Menu

DeFi Liquidity

Coinbase brings back the stablecoin bootstrap fund to expand USDC liquidity

Coinbase brings back the stablecoin bootstrap fund to expand USDC liquidity

, , , , , , , , , ,

Coinbase is reviving its stablecoin bootstrap fund program after a nearly six-year hiatus, signaling renewed commitment to expanding USDC liquidity across decentralized finance platforms. The initiative will initially direct capital to four major protocols—Aave and Morpho on Ethereum, alongside Kamino and Jupiter on Solana—with Coinbase Asset Management administering the effort on behalf of Circle, the issuer of USDC.

The reopened fund represents a strategic pivot as on-chain financial services gain mainstream traction. Rather than traditional grants, Coinbase will deploy working capital directly into protocol liquidity pools, reducing borrowing costs and minimizing trading friction for users.

Liquidity as Infrastructure

According to Shan Aggarwal, Coinbase’s chief business officer, the fund exists to “deploy capital in on-chain protocols to ensure sufficient liquidity for their unique use cases.” The exact fund size remains undisclosed, though the company plans to supply liquidity in both USDC and EURC, with additional stablecoins potentially added later.

The initial focus targets protocols addressing distinct DeFi functions. Aave and Morpho operate as lending and borrowing markets on Ethereum, while Kamino provides concentrated liquidity services on Solana, and Jupiter functions as a trade aggregation platform on the same network.

These moves are part of a long-term strategy to guarantee ongoing USDC availability for both established and emerging networks.

— Coinbase statement to CNBC

By concentrating liquidity in key protocols, Coinbase aims to lower friction costs and accelerate protocol growth across multiple blockchain ecosystems.

Lessons from 2019

Coinbase’s original stablecoin bootstrap fund launched in 2019, when USDC was still establishing itself in decentralized markets. The initiative proved remarkably effective at building infrastructure during USDC’s formative period.

The early program directed capital strategically. Compound, a foundational lending protocol, received liquidity injections, as did dYdX, an important derivatives trading venue. Rather than grant distributions, Coinbase repositioned capital within protocol liquidity pools—a mechanical approach that directly addressed user experience.

The fund expanded over time to include Uniswap, the largest decentralized exchange by volume, and PoolTogether, an innovative no-loss savings protocol. Each injection reinforced USDC’s utility across different DeFi segments.

Market Impact

Early liquidity injections helped establish USDC as a foundational store of value throughout DeFi, enabling traders and borrowers to access stablecoins with minimal slippage and stable pricing.

The results reshaped DeFi infrastructure. By guaranteeing consistent USDC availability across protocols, Coinbase helped build user confidence in on-chain financial services. The approach contrasted sharply with traditional venture capital, which funds protocol development but rarely ensures operational liquidity.

USDC’s Multi-Chain Evolution

USDC has since evolved into a multi-chain stablecoin, operating across Ethereum, Solana, Polygon, Arbitrum, Optimism, Base, and numerous other networks. Daily transaction volumes now reach billions, reflecting its emergence as essential infrastructure for on-chain finance.

The stablecoin underpins some of the largest borrowing markets in crypto, with several billion dollars locked across protocols at any given time. Thousands of smart contracts depend on USDC as a settlement layer, making its liquidity a critical variable affecting user costs and protocol competitiveness.

For investors and traders, USDC pricing and availability directly influence their ability to enter and exit positions efficiently. Widespread liquidity reduces slippage—the difference between expected and actual execution prices—particularly during periods of high trading volume or market stress.

Key Context

USDC operates across all major blockchain networks and Coinbase’s Layer 2 solution, Base. It has become the default settlement currency for many DeFi protocols and continues to gain adoption among institutional and retail participants.

Coinbase’s Strategic Position and Ecosystem Leadership

Coinbase itself operates as a critical node in the broader cryptocurrency infrastructure. As one of the largest cryptocurrency exchanges globally, with over 100 million verified users, Coinbase maintains significant influence over DeFi adoption patterns and stablecoin demand signals. The company manages billions in cryptocurrency assets, operates institutional custody services, and recently expanded into blockchain infrastructure through its Base Layer 2 network, which settled over $4 billion in transactions during its first year of operation.

By redeploying capital through the stablecoin bootstrap fund, Coinbase simultaneously strengthens USDC’s competitive positioning and builds network effects that benefit its own ecosystem services. This strategic alignment differs fundamentally from third-party liquidity providers, as Coinbase directly captures value from increased on-chain transaction volumes through trading fees, custody services, and Base network activity.

The company’s scale provides meaningful advantages in executing this strategy. Coinbase Asset Management oversees substantial cryptocurrency holdings and maintains direct relationships with protocol teams, enabling efficient capital deployment and ongoing coordination. This infrastructure positions Coinbase to respond rapidly to emerging liquidity needs or strategic opportunities within the DeFi landscape.

