Yesterday, Binance just updated Binance Alpha 2.0, allowing CEX users to purchase any DEX tokens directly from CEX without withdrawals. CZ also commented, I think other CEXs will follow suit, and DEX trading volume will also increase. Soon after, Coinbases move came.
Last night, Coinbase announced the launch of Verified Pools, a set of strictly screened liquidity pools. Users holding Coinbase Verifications certification credentials can seamlessly conduct on-chain transactions, connecting Prime Onchain wallets, Coinbase wallets or other third-party wallets with Coinbase verification credentials to conduct transactions, in order to solve the problem of opacity of traditional liquidity pools.
Verified Pools is based on the Uniswap v4 protocol on the Base network, and uses the hooks mechanism to achieve customizable smart contract functions. In addition, it also cooperates with DeFi research and risk management company Gauntlet to optimize the configuration of the liquidity pool and ensure the health of the overall liquidity pool.
In the official announcement, the verification pool was characterized as another important measure for Coinbase to promote the popularization of on-chain applications. However, what surprised users who follow the Base community was that the verification pool was based on Uniswap V4 instead of Aerodrome, the largest DEX application on the Base chain. Some even called this behavior backstabbing Aerodrome.
Aerodrome ranks first in TVL on Base; Image source: DeFiLlama
So why did Coinbase choose Uniswap instead of Aerodrome as its verification pool?
Compliance first, Uniswap is a more cost-effective choice
Many people do not understand Coinbases approach. Even Sonic founder Andre Cronje asked, I am really confused. Aerodrome and Alex have always been the strongest supporters and advocates of Base. This can be built on Aerodrome. Isnt it a slogan to support your builders?
In response to these doubts, Aerodrome co-founder Alexander Cutler said, We talked to them in the early stages of development and were fully capable of adding the same functionality - it was just not a priority at the time. We will definitely pay attention to its adoption.
He said that Coinbase had approached Aerodrome to cooperate with the verification pool last summer, but the PMF of the verification pool still had many unresolved issues, so Aerodrome chose a larger opportunity as a priority target at the time.
The core of the Coinbase verification pool lies in the binding of its on-chain credential system with KYC certification. Uniswap V4s hooks mechanism can be customized to only allow LPs that have passed Coinbase KYC certification to participate. This technical feature directly solves the problem of regulatory compliance.
Uniswap V4s hooks are essentially a plug-in system for smart contracts, allowing developers to customize the creation rules, fee structure, and permission management of the fund pool. This flexibility enables Coinbase to quickly deploy a whitelist access mechanism that complies with its compliance framework and achieve strong binding of LP identities through the on-chain credential system.
Related reading: When Binance Launchpool collides with Uniswap V4, who has the bigger trump card?
Aerodrome is a native DEX on the Base chain. Although it is positioned as a liquidity hub, its underlying code base does not natively support such complex permission hierarchical design. Even if it is implemented through forks or modifications in the future, its development cycle and testing costs will be significantly higher than the mature solution of directly adopting Uniswap.
As a listed company, Coinbase has a very low tolerance for compliance risks. Although Aerodrome is the native DEX of the Base chain, its permissionless and highly autonomous protocol features are fundamentally in conflict with Coinbases regulatory framework. If Aerodrome is directly integrated, Coinbase will have to bear joint liability for protocol loopholes, money laundering risks, and even regulatory review. In contrast, the modular design of Uniswap V4 allows Coinbase to gradually test the waters through a controllable KYC isolation pool, which can not only avoid regulatory minefields, but also reuse Uniswaps brand credibility and liquidity network.
Alexander Cutler also admitted that technically feasible, but made it clear that permissionless pool features such as dynamic rate optimization would be given higher priority.
In a reply to someone else’s tweet, he wrote, “There are still many questions about how permissioned pools can gain enough traction to become a viable alternative to permissionless pools. If it does gain market acceptance, we are always ready to join support. But in the short term, it is unlikely to surpass opportunities like dynamic fees.”
This choice reflects that Aerodrome prefers to serve existing DeFi native users rather than cater to Coinbases compliance experiments. On the other hand, Coinbases goal is to explore on-chain compliance trading scenarios through verification pools, and gradually migrate CEX users to the chain - this path requires immediate availability and low compliance risks, and Uniswap V4 happens to provide a ready-made technical interface.
Experimental nature is greater than PMF
In the eyes of some people, the whitelist fund pool has long been expected as one of the application scenarios of Uniswap V4, and Coinbases verification pool is just the implementation of this concept. The most direct contradiction lies in the high overlap of target users - institutional LPs and compliant buyers on the Coinbase order book have long been accustomed to the low-friction environment of centralized trading platforms.
If the centralized liquidity on the chain only replicates the order book function of CEX, users will lack the motivation to migrate - the gas cost, price slippage and operational complexity of on-chain transactions are still higher than CEX, and traditional users rely more on CEXs instant settlement, fiat currency channels and customer service support. Even if the verification pool can provide slightly higher market-making returns, liquidity segmentation may reduce capital efficiency, forming a dilemma of compliance premium is difficult to cover migration costs.
A deeper challenge comes from the paradox of liquidity allocation. If the verification pool focuses on assets that are not listed on Coinbase, it will fall into a chicken and egg cycle: the high-risk attributes of unaudited assets naturally conflict with the conservative positioning of compliance pools, and funds pursuing Alpha tend to prefer early assets in permissionless pools. This makes it possible for the verification pool to become a compliance buffer for market makers - earning fees by providing liquidity rather than capturing asset appreciation dividends.
Even if unlisted assets are allowed to enter the pool, it remains to be seen whether it can become a transition channel for listing. As a listed company, Coinbases strict standards for asset review will not be relaxed due to the existence of on-chain pools. On the contrary, they may be further tightened due to compliance pressure.
Although Coinbase binds KYC identity through on-chain credentials, ZachXBT has revealed a systemic loophole: there is always a risk that the black industry will forge a compliant identity by purchasing/stealing KYC information to inject stolen money. If hackers sell illegal ETH to the verification pool through market makers, the gap between on-chain anonymity and CEXs risk control capabilities may cause the entire pool to be marked as a polluted asset pool, thereby triggering regulatory review. More subtly, arbitrage robots still need to rely on market maker channels to balance prices, but market makers risk control capabilities are far inferior to CEX centralized systems, and may eventually pass risks on to ordinary users.
In the short term, the verification pool is more like an on-chain feasibility study report - reusing the hooks mechanism of Uniswap V4 to build a minimum compliance model, test regulatory tolerance and user behavior data; in the medium term, it is planned to iterate the interactive interface developed for this purpose into a standard on-chain trading tool, paving the way for the future integration of permissionless pools; the long-term goal is still to blur the boundaries between CEX and DEX, and gradually realize Brian Armstrongs vision of on-chain and off-chain liquidity unification.
However, whether this experiment can cross the gap between sandbox and implementation depends on two key variables: first, whether the US SEC regards such pools as disguised securities trading platforms, and second, whether the speed at which CEX users migrate to the chain can support liquidity density. At this stage, it is too early to assert its success or failure.
