Coinbase

Coinbase
Founded	2012
Headquarters	San Francisco, California
Key People	Brian Armstrong, CEO; Emelie Choi, COO
Employees	1200
Products	Cryptocurrency wallet, trading platform and processor, OTC brokerage services, cryptocurrency index, cryptocurrency custody services
Twitter	@coinbase
LinkedIn	Profile
Facebook	Page
Website	Coinbase Home
Blog	Blog

Coinbase, one of the largest individual companies in the U.S. cryptocurrency industry, is a cryptocurrency trading platform (CTP), wallet and broker for bitcoin, Ethereum, Litecoin, and other digital assets as part of its services. It also acts as a bitcoin transactions processor for merchants and other businesses (examples: Expedia, Overstock.com, Dell), and is among the top bitcoin CTPs both for trading volumes and the quality of its market according to CryptoCompare, an online cryptocurrency data aggregator and reporting service. Coinbase became the blockchain industry’s first “unicorn” when it raised $100 million in August of 2017, reputedly valuing the company at $1.6 billion. On December 17, 2020 the company posted a statement in its blog that it had filed a draft - thus confidential - Form S-1 with the U.S. Securities and Exchange Commission (SEC) as the first formal step toward a stock exchange listing.

History

The San Francisco-based company was founded by Brian Armstrong and Fred Ehrsam, a former Goldman Sachs trader. It was incorporated in 2012. Coinbase was available in more than 32 countries as of August 2017 and grew its distribution to more than 100 countries by November 2020.

The company received $5 million in funding from the venture capital firm Union Square Ventures in May of 2013 and $25 million from the venture capital firms Andreessen Horowitz, Union Square Ventures and Ribbit Capital in December 2013.

Coinbase experienced an outage in December of 2017 when the platform went down under the weight of heavy traffic, leaving many of its more than 10 million customers unable to access their funds.

In January 2018 Coinbase teamed up with Trading Technologies to give TT's clients access to GDAX so that they can trade futures and spot bitcoin side by side on TT's platform. Trading Technologies now offers trading in bitcoin, Ethereum and other cryptocurrencies on Coinbase via TT Crypto for free to TT customers.

In August of 2018, Coinbase announced it would boost its daily purchase limits to $25,000 and allow customers instant trading via bank transfers. Only customers who have completed the site's identity verification process will have access to those changes.

In October 2018, Bloomberg reported that Coinbase's projected revenue from trade commissions, as well as gains and losses for its own cryptocurrency holdings, would be approximately $1.3 billion for 2018. These figures were predicted despite the platform losing 80 percent of its users between 2017 and 2018, as well as the lowering of cryptocurrency prices across the board (bitcoin's price at the end of October in 2018 was approximately $6250) and a pervasive "cooling" of the cryptocurrencies market's volatility. This news came just as multiple sources reported that the company was planning to start a new fundraising round at a higher valuation. New York investment firm Tiger Global was reportedly in talks with Coinbase to lead the round with an investment of as much as $500 million. Coinbase's COO, Asiff Hirji, said that this round of fundraising would focus on raising money from firms with a bullish view of cryptocurrencies: "for this round, we simply weren't interested in taking investments from firms that didn't have a constructive view of crypto. This round, and the future of cryptocurrencies in general needs to be about more than asset prices."

Following a 51% attack on the Ethereum Classic (ETC) blockchain , Coinbase suspended all trading for ETC in January 2019. Coinbase made a post on its official blog saying that it had detected 88,500 ETC being double-spent.

In April 2019, Coinbase ranked above JPMorgan Chase and LinkedIn on LinkedIn's top 50 U.S. employers list for 2019.

In October 2019, Brian Armstrong said onstage at a Vanity Fair event that Coinbase had turned a profit for the last three years in a row, and that it had earned over $2 billion in transaction fee revenue since launching in 2012.

In August 2020 Coinbase very publicly quit the Blockchain Association, which it helped found in 2018, when the association admitted rival Binance.US as a member. In a letter to the association board, Coinbase said, ". . . recent weeks have demonstrated to us that the Blockchain Association is not interested in the membership criteria we had worked to establish to underpin the mission of this organization."

In late August 2020, Coinbase appointed Marcus Hughes, a former Morgan Stanley compliance executive, as general manager of its European operations.