Stablecoin Market Dynamics and Competitive Pressure

The stablecoin market has evolved substantially since 2019, introducing competitive dynamics that inform Coinbase’s relaunch timing. USDT, issued by Tether, maintains the largest market capitalization but faces ongoing regulatory scrutiny and transparency concerns. DAI, an algorithmic stablecoin issued by MakerDAO, offers decentralized issuance but requires substantial collateral and carries liquidation risk. Emerging competitors including PayPal’s PYUSD and projects within the Solana ecosystem have begun fragmenting liquidity across multiple stablecoins.

For Coinbase and Circle, the challenge involves maintaining USDC’s utility and availability even as alternative stablecoins compete for protocol integration and user adoption. Concentrated liquidity provision directly addresses this competitive dynamic—protocols gravitate toward stablecoins offering abundant depth and minimal execution friction. By subsidizing USDC liquidity across top-tier protocols, Coinbase raises the economic cost for protocols to prioritize competing stablecoins.

This dynamic intensifies within the Solana ecosystem, where USDT has historically dominated despite USDC’s technical advantages. Kamino and Jupiter represent strategic choices targeting Solana’s most active participants. Robust USDC liquidity on these platforms could materially shift Solana ecosystem preferences, generating compounding effects as traders and developers optimize around available liquidity.

Strategic Timing and Market Conditions

Coinbase frames the fund’s relaunch amid what it calls an “inflection point” for on-chain financial services. The company argues that both crypto-native users and newcomers increasingly demand accessible, stable-priced entry points into blockchain-based finance.

This timing reflects broader market dynamics. Institutional adoption has accelerated following regulatory clarity in several jurisdictions, while retail interest has rebounded alongside crypto price appreciation. Both cohorts require robust liquidity infrastructure to reduce friction costs. The approval of spot Bitcoin and Ethereum ETFs in major markets has introduced institutional capital flows, intensifying demand for stablecoin infrastructure that can facilitate efficient trading and settlement.

Regulatory developments also support the initiative’s timing. The emergence of coherent stablecoin regulation in the European Union and clearer frameworks in the United States have reduced uncertainty around USDC’s long-term viability. Institutions previously hesitant to engage with cryptocurrency-native stablecoins now view USDC as a legitimate settlement asset, expanding potential liquidity demand.

By repositioning capital in top-tier protocols, Coinbase simultaneously strengthens USDC’s competitive position against alternative stablecoins, including USDT, DAI, and emerging competitors. Liquidity itself becomes a moat—protocols with abundant stablecoin liquidity attract traders and borrowers, generating fees and further protocol value.

The initiative also underscores Coinbase’s broader strategy to leverage its balance sheet for ecosystem development. Unlike traditional venture investors focused on equity returns, Coinbase benefits directly from robust on-chain financial infrastructure, as it drives user acquisition and transaction volumes on its Ethereum-compatible Base network and custodial services.

For DeFi participants, the implications are practical. Lower borrowing costs on Aave and Morpho reduce leverage financing expenses. Improved liquidity on Jupiter reduces trade execution costs for Solana users. Concentrated liquidity on Kamino generates better returns for liquidity providers.

Long-Term Infrastructure Development

The stablecoin bootstrap fund represents a long-term commitment rather than a short-term subsidy. By ensuring that major protocols maintain sufficient USDC depth, Coinbase reduces the likelihood of liquidity crises that historically damaged protocol reputation and user trust.

As on-chain finance matures, reliable stablecoin availability will remain critical infrastructure. Coinbase’s relaunch signals confidence in that thesis and willingness to deploy significant capital to support it. Whether other major crypto platforms follow with similar initiatives may determine how quickly DeFi achieves mainstream adoption.

The success of this program could reshape infrastructure expectations across the broader industry. If competing platforms recognize similar competitive advantages, stablecoin liquidity provision may evolve from differentiator into table-stakes requirement, accelerating the capital deployment necessary to achieve institutional-grade on-chain financial services.

For detailed analysis on bitcoin, ethereum, and broader crypto market movements, explore our research sections.

Get weekly blockchain insights via the CCS Insider newsletter.

Subscribe Free

Is Mango’s Multi-VM approach enough to solve fragmented liquidity?

Is Mango’s Multi-VM approach enough to solve fragmented liquidity?

, , , , , , , , , , ,

Decentralized finance (DeFi) still struggles with fragmented liquidity, where users face higher costs, developers must duplicate their efforts across chains, and capital becomes less efficient because every blockchain operates in isolation.

A new Layer 1 blockchain, Mango Network, claims it runs several virtual machines, Ethereum’s EVM, Solana’s SVM, and Facebook’s MoveVM (Multi-VM architecture) on a shared system. This allows it to connect apps and users from different blockchain communities without risky third-party tools.

Mango even launched a major airdrop to reward early users, and its testnet claims to handle more than 297,000 transactions per second due to high-speed performance.

But can a single blockchain link multiple virtual machines, both enable assets to move freely, process extremely fast transactions, and remain secure?

Some followers say Mango will open up access to liquidity and open the world of decentralized finance to everyone in a more connected and useful way, to a wider array of people. Still, critics worry the system is too complex, too new, and potentially so unstable that it becomes increasingly difficult to untangle as it grows.

Why should anyone care about Mango Network?

Mango Network is a newly launched full-chain Layer 1 blockchain that aims to change how developers build and users interact with decentralized applications across different ecosystems.

