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Coinbase users can now communicate using encrypted messages through Coinbase Wallet, the cryptocurrency exchange’s self-custodial wallet product announced today.
The service was built in collaboration with Texas-based startup XMTP, and it uses the firm’s open-source Web3 messaging network. The feature is a new way for people to engage with crypto, Coinbase said in a press release, and will initially be rolled out to a small subset of its users.
Tapping XMTP’s network, Coinbase Wallet’s messaging service supports Ethereum addresses that are human-readable, including those that leverage the Ethereum Name Service (ENS), as opposed to just wallet addresses consisting of a lengthy string of characters.
Coinbase Wallet users already have access to personalized wallet labels through Coinbase Decentralized ID (cb.id), which the exchange created in collaboration with ENS. And while there are costs associated with securing an ENS domain, Coinbase’s labels are free.
One of Web3’s purported advantages over established internet structures is the ability for users to have more control over their data. And in true Web3 fashion, Coinbase said users will be able to take data to other applications supported by XMTP, like Lenster or Orb.
“An end user’s inbox is portable and interoperable with all other supporting apps, so one user’s choice to use a particular app versus another does not require their recipient to do the same,” XMTP co-founder and CEO Matt Galligan told Decrypt.
Encrypted messaging services like Telegram and Signal are already quite popular in crypto circles, yet Coinbase Wallet’s messaging feature also allows users to make cryptocurrency payments, paralleling services like PayPal’s Venmo or Block’s Cash App.
The exchange said its messaging feature supports “thousands of coins” at launch, and users who conduct transactions in Circle’s USDC stablecoin won’t have to pay gas fees.
Coinbase’s collaboration with XMTP mirrors the exchange’s work on its Ethereum layer-2 scaling network Base with Optimism, where Coinbase drew upon existing technology that aligns with Web3 values, Galligan said.
“Building with XMTP further illustrates Coinbase’s deep commitment to building on top of protocols and embracing decentralization,” he said. “Rather than building their own stack, they’re now committed partners to ecosystems they’re a part of.”
Coinbase launched its self-custody wallet as a mobile application in 2017, and the exchange has brought additional features to the product over time, including ones that focus on safety. In January, an update to Coinbase Wallet introduced transaction previews and measures that flag potentially malicious smart contracts before it's too late.
XMTP’s network can be used for announcements and alerts, in addition to private messaging, meaning it can also be tapped by applications themselves. XMTP raised $5 million in seed funding in 2021, and the California-based venture firm Offline Ventures was a lead investor, according to CrunchBase.
The United States Securities and Exchange Commission (SEC) put Coinbase Wallet in its regulatory sights when the agency unveiled a lawsuit against the exchange last month. The watchdog alleged that Coinbase’s wallet product is an unregistered broker, which allows users to route trades through third-party platforms.
But in the lawsuit’s wake, Coinbase’s Chief Legal Officer Paul Grewal said the exchange will operate its “business as usual.” And when it comes to pushing the boundaries of what self-custodial wallets can do, it appears Coinbase’s stride hasn’t wavered.