Crypto exchange Coinbase announced today a new fund aimed at encouraging the development of decentralized finance, or “DeFi” protocols. The exchange revealed that it has invested in two DeFi protocols: “Compound,” a protocol for lending and borrowing money and “dYdX,” a protocol for margin trading.

Coinbase’s new initiative dubbed the “USDC Bootstrap Fund,” will invest in DeFi-related projects, by stumping up chunks of its stablecoin USD Coin (USDC). It will also help the project’s teams to assess their protocol’s strategy and usability.

Think of a DeFi protocol like a bank—it’s a place where people can deposit money and earn interest, and a place where people can borrow money, on which they’ll pay interest. Instead of a bank though, made up of people and governed by laws, DeFi protocols are made up of smart contracts and governed by code and the network on which they’re built. 


Based on its talks with DeFi protocol developers, Coinbase says liquidity, or having money available to borrowers, is one of the biggest needs for such businesses. And so, it is hoping its grants will boost the growth of the already burgeoning DeFi ecosystem.

However, concerns have been raised recently over how decentralized these protocols really are—with SpankChain CEO Ameen Soleimani claiming that Compound has a master key to all trades made on its platform. But perhaps this extra funding will help the projects evolve into true decentralized finance.

Daily Debrief Newsletter

Start every day with the top news stories right now, plus original features, a podcast, videos and more.