Coinbase launches open-source protocol to improve crypto payments

Cryptocurrency exchange Coinbase made waves this week with the launch of its new open-source Onchain Payment Protocol — aimed at improving the company’s Commerce product for merchants.

The San Francisco-based exchange announced the new protocol on Thursday, describing it as a way to enable “instant settlement, low fees, and broad asset support” for merchants using its services. Coinbase Commerce was first introduced in 2018 as a platform for merchants to accept cryptocurrency payments. Since then, the company says thousands of merchants globally have processed billions of dollars in on-chain payments.

However, the volatility of cryptocurrencies and complicated user experiences have remained barriers to broader adoption. Coinbase’s new open-source protocol looks to solve these problems by automatically converting customers’ cryptocurrency payments into the popular stablecoin USDC, thus eliminating exposure to volatility. The protocol currently supports Ethereum, Polygon, and the Coinbase-incubated Base — with plans to expand to more networks soon.

Merchants may benefit from dramatically lower payment processing fees by accepting cryptocurrency directly rather than traditional credit card payments. The open-source nature of the protocol also opens the door for other platforms to integrate and build on top of Coinbase’s infrastructure.

The launch comes as Coinbase pushes forward with developing its own Layer 2 network, Base, to capture market share in the hot DeFi space.

Photo by David McBee.