Bitcoin Cash investigation

In December 2017, Coinbase first announced that it would begin allowing users to trade Bitcoin Cash (BCH). It also added BCH to the accounts of users who had bitcoin in their Coinbase wallets before August 1, 2017. Shortly thereafter, the price of BCH spiked, going from $2,100 to $3,600 in less than 24 hours.

The price increase resulted in Coinbase customers filing a class action lawsuit against Coinbase, accusing the exchange of facilitating insider trading. In July 2018, after a 6-month internal investigation, Coinbase concluded that there was no evidence that its staff had participated in insider trading.

Personnel Changes

In October 2018, Coinbase announced that Adam White, head of the institutional platform group and one of its original employees, would be leaving the company and that Jonathan Kellner, the former CEO of Instinet, would take over White's former duties. It was later announced that White left Coinbase to become the COO of Bakkt.

Later that month Coinbase's head of trading, Hunter Merghart, announced he had resigned from Coinbase and was exploring other opportunities. Sources from Coinbase said that Merghart left the company because he felt he was not getting the proper resources to do his job and that he felt the company did not have a clear roadmap for building an institutional trading business. Merghart had joined Coinbase after being hired by Adam White.

In April 2019 Dan Romero, the head of international business and former head of institutional business for Coinbase, announced that he would be leaving the company.

A month later Balaji Srinivasan, the CTO of Coinbase, announced that he was leaving the company as well. An anonymous source told The Block that Srinivasan was not given enough freedom within the company to operate independently, and that his vision for Coinbase's future differed from the company's roadmap. In June 2019, Asiff Hirji left the company. According to a July 2019 article in The Information, an online technology news service, Srinivasan and Hirji had battled while at Coinbase.

Emilie Choi, vice president of business, data and international and a former executive of Yahoo! and LinkedIn, was named COO.

In late July 2019, Coinbase confirmed that Tim Wagner, the vice president of engineering would leave in two weeks. On September 17, 2019 the Commodity Futures Trading Commission's Chairman Heath Tarbert announced the appointment of Coinbase vice president Dorothy DeWitt as the new director of the CFTC's Division of Market Oversight. DeWitt was Coinbase's general counsel for business lines and markets.

In September 2020, Coinbase hired multiple Big Tech veterans - including two executives - to create a new "Platforms" team, which would focus on scaling Coinbase's technical infrastructure, ensuring its compliance with all applicable laws and regulations, and ensuring its resilience. The new Coinbase team consisted of VP of Product Shilpa Dhar, former head of product at Venmo; VP of Engineering Ravi Byakod, who formerly held leadership positions on engineering teams at Adobe and Google; and Frank Yoo, VP, design & research, who formerly led global design and research teams for GSuite at Google, as well as making significant contributions to platforms like Lyft, LinkedIn and Yahoo!.

Black Lives Matter protests' fallout

In early October 2020 the public learned through leaks to the media that Armstrong had provoked a walkout (which consisted of engineers closing their laptops due to their working from home during the novel coronavirus stay-at-home mandate) in June after the murder of George Floyd in Minneapolis sparked widespread protests. According to CoinDesk, Armstrong resisted signaling publicly support for the movement Black Lives Matter, although he did tell Coinbase staff he acknowledged black lives do matter (lower case). On June 4, 2020 Armstrong tweeted "I want to unequivocally say that Black Lives Matter." The Block Crypto also first reported in October that a person had informed them that hundreds of employees had taken part in the walkout.

Armstrong posted a blog on September 27, 2020 titled "Coinbase is a mission focused company." After acknowledging the walkouts Armstrong highlighted the following statement, "Broader societal issues: We don’t engage here when issues are unrelated to our core mission, because we believe impact only comes with focus." On September 30 Armstrong followed up with a letter to employees offering those who were dissatisfied a severance package. He also said that by staying with the company an employee was affirming their support for the "culture shift" away from social and political activism. In an October 8, 2020 blog post Armstrong reported that roughly five percent of the employees (at least 60 persons) had taken the severance offer.

