The Coinbase Secret Master Plan
Fred and I are passionate about creating an open financial system for the world. By open we mean not controlled by any one country or company (just like the internet).
We think this is the highest leverage way to bring about more economic freedom, innovation, efficiency, and equality of opportunity in the world.
In this post we’ll outline where we think the digital currency industry is headed and how the world will come to have an open financial system. We believe there will be four major phases (which we compare here to the internet).
Let’s take a closer look at each phase, and what Coinbase’s role will be in it.
Phase 1: Develop the protocol (1M people)
In this phase, new protocols (Bitcoin, Ethereum, etc) were invented and people began to tinker with them. Open source communities developed around each protocol and in some cases received help from corporate sponsors. The race is now on to see which protocol can scale and attract application developers.
Coinbase works closely with the open source communities around each protocol, contributing financially in some cases, but we did not play a major role in this phase.
Phase 2: Build a digital currency exchange (10M people)
Investment or speculation is a bootstrapping mechanism for the payment network (in other words, it is the single-player mode of digital currency). The creation of safe and easy to use exchanges serves as a bridge for people to get their local currency into and out of digital currency.
In this phase, we’ve built Coinbase for consumers and GDAX for institutions and pro traders. This is our core business today, and we’ll use the revenue from this phase to invest in the next steps, while continuing to expand these businesses to more countries.
Phase 3: Build a consumer interface for digital currency apps (100M people)
Consumers need an easy interface to start using digital currency applications (aka decentralized applications, or dapps).
With the internet, this happened when HTML and the web browser were introduced on top of TCP/IP. In digital currency we believe this will happen with something like Ethereum script and a yet undeveloped web browser equivalent, which may have a user controlled wallet underlying it. The key feature of this application will be that it dramatically lowers the hurdle for new digital currency applications to be developed and used by ordinary people.
Coinbase will participate here by building or investing in teams who are working on this application.
Phase 4: Build the apps of an open financial system (1B people)
The existing financial system needs to be recreated on open networks and made globally accessible in this new consumer interface. Some example apps or components that we believe need to be created include:
- Loans (mortgages, small business lending, micro-lending, etc)
- Venture Capital (seed, traditional vc, venture debt, etc)
- Investing (stocks, index funds, savings accounts, etc)
- Identity & Reputation (IDs, authentication, credit scores, etc)
- Remittance (sending money cross border)
- Merchant Processing (point of sale, internet orders)
Coinbase will participate in this area by buying, building, or investing in various companies. We will also build developer tools and work with regulators to craft appropriate regulation in this space.
Conclusion
We are most likely nearing the end of phase 2 right now, although each phase overlaps a bit. It is still early days in digital currency.
Tl;DR…
- Some new protocols got invented which enable an open financial system
- We’ll make it easy for people to invest in digital currency to bootstrap the network
- We’ll use the money from this to make a mass market consumer interface
- We’ll use the money from this to build or invest in the apps of an open financial system (earn, borrow, invest, spend, etc).
Brian and Fred
Co-founders of Coinbase