Coinbase is a cryptocurrency exchange of American origin, one of the most famous in the world. The company is headquartered in San Francisco, California and offers currency and cryptocurrency trading in more than 30 nations, asset management, and digital asset storage for more than 120 countries. One of the great innovations of this company is that it does not have an official physical headquarters, or at least it did not have one in the beginning.
Coinbase was founded by Brian Armstrong and Fred Ehrsam in 2012, and as of March 2021 it was the largest cryptocurrency exchange in the entire United States by trading volume.
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How has this company become so successful in the midst of the cryptocurrency technological revolution?
One of the factors that explain its resounding success is that it was one of the first companies in the sector, just when Bitcoin was in its infancy and many believed that it was an investment that was not worth it or that it had no future. You have to understand that at the beginning of the cryptocurrency revolution, just when they had very little value, few were betting that they would be a massive success. Being able to position itself early in the industry gave Coinbase the strength to grow to a truly massive level.
Coinbase History
Coinbase was founded in June 2012 by Brian Armstrong, a former engineer who worked for Airbnb. Armstrong in the Y Combinator startup incubator program and received $150,000 in incentives. Fred Ehrsam, a former Goldman Sachs stock trader, later joined the company as a co-founder.
Ben Reeves, a British programmer and co-founder of Blockchain.info was going to participate in the company as a co-founder, however, before starting the team he left Armstrong, just before he joined the Y Combinator funding event, due to differences on how Coinbase’s digital wallet should operate.
Why is Coinbase called that?
The company acquired the name Coinbase due to coinbase transactions, which are special transactions that introduce a cryptocurrency into circulation in proof of work of cryptocurrencies. In October 2012, the company launched services for buying and selling bitcoins via bank transfers. By February 8, 2013, the company already had more than $1 million worth of bitcoin in trade each month. Company CEO Brian Armstrong, as of the date of that report, said: “There is an incredible amount of demand from people who want to buy bitcoin now. The jump from 0 to 1 million dollars was incredibly fast.”
In May 2013, the company received a $5 million series A investment in private financing led by Fred Wilson from venture capital firm Union Square Ventures. In December of the same year, the company received a $25 million investment from venture capital firms Andreenssen Horowitz, Union Square Ventures, and Ribbit Capital. To date, Techcrunch reported that the financing brought the venture capital raised by the firm to $31 million.
From 2014 to 2017, a period of consolidation
In 2014 the company grew to reach one million users, Coinbase acquired the blockchain explorer service Blockr and the Kippt company, also ensuring insurance coverage for bitcoin values within its servers and launched the bitcoin vault system to secure the safe storage of bitcoins. Throughout 2014, the company also partnered with Ovestock, Dell, Expedia, Dish Network, and Time Inc, allowing these firms to accept payments in bitcoin.
The company also added bitcoin payment processing capabilities for traditional payment companies Stripe, Braintree, and PayPal in April 2014. These moves allowed the company to expand its customer base and establish itself as an industry benchmark while the price of bitcoin was growing and there was a much deeper interest in cryptocurrencies.
In January 2014, Coinbase Global Inc moved to Delaware as a holding company for Coinbase and its subsidiaries. The corporate organization that made Coinbase a subsidiary of Coinbase Global was completed by April 2014.
In January 2015, the company received $75 million in a private investment round led by Draper Fisher Jurvetson, the New York Stock Exchange, USAA, and several banks. This round of financing meant a big step for the financial institutions of the United States, which were beginning to understand the disruptive power of cryptocurrencies and how much they would lose if they did not join the party of operations and financial speculation that surrounded this world. . Although initially, bitcoin and decentralized finance had been presented as a phenomenon that wanted to take power away from the financial sector, the truth was that now the financial sector was actively involved in the world of cryptocurrencies and was looking for ways to take advantage of it.
Later in January, Coinbase launched a US-based exchange for professional traders called Conbase Exchange. At the time of the exchange’s launch, the Wall Street Journal reported that the move was a very strong boost for the bitcoin cryptocurrency, as Coinbase became the first fully licensed US exchange in the United States. The movement was designed to give Bitcoin greater legitimacy, something it achieved in its first two years and with much more force in 2020.