System outage during market crash

Coinbase experienced a brief outage on June 26. The website, API, and mobile apps were nonfunctional for about 15 minutes around 5 p.m. Eastern Standard Time. Around that time, the price of bitcoin slid about $1,785 before briefly recovering - exceeding $12,000 - then continuing to fall throughout the following day. According to data from BitMEX, almost $250 million worth of digital assets were traded within five minutes during the first price drop, and almost $690 million were traded across the 15 minutes across the XBT/USD swap contract market. Robinhood experienced similar issues during the Coinbase outage and crash.

Barclays drops Coinbase

In August 2019, the U.K.-based bank Barclays ended its relationship with Coinbase, ceasing all banking services for the exchange. This affected Coinbase's Faster Payments Scheme (FPS) services for U.K. customers, meaning that deposits and withdrawals began taking days to process. ClearBank is expected to begin banking services for Coinbase by the end of Q3, hopefully restoring Coinbase's FPS services.

Acquisitions

Neutrino

In a blog post on February 19, 2019, Coinbase announced that it had acquired Italy-based Neutrino to contribute to help it identify suspicious transactions. At the time, Neutrino's website stated, "Neutrino supplies in-depth and flexible investigative solutions to the world's most crypto-savvy experts within leading financial services companies and law enforcement agencies." Neutrino's three founders were once senior officers of Hacking Team, an Italian surveillance and cybersecurity consulting company which reportedly had sold spyware to the governments of Ethiopia, Sudan and Saudi Arabia, among others.

According to news stories released after Coinbase's announcement, the Hacking Team had helped governments target journalists in addition to dissidents. Using Hacking Team software, governments reportedly stole journalists' internet passwords “to commit violations of human rights and freedom of information.” The public advocacy group Journalists Without Borders cited the Hacking Team as "Enemies of the Internet." Reacting to the controversy over its acquisition of Neutrino, Coinbase submitted a statement a week later to The Block, an online blockchain industry news service, that said, “Coinbase does not condone nor will it defend the actions of Hacking Team.”

CoinDesk reported on March 1, 2019, that "the battle cry #DeleteCoinbase" raised in response to the Neutrino acquisition, "was resounding across crypto Twitter."

Citing a conflict between Coinbase's and Hacking Team's missions, Armstrong wrote in a blog post on March 4, 2019, that Coinbase "together with the Neutrino team have come to an agreement: those who previously worked at Hacking Team (despite the fact that they have no current affiliation with Hacking Team), will transition out of Coinbase." On March 5, a representative of Coinbase told Coindesk that the exchange "never shared our customer's personally identifiable information with any third-party blockchain analysis vendors." Analytics firm Elliptic said in a blog post that while working with Coinbase, Elliptic was never provided with "any personally identifiable information about [Coinbase's] users," though it did provide other exchanges and clients with addresses and transactions associated with financial crimes.

Tagomi

In May 2020, Coinbase announced that it had acquired Tagomi, giving Coinbase the ability automatically to execute crypto trades valued in the millions of dollars, using Coinbase's holdings for liquidity. Greg Tusar, former global head of electronic trading at Goldman Sachs and co-founder of Tagomi, as well as Tagomi's other co-founders, joined Coinbase in the acquisition as well.

In a November 2020 interview with a representative of the leadership advisory firm Heidrick & Struggles, Coinbase's head of institutional coverage, Brett Tejpaul, said that the acquisition enabled the company to ramp up its services to institutional clients. He said that the value of assets held for institutions topped $20 billion, having been about $6 billion before Coinbase acquired Tagomi.

Going public

On the same day that the price of bitcoin first breached $23,000, December 17, 2020, Coinbase blogged that it had filed a confidential draft application to register its securities for sale to the U.S. public by filing a draft S-1 with the SEC. Rumors about the company,formally known as Coinbase Global, Inc., launching an IPO had swirled around the industry since early July when first reported by Reuters. The Coinbase blog did not state whether the company was seeking to raise new funds through an IPO or execute a direct stock market listing to provide liquidity to current investors for their holdings.

Coinbase announced on January 28, 2020 that it would go public through a direct listing on a stock exchange.

In February 2021, Coinbase's draft S-1 form became publicly-viewable on the SEC's website. On February 25, 2021, Coinbase posted an announcement on its blog saying that it had filed the registration statement, and that it planned to list its Class A common stock on the Nasdaq Global Select Market under the ticker symbol “COIN.” On March 17, 2021 it filed an amendment S-1/a registering almost 115 million shares which would be sold upon Coinbase's listing on Nasdaq.

