At an interview with Bloomberg TV anchor Emily Chang at the second annual "Players Technology Summit" event in San Francisco on 14 August 2018, Brian Armstrong, co-founder and CEO of Coinbase, talked about how he got into Bitcoin, the evolution of Coinbase, Bitcoin's price action, his view of the U.S. SEC, his view of crypto skeptics such as Warren Buffett, how he sees ICO evolving, Coinbase's approach to cyber security, and real world adoption of crypto. Here, we present some of the highlights from this interesting interview.
How He Got Into Bitcoin
"I had started computer science and economics in school. I had taken a year to leave abroad in Argentina, which is a country that had got into hyperinflation. And then... I joined Airbnb. And they were a company that was moving money to 190 countries all over the world. So, I sort of had a front row seat into the difficulty of integrating with the global financial system. Every country has kind of their own systems you have to integrate with... In December of 2010, I happened to read the Bitcoin white paper, which was written by this mysterious person who nobody knows: Satoshi Nakamoto... It definitely captured my imagination when I read it because it talked about how the whole world could have this universal currency that ran on the internet... It just grabbed me and I felt like this is the most important thing I have read in like five years. So, I started go around to different meetups in San Francisco... they had these very early Bitcoin meetups... I remember thinking 'Oh my gosh! I am too late to the game!' because there was already Bitcoin exchanges... this was the 2011 timeframe... I'd go to these meetups and the room was half [full of] brilliant computer scientist people and half completely crazy people... So, in that environment, I started to tinker with the prototype on nights and weekends, which eventually would became Coinbase, and so that was a little bit of the origin story."
The Evolution of Coinbase
- Coinbase holds "10 to 20 billion dollars of customers' crypto."
- "So, I think we are the largets custodian of crypto right now (that we know of)."
- Coinbase's first product was a hosted Bitcoin wallet.
- "But a funny thing happened: all these people were signing up for the product, and they were like 'I like the product, but I don't have any bitcoin to keep in the wallet, and so it would be nice if I could buy some", and that was the next feature we launched: an easy way to buy and sell it, and that became the first product that got mainstream adoption. We've got about 25 million customers of that product now."
- "We now have a number of products... Another one we launched is an exchange... If Coinbase like the Charles Schwab or Fidelity of crypto, our exchange is like the New York Stock Exchange or Nasdaq of crypto. So, we did about $150 billion of crypto trading on that exchange [GDAX, which is now called Coinbase Pro] in the last year, and now we have other products coming out as well. We have a custodian for institutions, we have an asset management firm that creates these index funds..."
- "Our mission as a company is to create an open financial system for the world, and one of the first things we need to do to make that happen is enable people all over the world to get their fiat money in and out of crypto money, and so to be like that bridge all over the world... Once we do that, we need to shift crypto into what I call the utility phase, meaning 'let's have people actually try to use it in their daily lives for various goods and services..."
- "We now have about a 1000 people at the company."
Bitcoin's Price Action
Chang asked Armstrong if a price for Bitcoin of around $6,000 is the new normal, if the price is where it should be. Brian answered:
"The way I think about it is that this technology is going through a series of bubbles and corrections... So, we have actually been through four or five of them now, where Bitcoin made this big run up in price and there was kind of irrational exuberance, and then corrected back 60-70 percent. And each time it does that, it is at a new plateau. And it has kind of matched the growth of the company. If you go back to 2012-2013, when we started, we had maybe 500 people signing up. After the next bubble and correction, we had 1000 people a day signing up. Now, it's more like 50,000 a day signing up... People's expections are all over the map, but I think real world adoption and usage is steadily increasing each year."
His View of the SEC
"For my point of view, the SEC has been pretty positive on it. I don't expect them to take some brand new technology and instantly bless it. Their job is to ensure there's a safe market out there, that consumers aren't going to get defrauded... Rightfully so, they are looking at it with a lot of scrutiny, especially as there are so many new coins coming out there that are of questionable value... So, from my point of view, they've been actually good to work with, just helping the ones that are more established come out, and the next big challenge we have working with them is we need to jointly define a standard for what is an acceptable cryptocurrency, how do you classify one as a security vs commodity, and all those kinds of questions."
What He Thinks About Crypto Skeptics
"They are wrong... Look, if you go back six years, nine out of ten people I talked to were crypto skeptics. Now, it is getting harder and harder to find crypto skpetics. There probably are some still out there. It's becoming contrarian to be a crypto skeptic instead of the other way round. Just like all new technologies when they first come out, people are skeptical, and then they start to see real world use cases, and they get a little bit more excited."
How He Sees ICOs Evolving
"We've taken a more cautious approach to looking at ICOs... With that being said, I do think ICOs are an important innovation in the world, and the reason is that it's really difficult for people out there in the whole world to raise money for new ventures... Yes, there's a lot of legal questions to work through... There are questions about quality with some of them, but I expect the ICO trend to continue... In fact, this year, I think already it is track to be 4X the size it was in 2017, and ICOs have broken all the previous crowd funding records out there."
Coinbase's Approach to Cyber Security
"There are all these hackers out there in the world who are trying to break into exchanges and steal crypto. So, we've built a track record and reputation so far of being the most trusted at that, which is why we have the deposits that I mentioned earlier. And, some of the things we do, we talk about publicly, which is 99% of those funds are stored entirely offline. They are not connected to the internet. We have a series of keyholders that are geographically distributed around the world that need to come together in some kind of consensus to move any of those funds, and there's redundancy so pieces of it can be lost or forgotten and that kind of thing... If you just take me away, you can't get access to the funds... We have insurance on it..."
Real World Adoption of Crypto
"There are certainly countries undergoing economic crisis, and there are pockets of people in those areas that are getting interested in cryptocurrency... It's terrible to see what is happening in places like Venezuela... One effort that I started, on the side, is a non-profit called "GiveCrypto.org", and what we are doing is trying to make small payments out to people in the world who are going through economic crisis... I am bullish on that in the next 3-5 years... and you could see people organically adopting crypto as an alternative... The vast majority of usage is in the investment phase... In the U.S., I would say that is 90% of the activity. Let's say 10% is real world usage.... People are using it online... online crowd funding... people creating a bunch of games ... people creating user generated content sites... those are the kind of use cases that will take off first..."