The Case for Coinbase
A Job Update and Why I Think Coinbase Will be a Hundred Billion Dollar Company
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Hey everyone! Hope everyone has had a great start to 2024 thus far! As I mentioned in the previous blog, I took a little time off from writing to start the year as I sorted a bunch of moving parts including figuring out a move up to New York (closing on a place as we speak) as well as the topic of this blog today. In the time I did take off from writing, I definitely allocated a disproportional amount of time to one of the most defining aspects of my entire existence, football.
We’ve had quite the college & NFL postseasons with tons of great storylines from the Lions winning their first playoff game since 1991 against their former QB, the Cowboys chocking once again in the postseason (super fun), Patrick Mahomes beating the Bills once again (less fun), the Eagles end of season collapse, etc.
The end of the NFL season is always a bittersweet moment for me as the stakes of the games get bigger, thus making the games more exciting, but it also means that we’re one game away from having no more football for the next 6 months (sad boy hours). However, I think the timing will work perfectly with my move up to New York as I become incredibly more productive when there aren’t 12 hours straight of football I could be watching and getting irrationally angry (or happy) at. Ok…enough standard football intro talk, let’s get to it.
Juxtaposing my last blog where I wrote a recap of my entire year, I want to write a blog looking forward to what part of my 2024 will look like. More specifically, I want to do a quick overview of my new employer, Coinbase (and no…I did not write a cringe LinkedIn post for it. Did write a tweet that did numbers though), and why I think the company will be one of the most impactful in the coming years, similar to what I did almost a year ago for my previous company (blog here). I may be a bit rusty having not written in a few weeks (so bear with me), but let’s dig in!
Overview of Coinbase
I’m sure most if not all of you reading this know what Coinbase is but for the sake of not knowing what my faithful readers don’t know (I like to think I can be many things, but a mind reader isn’t one of them), let’s just do a quick overview.
Coinbase is the leading company in the cryptocurrency industry (an industry with a total market cap of $1.6 Trillion), known for its user-friendly platform that facilitates the buying, selling, and storing of various cryptocurrencies. Founded on the principles of making crypto accessible to everyone, Coinbase stands out for its commitment to security, ease of use, and democratization of financial services. In a market that is frequently classified as volatile and complex, Coinbase establishes itself as a trusted and safe platform to use for individuals, businesses, and developers interested in the crypto economy. Its company mission, while simple, is incredibly ambitious:
The story of Coinbase starts in 2012 when Airbnb engineer Brian Armstrong applied to the esteemed venture accelerator Y Combinator for a hosted Bitcoin wallet that would make it easier for anyone (particularly non-technical people) to participate in the new digital economy. Fred Ehrsam joined him, and the two received a $168k investment from YC before becoming the largest VC investment in the crypto industry in 2013 with a $5 million round.
While other industry giants started gaining ground in the US (namely FTX & Binance) during the 2020-2022 bull market, Coinbase still held the crown for the most trusted brand in the space. This was further solidified on April 14, 2021, when Coinbase was publicly listed on the Nasdaq at a $85.8 billion valuation, making it the largest and first major headline crypto IPO ever. These gains were soon diminished as the hype around the company dwindled as the crypto market went down and in turmoil with the collapses of Terra Luna, Three Arrows Capital, and most infamously FTX.
Fast forward to today, Coinbase has expanded its product offering, leading the industry’s legal battles with US lawmakers to provide more clarity regarding the emerging industry, and, most notably as of recently, helping facilitate the recent launches of the Bitcoin ETFs as a custodian for major financial firms issuing these ETFs. Now that I’ve told the general story about Coinbase (at least I’ve tried to), I want to explain why I believe Coinbase will be a gigantic and successful company in the future.
Side note: I may appear extremely biased since I work there, but I’ve believed this for a while. Furthermore, since Coinbase is publicly traded, I guess I will say that none of this is financial advice and all opinions are my own (still feels wild to type that as if people would trust a random blogger’s opinion, lol). So instead, I’ll drop some advice from the legend himself.
