Coinbase Considers Releasing a New Network Token. Could This Move Buoy the Stock?

Key Points

• If the token is part of a strategy to build the Base community, it could add long-term value.

• The token's purpose matters: A governance token could dilute shareholder control, but a utility token wouldn't.

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Coinbase Global (NASDAQ: COIN) CEO Brian Armstrong surprised investors on Sept. 15 with news that the company is exploring its own Base network token. Base is a Coinbase ecosystem where people can build decentralized applications that integrate with its products.

As a Layer-2 network, developers benefit from Ethereum's (CRYPTO: ETH) security alongside Base's lower fees and faster processing. With more than $5 billion in total value on the chain, it's one of the biggest Layer-2 solutions.

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Armstrong stressed there are no definitive plans, but until now the idea of issuing a token was not even on the table. Perhaps ongoing regulatory changes could now give a clearer framework for token issuance.

Image source: Getty Images.

Base token could drive long-term value

Coinbase set an all-time high in July, before it missed expectations with its Q2 earnings, which pushed its price down. It has struggled to gain momentum since.

In the short term, talk of a possible Base token won't be enough to revive the stock. It's super early -- the token may not even happen. Moreover, it doesn't do much to address investor concerns over falling revenue and increased competition.

Coinbase is heavily reliant on trading fees, which can be problematic when transaction volumes shrink. It needs to strengthen other aspects of its business, such as subscriptions, stablecoins, and the Base network. Longer-term, a Base token could grow the community and generate a steady non-trading revenue stream.

What a Base token might mean for Coinbase shareholders

Coinbase's position as a bridge between the real world and the crypto one could be powerful as traditional banks and institutions look to develop blockchain integrations. Its Base network could play a key role here, and a token -- depending on how it evolves -- could strengthen this part of the business.

As Coinbase considers potential models, the key question for investors is what the token might do. It's one thing if it gets used to pay gas fees and incentivize users. It's quite another if it is a governance token, as this could dilute shareholder control.

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Emma Newbery has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool recommends Coinbase Global. The Motley Fool has a disclosure policy.