Coinbase would later start offering its services in Canada in 2015, but in July 2016, the company announced that it could stop its services in Canada in August after the closure of its Canadian payment service provider Vogogo for online payments.
By May 2016, the company renamed itself Global Digital Asset Exchange (GDAX) and in July 2016, they added support for retailers trading Ethereum.
In January and then March 2017, Coinbase obtained the BitLicense, the most common license in the United States to operate cryptocurrencies, and was licensed to operate currencies such as Ethereum and Litecoin, licenses issued by the Department of Financial Services of the State of New York.
In November 2017, Coinbase was ordered by the United States Department of Revenue, the IRS, to report any user who had at least $20,000 in transactions annually. At the time of the IRS order, more than 14,300 users carried out annual operations greater than that amount. At the time of the order, US outlet The Verge noted that Coinbase had suffered a major defeat to the IRS. The US outlet also said that the move was a major blow to the privacy of retail cryptocurrency traders.
As more altcoins were added to the crypto landscape, Coinbase was adding them to its exchange for trades by traders. In December 2017, Bitcoin Cash was added to the platform, and then the exchange experienced price abnormalities that led to an investigation.
From 2018 to present
2018
If from 2014 to 2018 the company achieved great notoriety, the period from 2018 onwards offers a model of extraordinary growth that is by nature the objective of any company with the desire to generate a deep impact and a great transformation.
On February 23, 2018, Coinbase said that approximately 13,000 of its customers would have to provide their data, such as ID, full name, date of birth, address and historical records of transactions within the platform from the dates of 2013 to 2015, to the tax authority of the United States, the IRS in a period not exceeding 21 days.
On March 26, 2018, Coinbase announced its intention to add support for ERC-20 tokens, OR Ethereum, or based on the Ethereum blockchain platform, greatly increasing the company’s market reach. The Ethereum network standard was proposed by Fabian Voglesteller in November 2015 and has since been the technology behind several new cryptocurrencies that have entered the altcoin market to compete for a position with currencies like Bitcoin, Bitcoin cash, and Ethereum, which are the most popular.
On April 5, 2018, Coinbase announced that it had formed a venture capital fund for start-up companies, Coinbase Ventures, which focused on investments in companies related to cryptocurrencies and blockchain technology. The fund was created with the aim of helping cryptocurrency-based technology companies and their founders gain a foothold in the field, and has also focused on building an entire ecosystem related to this niche market. In this way, Coinbase took a new leap in its growth stage, with the ability now to finance even its competitors.
On May 16, 2018, Coinbase Ventures announced its first investment in Compound Labs, a startup building Ethereum smart contracts similar to contracts made in financial markets. Shortly thereafter, in August, Amazon Cloud Storage (AWS) division executive Tim Wagner joined Coinbase as Vice President of Engineering. Brian Armstrong, the director of Coinbase noted regarding Wagner joining the company: “He is aligned with our values, and he has long experience leading a large organization at a technical level.”
For May 23, 2018, GDAX (the name that the company had at the time) was changed to Coinbase Pro. Also in that same month, Coinbase launched Prime, a platform that would be dedicated exclusively to institutional clients. Tech news site Techcrunch announced that with Prime’s move, Coinbase was specifically targeting large Wall Street investors, especially institutional investors who were finally embracing the world of cryptocurrencies. At the same time, Brian Armstrong referred to the exponential growth of cryptocurrencies and pointed out “Over the last year we have seen the emergence of more than 100 hedge funds dedicated exclusively to cryptocurrency operations. By some estimates, there are at least about 10.
For the month of September 2018, Coinbase, together with Circle and the bitcoin mining company Bitman, was part of a consortium called Center, which launched a digital currency USD Coin (not to be confused with the project of a digital dollar of the Reserve United States Federal Reserve), which was tied to the value of the US dollar.