Why Coinbase Will Make It
1) Strong Founder
With any company, particularly at the earlier stage of the company’s lifecycle, a strong indicator of whether or not the company will end up “making it” ends up being who is the captain steering the ship, the jockey riding the horse, or any other analogy you want to use to describe who the leader is. You can ask any venture investor, and they will almost always say that the biggest thing they look at in determining which companies they invest in or not is who the founder of said company is.
In my opinion, there are very few founders across any industry who are as quality as Brian Armstrong at Coinbase. Like many founders, he has an extremely impressive resume before starting his main venture with a master’s degree in computer science and previous work experience at top companies like Deloitte and Airbnb. However, I believe the quality that separates Brian from many other founders is his innovative mindset, consistency, and commitment to his vision.
Innovative Mindset
Brian Armstrong's innovative leadership has been a cornerstone in Coinbase's ascent in the cryptocurrency world. Firstly, the fact that he even decided to build a cryptocurrency company back in 2012, a time when no one knew what this industry was, speaks to his foresight. Additionally, this foresight is marked by continuous innovation, expanding Coinbase from a basic Bitcoin trading platform to a comprehensive crypto ecosystem. Armstrong added more cryptocurrencies to the platform as the industry grew and expanded into a diverse group of services, including crypto custody, merchant payment solutions, Coinbase’s own layer-2 chain, and more.
Consistency over Time
In the world of tech, where it’s easy for a founder to bounce from new trends to new trends (right now AI), it’s sometimes rare to see a founder have a mission and stick with it through thick and thin. Armstrong, on the other hand, has been steadfast and consistent in his vision and leadership, which was crucial in shaping Coinbase's journey. From the outset, he focused on making cryptocurrency accessible, a goal that has guided Coinbase through the volatile crypto landscape. His clear, unwavering vision has not only helped navigate market fluctuations but also kept the company aligned with its mission to democratize financial systems. This consistency in Armstrong’s mission is one of the many reasons why there are 52 million Americans who own crypto.
Commitment to the Vision
While many companies tell you they are committed to their vision, you would be hard-pressed to find many large corporations following this promise. This has never been more obvious than today, with the topic of DEI being pushed to the forefront at many companies that at times seem to take extreme political actions outside of the company’s main objective. While controversial at the time (fall of 2020), Brian Armstrong was the first brand-name tech CEO to come out against companies using their influence to engage in broader societal issues and instead have Coinbase, “be laser focused on achieving its mission.” While some disagree, I am a big fan of this approach, and makes me much more confident in an organization when they are allocating 100% of their time & resources to achieving its purpose rather than spending it on extraneous issues.
2) Brand Value
In an industry plagued with scams, frauds, and spectacular collapses of those once deemed industry leaders (i.e. SBF, Do Kwon, Alex Mashinsky, etc.), having a brand of trust and security is hard to come by. However, if a company does manage to achieve that brand status, it’s able to capture a ton of market value. With it being a publicly traded company with quarterly and annual reports and having a fairly clean slate in terms of shady activity (besides a rouge employee caught doing insider trading), Coinbase has achieved this brand status.
For many, particularly in the US, Coinbase has become a name that is almost synonymous with the crypto industry, in large part due to its simple yet extremely effective Super Bowl ad back in 2022.
While there are a bunch of centralized exchanges people can download and use freely on their desktop or mobile devices, Coinbase is by far the most well-known. A good analogy one can use to think of Coinbase’s brand dominance is to imagine it as the “Google of crypto” (someone told me this in terms of career value too, which selfishly excites me). When Google was launched in 1998, the internet search engine space was already occupied by several players like Yahoo, AltaVista, and Lycos. However, Google's focus on providing a clean, simple, and efficient search experience quickly set it apart, much like Coinbase. Google's brand became synonymous with internet searching, often leading to the term "Google it" becoming a common phrase for conducting an online search.
