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The service is powered by Morpho, a decentralized lending protocol, with allocations managed through onchain vaults curated by Steakhouse Financial on Base, the Coinbase-incubated Ethereum Layer 2 network. When users deposit USDC, Coinbase creates a smart contract wallet that routes funds across different lending pools to optimize returns. Users start earning yield immediately and can withdraw at any time, subject to liquidity.
"USDC Rewards does not involve lending customer assets — it’s a customer loyalty program offered at Coinbase’s discretion, and with payouts coming directly from Coinbase’s marketing budget," a Coinbase spokesperson told The Block.
https://www.theblock.co/post/371281/coinbase-usdc-onchain-lending
