Coinbase and the Future

Editor’s note: A business plan I wrote for Coinbase in late 2018. Publishing here for posterity.

Coinbase has positioned itself as the most trusted cryptocurrency exchange with its perfect track record of security and its constant rollout of new products and features. More importantly though, it has established itself as the leader in pushing the industry and the technology forward with its educational tools, engagement in the community, and Coinbase Ventures.

Coinbase will succeed if blockchain technology succeeds. Blockchain will succeed through increased adoption and innovative apps. In my opinion, the stated goal of Coinbase to “create an open financial system for the world” is not big enough. Blockchain is more than just finance, and that means Coinbase is too. I see enormous potential in focusing on education, diminishing reliance on fees, and Coinbase Ventures. This will create a flywheel effect that will make blockchain, with Coinbase as a global leader, even more successful.

  • Educate to encourage adoption and empower developers to build the future of blockchain.
    • The blog and Coinbase Learn are amazing resources. But there’s so much more untapped potential. Coinbase has an amazing network, utilize it. For example, create a podcast interviewing members of the internal team and also leaders in the space. With my podcasting experience and passion for the medium, I would love to be the driving force and host behind such a project.
    • Create a mining pool among exchanges that will agree to protect each other against double spend 51% attacks by having hash power at the ready should a chain come under attack.
    • It is still too hard to get up to speed on building blockchain apps, especially with how bad testnets can be. Coinbase should provide open source example dapps and create testnets for various blockchains to give developers an easy way to sandbox and test their ideas.
    • Create dashboards like Ethernodes and Ethstates to show the current state of various blockchains.
    • Expand the Coinbase API to allow extracting info and exploring various blockchains.
    • Create Ethereum Oracles with stock pricing data, weather data, etc.
  • Diminish reliance on fees.
    • Given consumers are more price sensitive, Coinbase must be prepared to lower fees on as competition increases. Lowering fees to keep users on Coinbase will allow Coinbase to more easily direct them to products built internally and through Coinbase Ventures.
    • The trust that Coinbase has developed with regulators and institutions will allow it to keep institutional fees higher for longer, but cannot be relied on in the future. Financial institutions everywhere are lowering fees, investors are becoming accustomed to it, so they will expect that of crypto financial institutions as well.
    • Coinbase will not be able to sustain itself long term if the main revenue driver is collecting rent on the exchange of fiat to cryptocurrency. Not only because this can be replicated, but mainly because this is not where the true value is.
    • The fees are a stop gap to help grow the business, but it’s not going to be the moat.
  • Coinbase Ventures to build and profit from innovative blockchains, tokens, and apps.
    • Use the network, resources, and domain expertise at Coinbase to create and identify startups, invest in them, and help them succeed.
    • Internet protocols through tokens now have a means for their creators to be compensated for the value they create. Being at the center of valuable protocol creation will allow Coinbase to thrive.
    • This is where the profit should come from because this is where the value for humanity is created. This is the unfair advantage of Coinbase and how it establishes itself as the leader over the next several decades.