Because of this trusted brand value, Coinbase has also been one of the first blockchain-based companies that large brands, namely consumer or finance brands, have turned to when they’re looking to get involved in the space. From the consumer side, companies like Coca-Cola have worked with Coinbase to launch NFTs (which I am an owner of personally cause I love to Coke brand way too much). From the finance side (which I think is more important), industry giants such as BlackRock, Franklin Templeton, Invesco, etc. have turned to Coinbase to act as their custodian (aka, the company that holds the assets) for the recently launched Bitcoin ETFs. To truly show how trusted the brand is, Coinbase is the custodian of nine of the 12 proposed BTC ETFs, with these ETFs drawing nearly $2 billion in volume in its first three days in trading.
This recent development is only going to bring more trust and belief in the Coinbase brand, creating a virtuous cycle of success begetting more success. Thus, when you see BlackRock CEO Larry Fink saying he wants to tokenize financial assets (i.e. stocks, bonds, etc.) and a projected global market of $16 trillion for blockchain technology by 2030, you can bet that Coinbase will have an outsized role in making that happen.
3) Product on Products
When Brian Armstrong started Coinbase back in 2012, all he wanted to do was create a product that would make it easier to purchase and sell cryptocurrencies (mostly Bitcoin, but more added later).
A key factor contributing to Coinbase's prominence in the cryptocurrency world is its expansive and diverse product range. Coinbase's offerings span across three major categories — Individuals, Businesses, and Developers — each catering to different needs within the crypto ecosystem. This broad spectrum of products not only demonstrates Coinbase's adaptability but also positions it to capture a larger share of the market.
For Individuals: Coinbase provides a comprehensive suite of services for individual users. This includes the primary exchange platform for trading various cryptocurrencies, a secure digital wallet for storing assets, and more specialized products like derivative trading and a Coinbase Card. By catering to both novice and experienced crypto enthusiasts, Coinbase ensures it remains the go-to platform for a wide array of individual investors.
For Businesses: Recognizing the growing interest of businesses in cryptocurrencies, Coinbase offers tailored solutions like Prime brokerage services, Coinbase Commerce for facilitating crypto payments, and institutional-grade exchange services. These products empower businesses to seamlessly integrate cryptocurrencies into their operations, be it through investment, transaction processing, or other financial services.
For Developers: Perhaps the most indicative of Coinbase's far-reaching vision is its suite of products for developers. This includes Coinbase Cloud, offering infrastructure services for crypto-based applications, Wallet as a Service, and various SDKs and APIs. By providing tools and services for developers, Coinbase is not just a participant but a facilitator of the broader crypto ecosystem, encouraging innovation and growth.
Coinbase's extensive product range across these categories is not just about offering more services; it's about creating an integrated ecosystem where each product complements and enhances the value of the others. Anytime a company can do this, it provides them a huge competitive advantage. Take Apple for instance, who’s built products that connect seamlessly, created an operating system for their product line, built custom Apple chips to use for their computers, and more.
This comprehensive approach allows Coinbase to tap into multiple revenue streams and user bases all at the same time. It also positions Coinbase as a leader in driving and shaping the future of crypto, much like how tech giants have influenced the internet and software industries. Furthermore, with the incredible brand value Coinbase has, any future product or service rollouts they have will be treated as high quality and possibly the gold standard for the crypto industry at large.
Conclusion
In the dynamic and ever-expanding world of cryptocurrency, Coinbase emerges not just as a participant, but as a trailblazer, defining the contours of this new financial landscape. As a company synonymous with the term “crypto” and with an incredible founder Brian Armstrong, the company has not only weathered the storms of market volatility but also set new standards in user accessibility, security, and trust. The diversity of its product offerings across various segments of the crypto economy positions Coinbase to capture an even larger market share, leveraging its strong brand value and an integrated ecosystem approach. With such a robust foundation and a clear trajectory towards increasing economic freedom in the world, Coinbase stands on the cusp of not just success, but potentially reshaping the financial world. A phrase commonly uttered in the crypto sphere is WAGMI, or we’re all gonna make it, and it’s safe to say that Coinbase won’t just be a part of that charge, it will be the leader of it.
Thanks for reading! This blog definitely took me a little longer than I anticipated. I guess I must be a little rusty from a quick blog break. Not sure what I’ll write about next week yet, but it will probably be a much different topic than the one I wrote about today. Stay classy, and watch football this weekend folks!
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