How Coinbase approaches forked and airdropped assets
We wanted to give our customers an update on how we approach digital currency forks and airdrops. We’ve previously posted about forks here andhere. You can read more about what a digital currency fork is here.
We operate by the principle that our customers should benefit to the greatest extent possible from hard forks or other unexpected events. This is essential in our mission to make Coinbase the most trusted, safe, and easy-to-use digital currency exchange.
We also believe forks and airdrops can enable innovation and improvements to digital currency and we believe that we will see an increasing number of both forks and airdrops in the future. That said, given how we currently secure customer funds, supporting every forked or airdropped asset on Coinbase is not possible. We are investing in infrastructure that should allow us to more rapidly support any forked or airdropped asset, but this will take some time. In the meantime, here’s how we will approach supporting forks and airdrops.
Adding a new asset to Coinbase is an endeavor that we take seriously. In the case of adding new assets to the platform (i.e. non-forked or airdropped assets), Coinbase has the ability to consider and select assets based on Digital Asset Framework.
However, forks and airdrops are slightly different — anyone can fork or airdrop a new asset from/onto an asset we already support on our platform, e.g. anyone can fork Bitcoin or airdrop an asset onto Ethereum. By definition, this newly forked or airdropped asset is associated with the private keys of the original blockchain. Our private key infrastructure — both our hotwallet and cold storage — significantly increases the security of assets stored at Coinbase, but by design makes safely retrieving forked assets and airdrops difficult and time intensive from an engineering standpoint. Engineering time spent on supporting a given forked or airdropped asset could be spent improving the security and reliability of our platform, which is of critical importance to our customers.
That said, our primary criteria for supporting forked or airdropped assets are that they 1) pass our Digital Asset Framework and 2) mitigate potential risks, including:
- Security vulnerabilities in the protocol or client software
- Unclear or non-existent core developer roadmap
- Infrequent or non-public commits to the core protocol code repository
- Sustained low liquidity of the asset
We will not add any asset we believe would put at risk 1) the security of customer funds held on the Coinbase platform or 2) any asset that would violate our compliance program.
In order for us to be the most trusted company in the space it’s important for us to be able to support forked or airdropped assets that we feel:
- Are safe and won’t compromise the security of our infrastructure
- Have a reasonable amount of developer activity and roadmap
Based on the both the risks and positive signals outlined above, we assess each fork and airdrop on a case by case basis.
In the case we plan on supporting a new asset, we will communicate this publicly prior to listing it on our platforms and detail our level of support. We will also give as much advance notice as possible. We intend to announce on the following platforms: