Leading U.S.-based cryptocurrency exchange, Coinbase, has integrated support for decentralized finance (DeFi) protocols on its wallet app.
Per a March 26 announcement, Coinbase Wallet will now allow users to earn interest on cryptocurrencies through the DeFi apps, Compound, and dYdX.
While the DeFi apps were already available through Coinbase Wallet’s built-in decentralized application browser, the exchange asserts that the integration significantly increases the ease-of-use for users seeking to access DeFi protocols.
The new feature will roll out for iOS this week, with Android support slated to follow in the near future.
Coinbase Wallet integrates support for DeFi protocols Compound and dYdX
With the integrations, Coinbase Wallet will support lending for Ethereum (ETH) in addition to a range of Ethereum-based tokens.
Both Compound and dYdX comprise algorithmically-driven automated lending platforms built on top of Ethereum, with dYdX also offering margin trading services.
While lending interest rates are floating, the annual returns offered by Compound and dYdX ranged from 0.03% to 4.17% at the time of Coinbase’s announcement.
Funds worth nearly $79 million are locked up in Compound at press time. DYdX’s smart contracts currently manage more than $20 million.
The security risks of decentralized applications
The exchange states that the integrations will allow users to earn interest on their crypto holdings in just a few taps, adding that users can quickly cash out by withdrawing their crypto from the DeFi smart contracts to their wallet.
Despite the company’s optimism regarding the integrations, Coinbase urges users to exercise caution when exploring DeFi applications —stating that “DeFi lending apps are relatively nascent and come with risks.”
“DeFi apps are programs running on the blockchain, and like any computer code they can potentially have bugs that cause you to lose money. Returns are not guaranteed and your deposits are not insured.”
ZenGo warns of major Dapp security vulnerability
On March 23, crypto wallet company ZenGo published a report seeking to highlight a major security flaw in the interaction between decentralized applications’ (Dapps) smart contracts and crypto users’ wallets.
The report asserts that when a user grants a smart contract permission to execute a single transaction involving their wallet, the Dapp is granted full control over all of the tokens held within that wallet.
ZenGo also highlights that the authorization is permanent, meaning that even users who have ceased to use a Dapp are still vulnerable to the flaw.
CryptoX reached out to Coinbase for commentary regarding the new integrations and the security flaws associated with Dapps. CT had not received a response as of press time.
