Disclaimer: These are my thoughts and opinions. Don't take this as investment advise as I am a hobby investor. Always do your own due diligence and never spend what you can't afford to lose.
Cobinhood is currently in it's ICO stage (Sept 13th - Oct 22nd) and offering a 10% bonus at the time of writing. It's also being traded on EtherDelta.com which is another topic of discussion I will be covering in a later post.
"COBINHOOD is a cryptocurrency service platform for the blockchain era..."
It's important that we keep in mind that Cobinhood is a platform and not just a 0 fees exchange. The 0 fees is definitely what piqued my interest, but is also questioned as to how this platform will be able to sustain that business model. In this post I'll be providing a brief overview of what the platform offers but diving deeper into how Cobinhood will make money and what value the COB tokens provide for investors.
I encourage everyone to go read the whitepaper here, as it will of course provide you with a more in depth explanation of everything it aims to achieve.
The problems that Cobinhood are solving:
Fees of course!: On average, makers and takers pay a .2% fee which can drastically cut into profits. If I wanted to utilize the power of compounding 1% interest per trade, I would have to make sure I make 1.4% to be able to sustain that. Of course making 1% on each trade isn't that difficult, but being able to cut out .4% of fees is significant.
Real-time trading: Solving the problem of rate-limiting API's as well delayed order book confirmations, Cobinhood uses Google Cloud Storage with Golang programming for high concurrency. Directly from their whitepaper: "COBINHOOD is able to process 1,154,284 orders per second and achieve 10,142 order book updates per second for each trading pair on average—making it the world’s first cryptocurrency exchange capable of high-frequency trading." I don't see much problems with this except on EtherDelta, but those numbers are impressive and I'm sure appeals to higher-frequency traders.
Security: We've all seen the problems with hacks, most famously Mt. Goxx. I have numerous friends that don't trade because of uncertainty of exchange security. Cobinhood will enforce 2fa and keep 98% of funds in a multi-sig offline (cold) wallet while 2% remain in their online (hot) wallet for faster user withdrawals and deposits.
They provide 100% reserve of all assets and will be easily audited due to the addresses of cold/hot wallets being easily accessed by all. This ensure no embezzlement or unauthorized use of dormant user assets.
Most importantly, all user's funds stored in the hot wallet will be insured. The cold multi-sig wallets are stored in 8 different locations and are virtually impossible to be hacked.
Fiat pairs: Many exchanges offer limited if any Fiat pairs. Cobinhood will offer a large selection of Fiat pairings ( USD/EUR/JPY/KRW/CNY/HKD/CAD/GBP/AUD/NTD7). The implications for this are huge as it will make it easier for international traders to be able to quickly liquefy positions into their local currency instead of cashing into btc/eth/ltc and then into fiat. With this in mind Cobinhood will enforce bank-level KYC processes to deal with Anti Money Laundering laws.
Language/Customer support: As you can see from the fiat pairings above, Cobinhood will support a large number of languages (98% of worlds native language) as well as provide 24/7 customer support which can be accessed through their website/mobile app and will respond to any trouble tickets within 24-hrs. There are also paid subscription services that will include direct access to a personal customer service representative.
How does Cobhinhood make money?
By thinking outside of the box compared to traditional exchanges and bringing fresh, new and needed ideas, Cobhinhood will utilize a few different methods in order to sustain the 0 fees business model.
Margin trading loan interest - Users can opt to become lenders for margin traders. Cobinhood will calculate the interest rates based on supply/demand and will collect a portion of the profits made from that loan's interest.
ICO underwriting - The number of ICO's have increased tremendously just in 2017 alone. It's very hard to tell which ICO's will stand the test of time and many ICO's face liquidity issues. Cobinhood will be able to help both the consumer's and businesses through their platform.
Cobinhood has a dedicated ICO review team that will assure that only high-quality and promising ICO's are underwritten. Only after stringent review of their Idea, feasibility, financial justification, smart contract code as well as legal compliance will the ICO be underwritten. Cobinhood will collect a percentage of ICO tokens as an underwriting fee. This solves the 2 problems mentioned above. Projects will now have instant liquidity upon the closing of their ICO's and investor's will have the piece of mind that the ICO's presented have gone through a thorough review process.
In addition, Cobinhood will roll out it's ICO Spark Program which will help well-established enterprises, successful startups and celebrities launch their own ICOs. Access their whitepaper section 3.3.4 for a better explanation and examples.
Paid subscriptions - Including the Spark Program discussed above, Cobinhood will have 2 additional paid subscriptions. The prices aren't listed in their whitepaper and I can only assume it will be unveiled according to their road map releases for said subscriptions.
Cobinhood Prime: At the cost of an annual fee, individual traders will be able to subscribe to this service in 2018. Cobinhood Prime will give traders higher leverage on margin trading, lower latency ticker, and higher trading API rate limit. Additionally, subscribers will have escalated customer assistance, dedicated phone support, a committed customer success account manager, and 100% uptime SLA.
Cobinhood High-Frequency Trading Server: This is another annual subscription service that is focuses on the needs of investment banks, hedge funds, and institutional investors. These servers will be on the same network with the Cobinhood order matching engine but will provide an ultra-low latency ticker and an unlimited API rate on the Cobinhood exchange and allow high-frequency algorithmic trading.
What value does COB tokens provide?
Cobinhood holders currently have 2 benefits with more possibly being added according to the white paper and dev team.
50% off margin trading loan interest can be availed when paid with COB tokens.
- This will increase the value of the COB token in a few different ways. In the beginning when supply of lenders are low, the interest rates on these loans will be high. COB holders will be able to halve the interest payment on these loans increasing profits. As margin lending increases in volume, more traders will want to own cob in order to protect their profits which will reduce circulating supply thus increasing value.
Significant Discounts on ICOs that are underwritten by Cobinhood. Using the formula (ICO Tokens Received by COBINHOOD from ICO Underwriting Service) * (The Amount of COBs Owned) / (Total Amount of COBs). The COB holder would be able to calculate how many ICO coins they would be able to get at a discount.
- As Cobinhood promises to underwrite only high quality and promising ICOs, getting significant discounts for these projects will become in high demand. This will drive circulating supply down and increase the value of COB tokens due to investors getting more discounted ICO tokens according to how many COB tokens being held.
- Stated in the white paper, Cobinhood will make efforts to maximize the benefits of being a COB token holder and additional benefit may be added in the future. (Buyback and burn/vest maybe?)
Conclusion
We are in the very beginning of a financial and technological revolution. There are many exchanges, but none that offer the same features of Cobinhood. The Cryptocurrency space will continue to grow and evolve. Cobinhood and their closest competitor IMO Binance will become the model from which new and old exchanges will draw from. These fresh ideas and higher profit margins will undoubtedly draw a large amount of volume from competing exchanges. If Cobinhood can increase their pairings on launch and continue to provide fresh features I see no reason why it won't be a top 10 exchange within a few short months. The Cobinhood exchange will be launching in November as the first step to a platform for this new blockchain era.