Does Coinbase stake on the user's behalf? Do they take a cut? What is Coinbase doing with the staked crypto?
Don't regular banks turn your deposits into investments (securities) that provide returns which become your interest?
Is the idea here that Coinbase is doing nothing but passing your crypto to the 'investment banks' to trade with and earn your return, then just depositing that 'interest' back?
Yes. While blockchains like Ethereum are open protocols and staking is permissionless, it isn't exactly easy if you aren't savvy and/or somewhat well off already. The value add here is an IT service.
>Do they take a cut?
Yes, between 15 and 35 percent.
>What is Coinbase doing with the staked crypto?
Nothing, staking involves "locking" your crypto in exchange for the privilege of running a validator. This is equivalent to "mining" in a proof-of-work protocol, and comes with similar rewards from the protocol in exchange for securing the network (with the risk that if you deviate from consensus, your staked crypto could be "slashed"). Coinbase operates the validator on your behalf.
>Don't regular banks turn your deposits into investments (securities) that provide returns which become your interest?
I'm not sure every investment is a security (some of them are just loans), but more or less.
>Is the idea here that Coinbase is doing nothing but passing your crypto to the 'investment banks' to trade with and earn your return, then just depositing that 'interest' back?
>This is equivalent to "mining" in a proof-of-work protocol, and comes with similar rewards from the protocol in exchange for securing the network (with the risk that if you deviate from consensus, your staked crypto could be "slashed"). Coinbase operates the validator on your behalf.
Using your analogy, if I send money to a Bitcoin mining company, they use the money to buy/run miners, and then send me a percentage of their profit, isn't that an investment in a common pool? Isn't the item they use to validate my share a security?
Bitcoin may not be a security but the middleman is a securitizing a service that involves bitcoin, right?
The analogy wasn't great, but I'm struggling to think of an accurate one — investing or giving a loan to a company is obviously different than having a company interact with a protocol on your behalf. Maybe it's more like email providers?
Don't regular banks turn your deposits into investments (securities) that provide returns which become your interest?
Is the idea here that Coinbase is doing nothing but passing your crypto to the 'investment banks' to trade with and earn your return, then just depositing that 'interest' back?