You have to give credit where it's due
– and looking at the increasingly strange and diversifying blockchain industry, it's not hard to view Coinbase as some sort of bastion of sanity. If that's true, then much of that connotation stems from Brian Armstrong, the firm's founder, and long-time CEO. Founded in 2012, Coinbase has grown from a one-man developer project to a multi-product conglomerate of public blockchain services, one that has a strong wallet and brokerage product (Coinbase) and blossoming exchange business (GDAX).
In an industry where grown-ups spend most of their time fighting on Twitter, chasing ideas that defy any rational explanation and talking about changing the world with an almost religious zealotry, Armstrong's firm has been called bitcoin's 'blue chip' for this reason. That's not to say there haven't been hiccups. A plan to build a developer ecosystem on top of bitcoin, for example, largely fell away, and Armstrong's attempts to influence the digital currency's long-running scaling debate did much to disillusion some customers.
Through it all, though, Coinbase has kept up progress – raising more than $100m, somehow consistently building brand and product through three boom cycles and checking in with CoinDesk along the way. Speaking before Consensus 2017 this week, it's less of an interview and more of a conversation between people who have been staring at the same screen for too long. We talk about a $2,000 bitcoin, laugh. There's a mutual acceptance that the once small cryptocurrency space might be coming of age.
Armstrong told CoinDesk:
"You've got the mainland, and you've got this little island, and initially there were people who made it to the island on a raft or something. Coinbase built a bridge and we've got a shitload of people who go over that bridge. That island is starting to get pretty populated."
Before the conversation drifts too far into unknowns, we cover expected ground. Armstrong is bullish on ethereum, excited for the launch of his new ethereum-powered payment app Token, cautious on initial coin offerings (ICOs) and clear and concise when talking about his company's direction forward and the various opportunities available to it. As bitcoin gains more traction as a financial asset, Armstrong said he's focused on the technology to achieve bigger goals, and that's why Token is an important step in the evolution of Coinbase's product suite. "I'm excited for the world to have an open financial system. What I want the whole industry to think about is how we can continue to shift digital currency from being a speculative investment to being used for goods and services," he said.
Like other digital currency startups, Armstrong has a certain company in mind when talking about its new Token product, and that's WeChat. The messaging app was also cited by Circle in its pivot away from competing with Coinbase as a broker, yet Armstrong painted the paths the two companies are taking differently. The key to Token is the rising interest around the ethereum blockchain, a platform that is winning favor with developers in a way that bitcoin never seemed to be able to achieve. Looking back, Armstrong recalls that it took former bitcoin developer Mike Hearn (now with R3CEV), eight to nine months to build an app called Lighthouse on bitcoin.
With ethereum, Armstrong believes he's found a way to open up a payments platform to developers in the way he envisioned bitcoin might allow. "There are already some apps on Token. Even the whole thing took three hours to build, so there's this order of magnitude difference," Armstrong said. In this way, he called ethereum blockchain tech's "Netscape moment", crediting the phrase to venture capitalist Fred Wilson, whose firm Union Square Ventures is a Coinbase investor.
On central bank-backed blockchains
Yet, there's the matter of whether public blockchains are still the best way to achieve financial inclusion, or if that's the best future for bitcoin, which has seen most of its popularity stem from its use as a 'digital gold'. One question posed is whether Armstrong would ever shift the company's technology strategy if its vision required it, say in some hypothetical situation where bitcoin became more specialized and central bank-backed digital currencies became the vehicle by which financial access was increased.
For his part, Armstrong agrees that this is a possibility, especially with global central banks increasingly becoming a vocal part of the blockchain community. "My theory is there are going to be some countries in the world that are progressive and they're going to get this stuff from the government. But, there's another category that will come from this grassroots movement," he argued. While this might be a "valid way to get financial inclusion", Armstrong continued, it still likely wouldn't provide the kind of open banking system that he wants to build. Further, in most cases, this development might happen "in spite of the government" and without the help of traditional financial services providers, he said.
Democratization of access remains the theme, and this emphasis eventually guides the conversation to initial coin offerings (ICOs), the process by which entrepreneurs are selling blockchain-linked data that will power distributed networks or products. Like CoinDesk, Armstrong noted that Coinbase has been inundated with offers from companies seeking to list these tokens on its exchange. But while other exchanges perfect the art of quickly adding new offerings, thus capturing the market, he indicated we shouldn't expect his company to follow the same path.
"We're not trying to be the fastest and the cheapest, we're trying to be the most trusted and easiest to use. I would love to have a dozen digital currencies listed by the end of the year, that's the right long-term strategy, but it's about making sure we do that safely and deliberately," he said. Still, he agrees that there's something about the concept, encapsulating how bitcoin achieved value creation and network effect but realizing it in a new way. In this way, Armstrong sees ICOs as another way to use blockchains to expand access to a service, in this case, startup capitalization. "Certain people have access to tons of capital in Silicon Valley, but that is not true of most people in the world," he remarked.
On Wall Street
Armstrong is also setting his sights on another key region across the country from his San Francisco offices – and maybe unsurprisingly given the recently escalating value of the cryptocurrency market – that's Wall Street. While he's short on details, he acknowledged that GDAX has hired a number of personnel to begin meeting with hedge funds and family offices. Asked if this means Coinbase could launch a stock market vehicle or a specialized product, he also deferred.
"I think one of the best things we can do with the GDAX product is slowly eaten up the food chain," he said, going on to liken Coinbase as a Fidelity of cryptocurrencies and GDAX as a sort of New York Stock Exchange. Still, he said it will likely be a long road. "Some traders, if they can't move $1bn in volume, it's not interesting," he said,
"But every year it's tripling in volumes, so it's a matter of time."
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