase rose to prominence by trying to bring crypto to the masses. With a current market cap of $41 billion, the company has emphasized a consumer-friendly approach to doing just that. As of Sept. 30, Coinbase counted 73 million users and generated over $1.2 billion in revenue in the third quarter of 2021.
This scale is impressive, but when it comes to NFTs, OpenSea is the largest and most popular marketplace. Over the past 30 days, there were nearly 432,000 users interacting with the platform. During the same time, a remarkable $2.8 billion of value was added to OpenSea.
However, conducting transactions is cumbersome, requiring a user to convert fiat currency, like the U.S. dollar or Euro, to a cryptocurrency like ETH, Ethereum's native coin. Users' wallets, where they store their crypto, must connect to OpenSea's marketplace. Multiple parties and steps are involved. Therefore, it's not difficult to see how investing in NFTs today would be limited to only tech-savvy people.
Coinbase wants to simplify the entire process. Similar to how the crypto brokerage and exchange business made it incredibly easy to buy, sell, and store Bitcoin, it wants to do the same with NFTs. Further bolstering the user experience is Coinbase's newly announced partnership with payments network Mastercard, which will reduce friction for newcomers by letting them use their debit or credit cards to buy NFTs directly. Adding more potential buyers to the entire NFT ecosystem will lead to a robust market for creators.
The yet-to-be-launched Coinbase NFT marketplace is not the first, but it aims to be one of the best. This strategy of focusing intensely on creating a seamless experience for customers at the expense of speed to market has worked extremely well for Apple, the world's most valuable company.
Gatekeeper for the crypto economy
I think Coinbase would probably make money by charging transaction fees, and possibly other fees, to customers of its NFT marketplace. But it's just another example of how the business can be a gatekeeper to the crypto industry, connecting the traditional financial system to the burgeoning digital asset class. Coinbase can be the primary account for anyone looking to do anything related to cryptocurrencies.
While this move certainly supports Coinbase's huge ambition to bring 1 billion people into the crypto economy, shareholders should continue to expect volatility when it comes to the stock. Cryptocurrencies are still nascent and unproven assets, so a company whose entire business model depends on its success will undoubtedly experience a bumpy ride.
Nonetheless, it's great to see Coinbase trying to simplify an intimidating process and open up payment options in the vast world of NFTs. It'll be interesting to see the success of this initiative.