2019
In January 2019, Coinbase halted all trading in Ethereum Classic, the world’s second most valuable cryptocurrency, due to a suspected attack on its network. The attack followed the company’s announcement that it would be releasing a new list of new coins to trade on its platform. Coinbse reported that it identified a deep chain reorganization of its Ethereum system, which essentially meant that some of the network’s controlling miners had rewritten the Ethereum network’s transaction history, the detected movement could eventually invalidate some of the transactions. above or change the route of cryptocurrency transfers, which would allow them to be stolen.
Neutrino Acquisition
In February 2019, Coinbase announced that it had acquired the blockchain intelligence platform Neutrino, a startup of Italian origin, for a price that was not disclosed to the media.
The acquisition created some concerns among Coinbase’s user base, as some of the Neutrino founders had connections to Hacking Team, an organization that has been accused of providing internet surveillance technology to governments accused of human rights violations.
Media reports suggested that Hacking Team had sold control tools to authoritarian governments in various parts of the world. This organization has also worked with multiple intelligence services around the world and even with the United States Department of Defense and the FBI.
Headquartered in Italy, Coinbase-acquired company Neutrino helps map blockchain networks, and in particular token transactions, to gain insights and insights into operations. With the growth of cryptocurrency thefts, which has seen law enforcement agencies focus on tracking the whereabouts of stolen digital tokens, Neutrino has the ability to address these types of situations and provide law enforcement with a clearer picture. clear where the stolen money has gone and who has it.
On March 4, 2019, Coinbase CEO Brian Armstrong said that his company “failed to properly evaluate the deal from an intelligence perspective with Neutrino and therefore Neutrino people who had worked with the Hacking Team would be left out.” of the company payroll.
Company earnings and growth outside the United States
In April 2019, a UK corporate filing revealed that Coinbase’s revenue outside of the US, from the UK, had grown 20% to €153 million in 2018 alone, resulting in a net profit for the company of about 6.6 million euros. Coinbase UK CEO Zeeshan Feroz said the company’s operations outside the United States accounted for about a third of Coinbase’s overall revenue and Reuters estimated the company’s total revenue to date. the 520 million dollars in 2018.
And it is that despite the volatility that was shaking the cryptocurrency sector, the companies behind bitcoin and blockchain technology, as well as many others that entered the market, were investing large amounts of money to further develop the cryptocurrency market. the cryptocurrencies. Among the renowned companies that were actively investing in the sector were the London Stock Exchange and Microsoft, which invested 2.4 billion dollars during 2018 in this market. All these large investments have led to companies like Coinbase and the like obtaining highly significant returns.
A sophisticated attack on the Coinbase network
In August 2019, Coinbase announced that it was the target of a sophisticated cyberattack attempt in mid-June. The reported attack used spear-phishing and social engineering tactics (including sending fake emails from compromised email accounts and creating landing pages similar to the University of Cambridge, among others. One of the tactics used by hackers could allow an attacker to escalate Javascript privileges on a browser page and the second element could allow an attacker to escape browser tracking and execute code on the targeted computer.
Coinbase’s security team detected and blocked the attack and its network was not compromised. As a result, the attackers failed to steal any cryptocurrency from the Coinbase platform. A Technology Review report noted that the attack was highly sophisticated and had caused a high level of concern within the Coinbase team. Technology Review further noted that Coinbase’s response to the attack highlighted the firm’s ability to respond to attacks that may have been planned and executed, or at least sponsored by nations such as North Korea.
The attack email message resembling Cambridge University had been so well crafted that it did not arouse the initial suspicions of Coinbase employees. But the message was a far-reaching attempt to gain access to the company’s backend network and steal a few billion dollars worth of cryptocurrency.
2020
The company becomes a fully remote enterprise
In May 2020, amid the first wave of outbreaks of the coronavirus pandemic, the company announced that it would move its operations to fully remote ways of working and no longer recognize a formal headquarters. The move was seen as an attempt to respond to inclusion needs and a response to the coronavirus crisis.
