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Home / Business / Coinbase builds a cryptocurrency empire

Coinbase builds a cryptocurrency empire

From its office tower overlooking San Francisco's financial district, Coinbase processes thousands of inquiries daily from investors seeking to buy, sell or store Bitcoin or perhaps other cryptocurrencies supported on the nearly six-year-old Exchange. [196592002] When bitcoin rose more than $ 19,000 in December last year, mainstream investors flocked to Coinbase to buy and hold cryptocurrency in the hope that Wall Street will now recognize a potentially transformative financial technology , Although Bitcoin's value has fallen by half, business owners, venture capitalists, and others are maintaining their enthusiasm for their prospects.

There is little evidence that Coinbase is different from other Silicon Valley startups. It has all the insignia: Catered Steak Salads for Lunch. Refrigerators equipped with coconut water and Soylent. Glass-walled conference rooms, named after historic space missions such as Voyager and Apollo, allude to the universal hype among investors who obsessively monitor the Bitcoin price: "To the Moon!"

But Coinbase has in many ways referred to itself as an anti-starter. Her attitude, hungry and calculating, could be the key to her survival as she tries to sell the world ̵

1; from mom-and-pop investors to massive hedge funds – to the idea of ​​what Google is to Web searches [19659004] Founded by a former Airbnb engineer in 2012, Coinbase has grown in comparison to much better-known start-ups. It manages more than 20 million accounts, almost as many as Fidelity Investments, twice as many as Charles Schwab and about as many accounts as Vanguard investors. Coinbase, however, is a much smaller player in terms of assets under management; It holds $ 20 billion worth of virtual currency, compared to nearly $ 7 trillion of assets in Fidelity.

As Coinbase has expanded its services, the appetite for talent is also growing. It has hired former executives of Twitter and TD Ameritrade. There were two spectacular corporate acquisitions in April. And what was 100 employees 100 years ago, has risen to 300, and next 450 should be added. This does not apply to support providers who have more than 1,000. In addition to existing satellite offices in New York and London, Coinbase plans to open more in North America, Europe and Asia this year.

Coinbase's secret sauce is not a fancy algorithm or a data-driven advertising business. It's a calculated bet that investors and regulators alike want a licensed partner that goes through routine audits and meets all the guidelines that a typical brokerage meets when the rest of the financial system begins to earn cryptocurrency. His brand, which is meticulously maintained, is one of trust and legitimacy, contrary to what it says are "fly-by-night" exchanges that operate freely in a legal gray area in other parts of the world.

"We are not You have to run fast to break the culture of things," said Asiff Hirji, Coinbase's Chief Operating Officer. "It does not work when you're dealing with people's money."

This may be doubly important for a novel asset that is experiencing large price swings almost daily and that is known as a currency preferred by black market drug dealers and criminals.

Consumers who sign up with Coinbase must be sure that online To minimize the risk of catastrophic data misuse, Coinbase stores approximately 99 percent of its client funds in non-Internet formats, with the remaining 1 percent – Coinbase's cash used for approximately trades – coming from the company's reserves so that client funds are never directly tied to the marketplace, and one percent is privately insured by Lloyds of London, Hirji said, offering another layer of protection.

Meanwhile, C oinbase overcome the widespread notion that cryptocurrency itself is a scam.

Legendary investor Warren Buffett has called Bitcoin. "Probably rat poison squares," and Bill Gates said he would probably bet against the currency if he could. "JPMorgan Chase Chief Executive Jamie Dimon is one of the most open-minded Bitcoin skeptics, calling it a" scam "last year

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Dimon also acknowledges that the technology underlying Bitcoin is promising.

"The blockchain is real," he told Fox Business in January. JPMorgan is so convinced of the potential of blockchain to quietly develop products that use technology.

Blockchain is a technology that allows people or businesses to instantly and irrevocably record their transactions in a public ledger The belief in the ledger is maintained by thousands of computers worldwide that collectively promote the system Monitor counterfeiting and other types of fraud.

Real applications of Blockchain are still limited, but the technology has been proposed as a way to automate and streamline activities from home buying to protecting intellectual property. Individual cryptocurrencies operate on block chains, often as a way of transmitting information or presenting valuables.

Coinbase plays an oversized role in its own way in accelerating the acceptance of blockchain as mainstream technology. Its dominant position among the stock exchanges, for example, has made it the royal house of cryptocurrencies. Only four coins – Bitcoin, Bitcoin Cash, Ethereum, and Litecoin – are traded on its platform, though hundreds exist.

Being listed on Coinbase is like a reception at a top university, Zavain said Dar, a partner of venture capital firm Lux Capital, and with so much money flowing into the stock market, has the important implications for the industry's projects arguing about visibility and financing. "

" They essentially play the retail gatekeeper for what's legitimate in Crypto, "said Dar of Coinbase," The more selective they are, the better their brand is. "

But Coinbase is also playing a more active role in shaping the e environment, and this year became Coinbase Ventures, an investment arm that provides funding for early-stage cryptocurrency initiatives. And many former Coinbase employees have begun to set up virtual currency companies and mutual funds, some of which have told Coinbase Ventures that they will provide financial support. This group of ex-Coinbase entrepreneurs is so large and influential that it has become informally known as the "Coinbase Mafia".

As members of the original team moved on, Coinbase has gradually changed its character, Linda Xie said joining the company when it had fewer than three dozen employees. (Xie, a member of the Coinbase mafia, founded Scalar Capital in 2017.) The company now has fewer hardcore believers who are saturated with Bitcoin's founding ideology – one that supplants the cryptocurrency that displaces traditional banks and similar institutions – and More Believing Just By Using Blockchain Technology To Create A Financial System That Works Faster And Smoother.

Brian Armstrong, founder and CEO of Coinbase, is perfectly fine with this.

"The idea of ​​being compliant and trustworthy is not a popular attitude of the crypto world," said Armstrong. "First of all, the first crypto people said, 'You destroy crypto!' There are anti-coinbase people out there, but I really believe that if we want to offer this technology to a mainstream audience, we will

Although Armstrong has been disciplined about Coinbase and its power-user platform, GDAX, Coinbase, is offering in the Armstrong, many of which are sophisticated enough to take more risk, will be Coinbase's crypto-currency index fund, which is similar to Fidelity or Vanguard, and will give retail investors more choice next year. Products that mimic the composition and performance of the S & P 500 or the Stock Exchange

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Coinbase's explosive rise last year, along with bitcoins, was not without Growing pains.

Social media are littered with lawsuits about long waits to settle transactions, delays in customer service, and funds tied up with little explanation.

In late January and early February, many customers were alarmed to find that their purchases on Coinbase resulted in double or triple charges on their bank accounts and at mysterious fees. "Coinbase has emptied my bank account," said a Reddit user who said the debacle caused his rent check to rebound.

The mistakes came at a sensitive time for Coinbase – just weeks after the price of Bitcoin had reached $ 19,000 interest from average investors. Managers set out to identify the problem.

"I remember Dan [Romero, head of Coinbase’s consumer division] who brought the team together, I remember Asiff [Hirji, the chief operating officer] hopping and phoning on the phone," said Adam White, Coinbase Vice President. The problem got out of control of Coinbase: a change in the coding scheme that banks and payment processors use to identify transactions. Visa and Worldpay, the two financial institutions that took responsibility for the problem, issued a statement in mid-February apologizing for the confusion and announcement of refunds.

But the incident did capture Coinbase's important reputation "class =" trb_em_ic_img "title =" Coinbase "data-c-nd =" 2048×1365 "/>

Christie Hemm Klok / For the Washington Post

Tina Bhatnagar, Customer Care Manager, says Coinbase deals with some

Tina Bhatnagar, Customer Care Manager, says Coinbase is struggling with some hard growing pains.

(Christie Hemm Klok / For The Washington Post)

"I remember reading Reddit posts double-charged or Coinbase had withdrawn money from her checking account, but her Coinbase [account] was not credited for several days," said Zak Yaffe, a medical student at the University of Washington who purchased a mix of virtual currencies in September. "In both cases, Coinbase support did not seem to react for many days or even weeks. "

In later surveys, customers said that they would be less likely to recommend the company," said Coinbase vice president White

"Customers were less satisfied with their experience," he said, "and that is shit. "

The episode underscored what executives already knew: Demand for Bitcoin would require so much more customer service, and since then, Coinbase has more than doubled its support staff and the time it takes to answer most requests, Reduced order backlog to less than 10 hours from more than 70 hours, order backlog has dropped by 95 percent, according to company. [19659002] The pressure has eased as the price of Bitcoin fell this spring, at the peak of Bitcoin mania in December Coinbase received up to 100,000 phone calls a week from the public, said Tina Bhatnagar, VP of Operations and Technology, a The customer service leads.

"Now we're" "It's getting quiet," she said. "We get a lot of volume, but that was definitely peak-peak-peak, and now we're getting 30,000 to 40,000 in a week."

In retrospect, the service hiccup has ultimately been less of a burden on the company than motivation to push its expansion into overdrive. Although Coinbase continues to expand its core offering – the trading platform – its investments and acquisitions seem to be geared towards diversifying the company, much as Google's ambitions grew from the search engine to online video and self-driving cars.

Last year has forced Coinbase to grow up much faster than many of its peers, said Barry Schuler, the former CEO of AOL and a Coinb ase-board member.

The company [had] developed from the start-up to the growth stage in less than 12 months, "he said." It was tantamount to going from toddler to college graduate without it being time to be a teenager. "

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