Bankless Ep 91 - Brian Armstrong and The Future of Coinbase
Primer: In this episode of Bankless in Nov 2021, David Hoffman and Ryan Adams interviewed Brian Armstrong, CEO of Coinbase. The discussion ranges from Brian’s personal values and story as a crypto entrepreneur to the current challenges that Coinbase is facing and their long term sentiment on crypto and DeFi adoption.
Who is Brian Armstrong?
Background
Brian was always very passionate about economic freedom and always wanted to become an entrepreneur. He studied computer science and economics
He always felt like he was born a little bit too late to start a great internet company
For Brian, the Bitcoin whitepaper was the next internet
After reading the Bitcoin whitepaper in 2010 Brian’s first thought was “how can I make this easier to use?”
After a little bit of seed funding, Coinbase became a “scrappy” three-man operation in 2013
Initially, Coinbase was no more than a simple Bitcoin wallet (which failed to build a user base)
After personally calling early users, Brian found that the core issue was that users simply did not have any Bitcoin to use
Following discussions with banks and exchanges, the three-man Coinbase team added a buy button to the Coinbase website
Once Coinbase enabled users to buy Bitcoin “the boulder began to roll downhill” and the focus shifted to customer support and optimization
What are Brian’s values?
Brian is a capitalist at heart and is passionate about economic freedom. Like many companies with a CEO founder, his values are reflected in his work
After spending a year in Argentina, Brian saw first-hand what hyperinflation is like. Specifically, stating that modern monetary policy is inefficient and a tax on the poor
Brian believes that fiat currency creates completely unnecessary economic friction internationally. Furthermore, it hurts good property rights and is unfair
Brian is a hodler. He was never really into active trading or speculation. He is more “in it for the freedom”
Reflecting values in Coinbase
Trust is a major focus. Brian wants Coinbase to be viewed as the most trusted brand in the space
Brian loves the idea of repeatable innovation and fears becoming a complacent boomer. To realize this 10% of Coinbase’s resources go towards venture bets, such as the Coinbase wallet.
Brian thinks the best tech companies are all going to become crypto companies.
What is Coinbase’s product roadmap?
Coinbase has three main product categories
Retail investors
The primary financial account in the crypto economy, borrowing and lending, Coinbase card, Coinbase earn, the place where you store all your crypto
Institutions
Qualified custodian, prime brokerage, OTC trades, primary financial account
Coinbase direct deposit and payroll coming soon
Developers
Kind of like AWS for crypto, Coinbase cloud. Expose developers with tools to integrate into the crypto economy and create a framework for building applications
Is Coinbase competing with DeFi?
No, they are building on top of it. Brian believes that the only way to be relevant is to go where the customers go. With this in mind, they are focusing on both custodial and non-custodial apps that allow customers access to DeFi
Coinbase Lend
Does Coinbase Lend generate a yield from DeFi?
Coinbase lend is a centralized product. The yield does not come from nor does it utilize DeFi
Why did the SEC halt Coinbase lend?
The SEC threatened a Wells Notice over it and said under no circumstances can you launch it.
💡 A Wells Notice is a letter and/or telephone call from the SEC indicating that the SEC staff intends to recommend that a civil enforcement action be taken against an individual and/or company
Decided not to launch lend because they figured they had a 50/50 chance of winning in court
Brian on exchange-based blockchains
BNB and BSC make Brian uncomfortable because of the centralization. Same with SOL
Brian doesn’t like the idea of there being a Coinbase chain. He doesn’t think the world needs another chain. Would rather focus on helping scale existing blockchains or contributing to open-source public goods. Says they could have printed more money by making their own chain but that isn’t what he is interested in
Coinbase takes a chain agnostic approach and encourages self custody
Brian’s thoughts on founder CEOs
Brian is a long term thinker and not interested in playing short term gains with short term people. He is here for the long run.
He even goes as far as to think about what will happen to Coinbase once he is dead. Mentions writing a book to help extend his values beyond his life
One of the advantages of having a founder CEO is that they are more risk-tolerant and risk tolerance is scarce in companies today
Coinbase and self custody
David thinks that Coinbase offering self custody products could negatively affect Coinbase’s revenue because they teach users to not need centralized intermediaries
Brian believes self custody products will work against their interests in the short term and maybe medium term. But long term Coinbase has to meet customer interest and the future is non-custodial. Coinbase is trying to meet what consumers will want in the future. Non-custodial wallet users are living in the future. However, a majority of users will always use a centralized service
Build for the future (non-custodial) and also build for the masses (custodial)
What does Brian think of Meta (Facebook)?
Meta allows Facebook to get away from its own hate and also expose its subsidiary network (Instagram and Oculus). It was a good market branding move by the Zuck
Apple and Google caught the move to mobile but are missing the move to AR and VR. Facebook is on top of it
Coinbase wants to be the primary financial account of this. The place where people store their goods and currencies. They aren’t so much interested in building their own metaverse or UI. Just want to be the custodian of it.
Ryan thinks META will be forced to build on top of existing crypto and DeFi infrastructure
Brian is also bullish and agrees with Ryan but thinks there may be a temptation for centralization
Coinbase’s NFT platform
Coinbase’s NFT platform had 3 to 5 million sign ups for early access in the first few days. It will be an interoperable platform allowing metamask or non-custodial wallet interactions
Brian was pretty vague about the platform but said the goal is to make purchasing and using NFTs easier. There may also be social media elements incorporated such as followers, likes, etc.
Additionally, Brian wants to create NFT bounties or create commissions where users can pay others to create NFTs through Coinbase’s NFT platform
Brian on withdrawals from Coinbase to L2 blockchains
Brian doesn’t have anything that he can announce publicly but says the Coinbase team wants to. “I’ve been seeing some really cool stuff internally”
Is Brian worried about U.S. regulation?
One of the problems is a gap in education. Folks on Wall street who have spent their whole career in traditional finance are hardwired to dismiss crypto. “The dollar is the currency of the world.” “How dare you challenge it!”
Brian has to be patient with finance 1.0 folks. He spends a lot of time explaining crypto to them. Additionally, he needs to be receptive to their concerns (ransomware, national security, etc.)
Regulators think about crypto like Coinbase did in 2015. Brian is patient though and wants to help bring those along who quite aren’t there yet
Ryan thinks crypto needs Coinbase. The bridge between traditional finance and crypto
One way that Coinbase is tackling regulations is through one of their side projects, cryptoforinnovation.org, A Coinbase funded organization for helping with crypto policymaking and regulation
Brian thinks the SEC is patronizing with their stance of “we are here to protect the retail investor”
There is a revolving door around big banks and regulators. Brian is against this and thinks it is quasi nationalizing private companies. “It’s unAmerican”
Closing remarks from Brian on the future of crypto
“The first decade was on birth and speculation”
“The next decade of crypto will be about people using crypto”
“Freedom is at the frontier”
Links
Podcast link: http://podcast.banklesshq.com/91-brian-armstrong-and-the-future-of-coinbase
Note from maxbphi - Hello apes! This is my first time writing for The Reading Ape. I am a big fan of the newsletter and also a pretty avid podcast listener. I work full time in DeFi for the Backd protocol but also contribute to projects I think are cool. Expect more guest writing from me in the future :)
Maxbphi’s substack version:
https://maxbphi.substack.com/p/78df52a6-af3c-4ebf-bee1-4b7eda266018
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