In the same month of May, the company also announced the acquisition of the New York-based digital asset trading firm Tagomi, for an estimated price of 75 to 100 million dollars, the purchase was aimed at strengthening services for clients. institutional.
Black Live Matters. Do black lives matter for Coinbase too?
The company came under heavy criticism in June 2020, following the tragic death of George Floyd, a black American citizen who was killed by a police officer. After Floyd’s death, a wave of protests rocked the United States and US companies were discussing whether to make public statements supporting the Black Live Matters movement and protesting Floyd’s death. The company’s “apolitical” position was met with great disappointment by public opinion. In September 2020, Brian Armstron issued a statement stating that Coinbase would not engage in social activism, stating that such form of behavior could harm other technology firms such as Facebook and Google, and offered a severance package for those who wanted to leave the company in response to the company’s policy. Around the same time, the company also received complaints from some employees who said they had been treated unfairly because of their race or gender.
Equity Issues in Payouts for Gender and Race Equity
In December 2020, the New York Times reported that based on data collected through 2018, women at Coinbase were paid an average of 8% less than men in comparable jobs and similar ranks within the company and that on the other hand, black employees received wages 7% lower on average than those who fulfilled similar job roles. The New York Times findings indicated that gender and racial equity issues within Coinbase were greater than those of other tech companies, whose payout reports were more equitable.
Visa debit card payment program
In October 2020, the company announced the launch of a Visa debit card program. With the card, customers could now use their cryptocurrencies anywhere Visa cards are accepted. Coinbase claimed at the time that “it was the easiest and fastest way to spend or use your cryptocurrencies around the world”, although at the time of launch the card was only available for Europe. There are a large number of debit cards in the world that allow people to spend their cryptocurrencies, but many platforms require the customer to load their funds onto the card before spending the money. The Coinbase card has the advantage that it eliminating this requirement.
2021
Coinbase to the public stock market
In January 2021, Coinbase Global, the parent company behind Coinbase, announced that it would take the corresponding steps to make an initial public offering of shares, and at the end of February of that same year, the company presented the necessary documents for its public offer before the Commission. Stock Exchange and Securities of the United States.
Use of Coinbase services by individuals, governments, or entities sanctioned by the United States
Later in March 2021, the company came under review by the United States Treasury Department’s Office of Foreign Assets Control, over concerns that the company may have provided its Blockchain services to individuals or companies. on US government blacklists, noting that the nature of blockchain technology makes it technically infeasible to prevent certain users from transacting. At the time of the review by the authorities, the Wall Street Journal reported: “The cryptocurrency exchange Coinbase Global Inc, has said that its services could have been used by individuals or entities, or jurisdictions that are subject to sanctions by the United States. United States and has disclosed its activities to the federal agency.”
Coinbase agreement with federal entities
The company agreed in March 2021 to pay $6.5 million to end a regulatory dispute with the Futures Trading Commission over reports that it had misreported its trading volumes. The company neither admitted nor denied the regulator’s accusations. The consequence cleared the way for Coinbase to file for listing via a direct listing on the Nasdaq Stock Exchange.
Opening in the Indian market
In March 2021, Coinbase announced that it was establishing its business presence in India and hiring employees for information and technology services, including engineering, software development, and customer support operations. The company also announced plans to open a physical office in Hyderabad, an Indian city.
At the time of the announcement of opening operations in the Indian market, the company was also actively recruiting in the UK, Ireland, Japan, Singapore, Canada, and the Philippines.
Nasdaq entry
In April, with its final earnings being filed with regulatory authorities ahead of its April 14 listing, the company reported a nine-fold increase in revenue for the first quarter of the year, reaching $1.8 billion. dollars, up from 190.6 million the previous year. The jump was attributed to the jump in the price of bitcoin during that period. Preceding the listing, Nasdaq set the reference price for Coinbase shares at $250, giving the company an estimated value of $47 billion.
Coinbase Products
Coinbase offers products for both retail and institutional clients, as well as other crypto-related products.
