P.S. Already know a lot about bitcoin? Feel free to skip this intro.
When bitcoin was released, back in 2009, it was merely an idea. Maybe we could create a technology that took the power away from banks and centralized organizations and give it to the people. Maybe we could bring the ability to save money to people who don’t have access to bank accounts.
Maybe. Maybe. Maybe.
But here’s the thing, while bitcoin’s technology is great, nothing happens in the world without people putting resources behind it to make sure it happens.
This is where Coinbase comes in.
Coinbase, started in 2012 by Brian Armstrong, is a company entirely focused on making it easier for people and businesses to buy and sell bitcoins.
You may not realize this now, but there was a time not so long ago where it was near impossible to purchase bitcoins in a trustworthy way. Coinbase fixed this, and continues to drive global adoption.
Since their inception, Coinbase has raised over $100 million from top investors (YC, Andreessen Horowitz, NYSE, DFJ, USV), has expanded to 24 countries, and helped pushed bitcoin to the mainstream via partnerships with major companies like Dell, PayPal, and DISH.
Due to Coinbase’s rapid growth, we decided to get them on ZapChain and let the community ask them any question they wanted to.
Nick Tomaino, who dropped out of Yale to join Coinbase, was awesome enough to set aside an entire day to answer our questions.
This is what we learned about Coinbase:
1. Coinbase Pays Attention to the Bitcoin Community
Whenever you make something that a lot of people use, you are always bound to attract some haters. Coinbase is no exception.
“We definitely pay attention to what the community says…There are times where we can’t do exactly what they want but we’re always mindful. Its important for us to listen to them.”
2. Coinbase is Experimenting with both Decentralized and Centralized Services
Bitcoin is decentralized, so early bitcoin evangelists are always pushing companies in the space to be as decentralized and transparent as possible.
Coinbase specifically has gotten a lot of flack for focusing most of their energy on being centralized and specialized.
“We’re thinking about both centralized and decentralized services right now — tough to say we’re leaning one way or another.
On the centralized front, our core wallets store private keys. This is the product most widely adopted and ready for the mainstream right now. I don’t see that changing anything soon.
On decentalized front, we have multisig wallets and we have an open-source bitcoin node called Toshi which devs can run to get information about the blockchain for apps. Its definitely possible that we build more of these types of products in the future.” — Nick Tomaino, Coinbase
The argument for centralization is that Coinbase specializes in security so that you don’t have to.
The same way a grocery store specializes in aggregating lots of produce together in one spot so that you don’t have to build connections with farmers just to cook tonight’s dinner, Coinbase wants to do the thing they are good at.
“Many of us love the decentralized nature of bitcoin — its what attracted a lot of us to bitcoin in the first place. We do think though that a centralized service that provides trust and stores private keys on behalf of consumers is essential in pushing the ecosystem forward.”
3. Coinbase pays attention to Alternative Crypto Currencies, But is not likely to add Anytime Soon.
“Our mission is to enable consumers from around the world to access a cheap, fast, global payment network. It’s pretty clear right now that Bitcoin is the dominate payment network , and we feel that adding another digital currency would slow us down in our mission by confusing people who are just being introduced to the concept of digital currencies.”
You may not know this, but bitcoin is not the only crypto currency out there.
There are hundreds, with a handful that are decently popular (most notable: Litecoin, Ripple, Dogecoin).
Brian Armstrong, Coinbase CEO, has publicly stated that focusing on anything but bitcoin right now is a major distraction. Making bitcoin successful is hard enough, why spread ourselves thin?
Interestingly enough, Coinbase hired Charlie Lee, the creator of Litecoin, to work on their engineering team.
“ I’m personally interested in Litecoin because Charlie Lee is an awesome guy to work with and he created it, though I don’t think adoption and use is signficant enough for us to add it right now.
We’d add it if we felt like adoption reached a critical mass or it was being used for parituclar behaviors that are interesting to us. We’ll certainly be paying attention to it and others, but right now i think tis pretty clear that bitcoin is the winner.”
The other big problem is that consumers have a difficult enough time understanding bitcoin, throwing other currencies at them would likely be too much for them to handle.
“Digital currencies are confusing enough for mainstream users and adding more coins confuses things for the average consumer.”
4. Coinbase is Looking Into Offering Advanced Trading Options On Their Exchange.
Today’s bitcoin exchanges have been first and foremost focused on simple buy/sell orders and global expansion. Advanced traders around the world are of course begging for more, such as options, margin, limit prices, trailing stops, and better charting.
“It’s definitely possible that we’ll roll out more exchange functionality in the future. We’ve also got a robust and open Exchange API and have been thrilled to see lots of services emerge on top of the API aleady, like http://www.bitanalysis.us/.”