After the company settled charges in an enforcement action brought by the CFTC on March 19, 2021, Bloomberg reported that Coinbase was pushing back the date of its launch on Nasdaq planned for later that month until April.

On April 14, 2021, Coinbase debuted on Nasdaq through a direct listing. Shares began trading at $381 per share. When trading began, Coinbase had a market valuation of $63 billion, and a fully diluted valuation of almost $89 billion, according to calculations by Bloomberg. The day before Coinbase's first day of trading, April 13, Nasdaq had set a reference price of $250 a share for Coinbase’s direct listing.

Brian Armstrong and other early investors in Coinbase, including Fred Wilson and his Union Square Ventures and Marc Andreesen and his Andreesen Horowitz venture capital firm, sold approximately $5 billion worth of shares on the first day of trading according to filings with the SEC.

On May 17, 2021, a little more than a month since its debut, the price of Coinbase shares slid for the first time below the reference price of $250 that Nasdaq had set for the company on April 13. The stock closed at $248.24. On May 17 the price of bitcoin was approximately $20,000 lower than its April 2021 highs of more than $63,000.

Products and services

The company provides an API that enables users to generate bitcoin wallets and addresses, buy/sell and send/receive bitcoin, securely store bitcoin, retrieve real-time or historical price information, receive notifications when payments arrive, and accept and request bitcoin payments as a merchant. Its platform also offers exchange-based "hot" wallets, and ensures the secure storage of bitcoins offline and distributes bitcoins geographically in safe deposit boxes and vaults worldwide.

Wallets and storage

In August 2017, Coinbase introduced Toshi, its first mobile application for Ethereum, as the first external application outside of the main Coinbase wallet, trading platform, and GDAX, Coinbase's digital currency exchange.

In February 2019, Coinbase announced that it had added a feature to its integrated wallet that would allow customers to back up their private keys using Google Drive or iCloud. This caused intense debate among Coinbase users on Twitter, some saying this feature was necessary for wider adoption of cryptocurrency, while others pointed out that it created a massive attack vector against Coinbase customers that hackers could easily exploit.

Coinbase Index Fund and "Coinbase Bundle"

Coinbase announced in March 2018 that it was working on a cryptocurrency market-value-weighted index fund for accredited investors and financial institutions. In October, the company announced that plans for the fund had been scrapped due to low interest from accredited investors and because the company raised fewer funds than expected.

After the cancellation was announced, Coinbase announced a new feature called "Coinbase Bundle," a retail-focused fund that allows investors to invest in a "basket" of digital assets for a minimum of $25. The feature launched in September.

Digital Asset Listing Framework

Coinbase announced on September 25, 2018 that it was instituting a Digital Asset Listing Framework which would allow token and coin issuers to apply to Coinbase to have their tokens and coins listed for trading or other support by Coinbase. The announcement provided a link to a form that applicants are to submit to Coinbase. The factors that Coinbase addresses in the framework are technology, including security and scalability; market supply and demand; cryptocurrency economics including distribution and incentives; regulatory certainty; and how the coin meshes with Coinbase's core values.

Custody Service

The New York Department of Financial Services announced on October 23, 2018 that it had approved Coinbase's Coinbase Custody Trust Company LLC (Coinbasen Custody) to provide a limited range of custody services for bitcoin, bitcoin cash, Ethereum, Ether Classic, Ripple (XRP) and Litecoin.

Grayscale Investments, part of the Digital Currency Group, announced on August 2, 2019, that it had selected Coinbase Custody to serve as the custodian for the digital assets underlying its products. The agreement was effective July 29, 2019, and Grayscale had already transferred some assets to the custodian by the time of the announcement. Coinbase Custody is a New York State regulated trust company that had about $1 billion in customer holdings before the Grayscale transfers. Grayscale was expected to transfer about $3 billion in assets to Coinbase Custody over an approximately 12 hour period, one of the largest transfers of cryptocurrency ever.