The company’s products for retail traders include:
Coinbase – A user application used to buy, sell and store different cryptocurrencies, such as Bitcoin, Ethereum, Bitcoin cash, Ethereum Classic and Litecoin.
Coinbase Pro – A professional asset trading platform for trading a variety of digital assets.
Coinbase Wallet: An app that allows customers to access their decentralized cryptocurrency apps using a Dapp Browser.
Coinbase products for institutional clients include:
Coinbase Prime: A platform dedicated exclusively to institutional clients.
Coinbase Custody: A specialist services platform for institutions holding bitcoin and other cryptocurrencies with Coinbase. The service includes an SEC-certified custodian, external audit, and validation reports, all of which are provided by Coinbase partners.
Other cryptocurrency-related products of the company include:
USD Coin: a stable digital currency or stablecoin that allows customers to exchange US dollars for a cryptocurrency that has the same value and can be easily traded.
Coinbase Card: A Visa debit card that allows customers to spend their crypto anywhere in the world where Visa cards are accepted.
Coinbase Commerce – A merchant payments service that allows merchants to convert cryptocurrencies into fiat and stablecoins within the platform.
Company operations
One of the great novelties of Coinbase is that it operates entirely remotely, without a physical headquarters. As part of its SEC filing to become a public company, the company reported 43 million verified users, 7,000 institutions, and 115,000 partner ecosystems in more than 100 countries as of March 2021. The company also reported revenue of $1.14 billion. dollars in revenue during 2020, up from $483 million in revenue the prior year. The company also reported a net income of $322 million for 2020, after reporting losses in 2019. Of the $782 billion in assets in the cryptocurrency market, about $90 billion are on the Coinbase platform ( for the date of April 22, 2021).
The Coinbase Effect
The Coinbase effect refers to the rise in the price of a cryptocurrency listed for sale on a large or dominant exchange such as Coinbase in the days after the company goes public. In the days leading up to Coinbase’s listing on the Nasdaq stock exchange and in the days following the company’s listing on Nasdaq, the price of bitcoin rose sharply in response to the company’s move to go public. public. According to Barron’s magazine, the effect of having a cryptocurrency listed on an exchange plays a big role in how cryptocurrencies gain acceptance among users worldwide.
Complaints
Problems with purchases made using Visa and Mastercard cards
On February 6, 2018, Coinbase admitted that some of its customers had been mistakenly charged to both their credit and debit cards for their cryptocurrency purchases. The problem started when banks and card issuers changed the merchant category code for cryptocurrency purchases earlier that month. This meant that cryptocurrency payments would now be processed as “cash advances”, which meant that banks and card issuers would start charging their customers fees in cash advances for cryptocurrency purchases.
Any customer who purchased cryptocurrencies on the exchange between January 22 and February 11, 2018, would have been affected. Visa initially blamed Coinbase, telling the Financial Times on Feb. 16 that it had not made any changes to its system that could result in duplicating the transactions its cardholders were reporting. However, the latest statement from Visa and WorldPay on the Coinbase blog makes the following clarification: “This issue was not caused by Coinbase.” Techcrunch reported the incident claiming that Visa and Mastercard were making it more difficult for cryptocurrency investors to enter the market.
Complaints about the availability of money
In March 2018, Quartz, an English-language business news outlet, reported that the number of monthly complaints against Coinbase had grown by more than 100% in January of that year, reaching 889 complaints, citing information officials of the Office of Financial Consumer Protection of the United States, with more than 400 people who reported that their money “was not available when it was promised”. After the incident and the Quartz report, complaints about the platform and its performance decreased significantly.
What are the advantages and disadvantages of investing in Coinbase
Advantage
There is a solid variety of altcoins to choose from: Coinbase offers over 25 cryptocurrencies to invest, trade, and gamble with.
A very easy-to-use interface: Coinbase is perhaps one of the easiest ways to invest in cryptocurrencies. It’s easy to sign up and buy cryptocurrencies in just a few minutes. It also has a learning platform that pays users in cryptocurrencies to learn how cryptocurrencies work.