5. How Coinbase is Making Bitcoin Easier to Use.
Bitcoin is not only technically challenging to explain to people, but it’s still fairly difficult to use. This is a major problem that a lot of companies are tackling.
Buying bitcoin is especially difficult.
“Unfortunately [buying bitcoin] relies on the antiquated ACH system in the US and there are challenges associated with accepting a reversible payment method for an irreversible one. There are lots of things we can do though to improve the experience though and get people bitcoin quicker.”
Bitcoin is still lacking good user experiences as well.
Too much of the tech is seen by the user today, it’s critical that more bitcoin developers start packaging their products in consumer friendly ways.
“We need to eliminate bitcoin addresses. A benefit of Coinbase is that you can send to and receive from an email address rather than a bitcoin address. The 30 character alphanumeric code is very confusing for new users and this has helped us reach more mainstream users. In the future it’d be great to see an open DNS-like protocol for bitcoin addresses emerge so that we could add interoperale usernames as another field users could send to. Sending to a username like Nick is a much simpler experience than sending to 186A3V2t39cgdYqiLWgCi85omSDEGMjiK4 and the interoperability of being able to communicate this way with a non-Coinbase wallet would be a step forward for the whole ecosystem, IMO.”
6. How Coinbase Believes Bitcoin Adoption Can Be Increased.
Bitcoin isn’t successful until everyone in the world is using it, and this is no easy accomplishment. What can we do to grow adoption world wide?
“Merchants passing bitcoin cost savings to consumers through discounts and bitcoin specific loyalty programs is definitely a good way to get more mainstream users to use bitcoin.”
The other really interesting opportunity that bitcoin brings, is to create business models that didn’t exist before bitcoin was around, specifically businesses built around microtransactions.
“I think the applications built that enable people to do things they couldn’t do before bitcoin (micopayments, cross-border payments, p2p lending, etc) will be even more effective.”
7. How Coinbase Envisions The Future of Microtransactions.
Microtransactions (the ability to spend tiny amounts of money) have never really been possible online. Why? Because the previous payment processors like credit cards and PayPal typically charge at least 10 to 15 cents per transaction. This means that if you send someone 10 cents using a credit card it’s actually going to cost you 20 to 25 cents in total.
Bitcoin changes this because of it’s almost nonexistent transaction fees. Now is the time for microtransaction trailblazers to start innovating.
“I envision apps using our API to integrate micropayments in a wide variety of ways including:
Email: an app that requires 100 bits for sent emails, eliminating spam
Metered payments: a content site requires users to pay 10 bits for every second on the site (debits from a Coinbase wallet so that user opts in and doesn’t have to touch again)
Crowdfunding: an app that enables micropayments from around the world for small projects”
8. Coinbase Believes Excessive Regulation Could Be Harmful to the Bitcoin Ecosystem
One of the biggest implications of bitcoin regulations is the amount of money companies will need to spend in order to get their license. While someone like Coinbase can easily spend $1 mil+ to do this, regulations like this would completely cripple entrepreneurs just starting out.
“This isn’t necessarily a challenge for Coinbase as a company, because we have raised millions of dollars and have the ability to hire a staff that can handle all of the requirements asked of us at both the Federal and State level. But it could make it harder for startups to innovate, which ultimately hurts the whole ecosystem.”
9. Security is Coinbase’s Biggest Focus
Everyone has heard about at least one bitcoin heist. Hundreds of millions of dollars worth of bitcoin have been stolen. As the bitcoin industry continues to push for mass adoption, it is paramount that bitcoin companies focus on security.
This is exactly what Coinbase is doing.
“Security is probably our biggest focus from an engineering perspective right now. Other than what we say publicly on our website, I can’t share more now unfortunately. Most of the best security companies in the world don’t talk a lot about what they’re doing, they just execute. That’s what we strive to do.”
10. Coinbase Will Eventually Focus on Mainstream Marketing
Even though Coinbase has raised over $100 million, they don’t even have a dedicated marketing team. They are currently focused on improving their product, integrating with well known brands, and helping entrepreneurs innovate with bitcoin.
But, it sounds like this will not always be the case.
“We think the only thing that is going to bring bitcoin to the masses is useful products. Our sole focus up to this point has been building useful products that bring the efficiencies of bitcoin to more people. There is a lot that goes into that — providing secure storage, getting banking partners so that people can easily buy/sell, getting merchants and developers onboard so that people can do things with their bitcoin. All of these things are essential and if one of these things doesn’t happen, all the marketing dollars in the world would not be helpful for bitcoin.
With that said, there will come a time (as there does with all technology products) when marketing with web, radio, and TV ads is helpul in taking the products to the next level. We are not there yet, but I wouldn’t be surprised if it does happen in the next 12- 18 months.”
Click “Recommend” to get this post in front of more people.