BlockFi, the now failed crypto lender, has announced that it will permanently shut down its web portal by the end of the month and has entered into a partnership with Coinbase to handle withdrawals for eligible customers.

Let’s see below all the details. 

Crypto news: Coinbase will facilitate payments to eligible BlockFi customers in the liquidation process

As anticipated, after completing the first round of withdrawals, BlockFi, the crypto lender in bankruptcy, has initiated a partnership with Coinbase to handle the subsequent phases of the distribution process. 

BlockFi, once among the main players in the cryptocurrency lending sector, declared bankruptcy on November 28, 2022 due to its strong connections with the now defunct exchange FTX and its affiliated companies.

On Thursday, BlockFi explained that customers who did not meet the deadline of April 28, 2024 to withdraw their digital assets will still have the opportunity to access their cryptocurrencies through a verified Coinbase account.

These customers will be able to transfer funds directly from Coinbase, avoiding conversion into cash. However, BlockFi customers who do not create a Coinbase account will see their digital assets converted into cash, following the restructuring plan.

BlockFi has announced that the plan administrator is authorized to use Coinbase for the subsequent phases of distribution, including handling the funds recovered from FTX. 

Without this collaboration, the administrator would have been able to distribute only cash in future phases. For those customers who are unable to open a Coinbase account, all distributions will be made in cash.

BlockFi could receive additional funds from assets recovered after the bankruptcy of FTX. 

Last Tuesday, FTX announced that it intends to reimburse 98% of its creditors with at least 118% of the admitted credits, a significantly higher value than the initial estimates. 

John J. Ray III, the current CEO of FTX, stated the following: 

“We are pleased to be able to propose a Chapter 11 plan that provides for the repayment of 100% of bankruptcy claims plus interest to non-governmental creditors.”

The Bitwise Report: Coinbase and the Base Layer 2 Network

In a recent report published by Bitwise, the leading manager of index funds on cryptocurrencies, a surprising comparison is drawn between Coinbase and Amazon.

In particular focusing on an underestimated but significant aspect of Coinbase’s activities: the Base Layer 2 network. 

The report, titled “It’s all about that base (and other thoughts on Coinbase)”, written by Matt Hougan and Juan Leon, explores the financial and strategic changes behind Coinbase’s recent successes and its potential future.

The financial results of Coinbase in the first quarter were astonishing, with a net revenue of 1.6 billion dollars, marking a 116% year-over-year increase and surpassing Wall Street’s expectations of 1.36 billion dollars. 

Even profits have reached impressive levels, with 1.2 billion dollars and a total liquidity reserves increased up to 7.1 billion dollars.

Despite these positive numbers, the Coinbase stock has remained subdued, suggesting that the market may not fully recognize the company’s strengths. 

However, the Bitwise report focuses on the Base Layer 2 network, a project launched by Coinbase on Ethereum in August, designed to improve blockchain throughput by reducing costs.

The adoption rate of Base has been remarkable, with a 74% increase in transactions in the first quarter and a 40% increase in April alone compared to the entire first quarter.

This rapid growth rate is accompanied by an increase in the number of developers using the network, which has grown eightfold.

The transformation potential of Base Layer 2

From a financial point of view, Base has proven to be profitable for Coinbase, generating $27.4 million in transaction fees in the first quarter, with Coinbase retaining $15.5 million of it. 

These high-margin profits continued in April, adding another $11 million to Coinbase’s earnings. Bitwise predicts that, at this rate, Base could soon contribute $10-20 million in monthly profits to Coinbase.

The analogy with Amazon comes from Base’s transformation potential.

Just like Amazon went from an online bookstore to a retail giant and then to a leader in cloud computing with AWS, Coinbase could follow a similar path.

That is evolving from a simple cryptocurrency exchange to a provider of critical infrastructure for the cryptocurrency industry.