High Liquidity – Coinbase consistently ranks among the most liquid exchanges on the market. This protects investors from serious price declines in an already highly volatile market.
Disadvantages
High fees when not using Coinbase Pro: Coinbase has high fees compared to its larger competitors. Many newcomers to the market using the standard Coinbase platform will be forced to pay these fees unless they use Coinbase Pro – which can be used at no additional cost at the time of switching and has fewer fees – plus it has many more features. that can overwhelm traders new to the market.
Users cannot control their own digital wallet keys: This is consistent with what many centralized exchanges do, but it is still a disadvantage for all of them. When a user buys cryptocurrency on an exchange, it is stored in a virtual wallet that Coibase can fully control. This means that the user does not have autonomous control over his investments, which essentially goes against the ethics of decentralized finance that characterize the cryptocurrency market. This can be avoided if investors withdraw their cryptocurrencies in their personal digital wallets, preferably in hard wallets (hardware wallets or physical purses).
Not enough variety of altcoins for altcoin traders: Coinbase has a good variety of altcoins for new investors, but for those interested in investing seriously in altcoins, there will not be a wide availability of options. Having said this, Coinbase plans to add more altcoins in the future. As of the date of this review, Coinbase had 46 cryptocurrencies available for users to trade.
Does it take a lot or a little experience to trade on Coinbase?
Trading on Coinbase is extremely easy for beginners. The platform can also be used via Android or iOS. Coinbase does not offer any downloadable software and is completely web-based, so if you want to trade, you can do it from your browser, even for its advanced platform, Coinbase Pro.
When you log into Coinbase you will immediately see a portfolio balance and its performance in a choice of time frames or charts, such as an hour, 1 day, a week, or a year.
Rates
Coinbase has an amazing fee system that is quite expensive compared to its competitors if you are not using Coinbase Pro. Those who are looking for an easy way to trade might overlook this disadvantage.
Coinbase fees vary between nations and regions, but for illustrative purposes, we can say that the normal amount of each transfer to and from Coinbase can cost on average 1.5%.
In addition to these fees, Coinbase also charges variable spreads for each trade. Coinbase says that it typically charges 0.5% for each purchase and sale of a cryptocurrency if the trade is below $10,000. The fee is significantly reduced when transactions are between $10,000 to $50,000 (0.35%) and continues to decrease to 0.004% for higher transactions.
In comparison, the fees for movements to and from Coinbase, with banks or own wallets, can be as little as 0.5%.
Security
Coinbase offers various security measures for account owners. It is important to understand that any account on an exchange is only as secure as the account holder wishes or wants to make them. It is of the utmost importance to use strong passwords and to use the available two-step verification features.
Biometric, fingerprint parameters can help make the user’s account much more secure.
Compared to other exchanges on the market, Coinbase offers strong security. This is one of the main reasons why Coinbase is a great choice for those who start investing in cryptocurrencies and want to do it safely.
Open a Coinbase account
Signing up for Coinbase is an extremely easy process. First, you enter your e-mail, name and the password you want to use. You will then need to verify your email and phone number. Coinbase will then use your number to send you two verification codes, at this stage, you will be asked to enter your identity information.
Like any bank or investment account, you must prove your identity via identification given by the government such as your ID or cedula, etc. Users from the United States will be required to present their social security numbers. At this point, your Coinbase account will have been created and you will be able to add your bank account, credit card, or debit card details to make deposits and withdrawals available as soon as you wish to invest.
Verdict on the platform
The following verdict is an independent analysis of the financial information website Investopedia:
“Coinbase is an ideal tool for new crypto investors who might not have previous investment experience. While the standard Coinbase platform is expensive, its features such as its learning program and the ability to easily set up recurring purchases provide new investors with a clear path to become experts and fully understand the world of cryptocurrencies.
Those with more experience will find Coinbase Pro a cheaper and more robust tool, but one that might still lack strictly professional features. If you want to trade seriously, you might find that Coinbase is not the right choice for you. Coinbase has been designed with beginners in this market in mind.”