While traditional blockchains rely on just one type of virtual machine (VM), such as Ethereum’s EVM or Solana’s SVM, Mango supports multiple virtual machines running side by side within a single network. 

The company may use Ethereum Virtual Machine (EVM) for Solidity-based apps, MoveVM for applications written in the Move language (originally developed by Meta), and Solana Virtual Machine (SVM) for Rust-based, high-performance programs. 

With this unique structure, Mango creates one platform where developers from different blockchains can build apps using their preferred tools.

At the same time, users interact with these products through one account and ecosystem without leaving the platform or going through risky, expensive, and slow bridging processes.

The company gave away 5% of its MGO token supply to early adopters, testnet participants, and contributors through a community-first airdrop that allowed users to trade, stake, or move their tokens as they please before Mango’s Token Generation Event (TGE).

Mango secured $13.5 million in Series B funding in February 2025 for security audits, ecosystem development, developer onboarding, and expanding toolkits to make it easier to build on the network.

Mango’s vision of shared infrastructure, native cross-VM communication, and unified state management could set a new standard for what a blockchain can do.

Why does DeFi struggle with fragmented liquidity?

Each blockchain (Ethereum, Solana, BNB Chain, etc) has its tokens, apps, smart contracts, and user base locked within its network that traps money and assets in silos.

This isolation slows down the entire DeFi economy because money can’t move freely or interact with other ecosystems, and creates multiple small liquidity pools instead of one large, flexible pool of capital.

Users have to use third-party bridges or deal with wrapped tokens that copy the value of the original asset, but come with their risks, just to move assets between chains, like sending tokens from Ethereum to Solana.

Bridges cause huge losses because they’re often slow, expensive, and complicated, and in many cases, they’ve been hacked or broken. In contrast, wrapped tokens can break the connection to the original asset or lose value if the wrapping system fails.

This fragmentation costs developers time and money and splits their user base across different versions of the same application. They must either stick to one chain and limit their audience or rebuild and redeploy their app across multiple chains to reach more users. It also multiplies their workload and adds unnecessary complexity to DeFi building as they must maintain these versions, manage different smart contracts, and track separate liquidity pools.

On the other hand, users must set up different wallets, learn new interfaces, and pay extra fees each time they move money around just to use apps on multiple chains. The struggle creates a broken experience where users feel like they’re jumping between disconnected worlds instead of using one global financial system. 

How Mango Network tries to fix liquidity fragmentation

Mango Network connects smart contracts on different VMs through a communication protocol built on OPStack (OP-Mango) that syncs all the VMs and ensures data and events are correctly passed between them.

Developers can mix and match components from different VMs, and users can access a unified experience because cross-chain interactions are faster, smoother, and far more secure.

There’s also no need to sync data across different parts of the chain on Mango’s shared global state across all VMs because every virtual machine (EVM, MoveVM, and SVM) reads from and writes to the same underlying ledger. On top of that, users only need one account to access all dApps and services across all supported VMs.

In addition, Mango allows tokens to move freely and natively within the network through a standardized format for digital assets across all VMs, making wrapping, copying, or bridging unnecessary. Developers can now create more reliable apps, and users can transfer or use their tokens more confidently, knowing they won’t encounter compatibility problems.

Mango’s unified liquidity pools across all VMs allow assets deposited into one protocol to be used instantly by another, even if the apps are written in different languages and built for different VMs.You won’t have to copy funds, bridge tokens, or manually move assets between services because a lending protocol built on EVM can contribute liquidity to a DEX written in MoveVM, and vice versa.

Can Mango’s Network handle the load?

Mango Network says the blockchain can process up to 297,450 transactions per second (TPS) and offer sub-second finality. This means a transaction gets confirmed and finalized almost instantly once a user sends it. Mango could support thousands of decentralized apps and millions of users without suffering from congestion or delays if these numbers prove true on the mainnet.

The network processed over 120 million on-chain interactions in more than 500,000 wallet addresses from token swaps, staking, cross-chain transfers, and decentralized trading through its ecosystem partner, BeingDEX, in just a few weeks during its testnet campaign. 

Mango’s parallel execution engine, MoveVM, uses the Move language’s resource-oriented design to process many operations simultaneously rather than waiting for each one to finish before starting the next. Moreover, Solana’s SVM runs on the Sealevel execution engine to provide blazing speeds and high throughput in the Solana ecosystem.

However, testnets may not behave the same way as real economic activity on a live chain because they often involve simulated or incentivized traffic. Mainnet conditions introduce new challenges like malicious behavior, network-wide stress tests, flash loan attacks, and unexpected user spikes that can expose weaknesses in performance or security..

Mango’s true test will come after its Token Generation Event (TGE) and mainnet launch, when real users, real assets, and real market demand begin to flood the chain.

The platform could set a new benchmark for performance in DeFi infrastructure if it can deliver sub-second speeds and high transaction throughput without compromising security, reliability, or developer experience. However, it may need to scale back its ambitions or make rapid improvements if it doesn’t.

Cryptopolitan Academy: Tired of market swings? Learn how DeFi can help you build steady passive income. Register Now