Staking

In March 2019, Coinbase Custody announced through Coinbase's Medium blog that it would begin offering staking services to clients who are institutional traders. According to Coinbase, clients who use the service can make between 5 and 8 percent profit annually in interest rates paid by Coinbase to the clients. This payout only happens if customers hold certain cryptocurrencies, and the interest payments will be paid in those cryptocurrencies. The first coin that will be used in this service is Tezos (XTZ). This service involves storing Coinbase's clients' assets in cold storage, substantially mitigating the risk of theft. Although part of the process requires some funds to be kept online, Coinbase puts its own coins up, assuming the risk instead of its clients. Coinbase also said that client assets in storage would remain fully-insured. This process is based on proof of stake, which is based on proof of work, a concept that governs the digital infrastructure of cryptocurrencies like bitcoin and Ether. Because of the way this staking service works, only certain cryptocurrencies will be applicable; bitcoin, which uses a governance model based on proof of work, and Ethereum, which is also currently using this model, will not be supported in the near future. According to the blog post, support for Maker tokens is planned for the future.

Coinbase Markets

Coinbase Markets refers to the set of central limit order books that are accessed by traders through Coinbase Pro or Coinbase Prime.

Coinbase Pro was originally called GDAX.

Coinbase opened a Chicago office in April 2018 and hired Paul Bauerschmidt, an Eris Exchange and CME Group alumnus to be product lead for its exchange platform. A year later, in April 2019, Coinbase closed the Chicago office in a shift away from its plan to develop support for high-frequency trading]. Bauerschmidt was among the 30 employees let go by the company.

In a blog post dated May 23, 2018, Coinbase announced that it was eliminating the GDAX brand and would now call its exchange targeted to individuals "Coinbase Pro." GDAX customers were automatically transferred to Coinbase Pro. According to CoinMarketCap, an online industry data reporting service, as of late February 2019 Coinbase Pro was second-largest U.S. based cryptocurrency exchange and the 47th largest one in the world. In the rankings, it was just behind Kraken at 46 but ahead of Gemini and Bittrex. In 2019, as concerns grew about volume reporting on cryptocurrency trading platforms, Coinbase was rated highly by Bitwise, a digital asset and cryptocurrency advisroy firm, for the integrity of its reporting reporting. According to Bitwise in March 2019, Coinbase Pro was the second largest U.S. exchange and the fourth largest in the world ranked by accurate volume counting.

On October 3, 2019 Coinbase posted its new fee structure for Coinbase Pro in a blog article. It raised fees for smaller accounts and lowered them slightly for larger, more active traders. For accounts below $50,000 per month, the discount for market making orders was also eliminated. The new fees were to go into effect on October 7, 2019.

In a November 30, 2020 blog post, Coinbase said that it was immediately instituting a market maker scheme for less liquid trading pairs, saying, "Our Program will reward qualifying exchange clients with access to new pricing tiers."

OTC cryptocurrency trading

In November 2018, Coinbase launched an OTC trading desk for Coinbase Pro customers. Coinbase's head of sales Christine Sandler said this new feature was meant to complement the rest of the exchange because "institutions are using OTC as an 'on-ramp for crypto trading.'" Sandler also said that the service is likely to be integrated with Coinbase Custody.

Cryptocurreny-to-cryptocurrency customer trading

Starting on December 18, 2018, retail customers at Coinbase.com were able to trade cryptos against other cryptos, allowing bitcoin to be traded against Bitcoin Cash, Ethereum, Ethereum Classic, Litecoin and 0x.

PayPal Withdrawals

In December 2018, Coinbase announced that it would be adding the ability for customers to link their PayPal accounts with their Coinbase accounts, allowing them to pay for cryptocurrency with fiat currency, or store fiat made from cryptocurrency trades in their PayPal accounts. In February 2019, Coinbase extended this service to European users, specifically those in countries that are members of the European Union (EU) and the European Free Trade Association (EFTA).

Tax services

In January 2019, Coinbase began offering tax preparation services through a partnership with Intuit's TurboTax software. This service allows Coinbase customers to import all of their Coinbase transactions into the software.

Insurance

In July 2019, Coindesk published a story saying that inside sources had said Coinbase was discussing the possibility of launching a regulated insurance company with insurance broker Aon, rather than self-insuring, an unregulated practice it had been using for years.

Mobile apps

In October 2019, Coinbase launched a mobile trading app for professional investors. The app was for iOS users only, but in January 2020, Coinbase released an Android app. The app supports over 50 trading pairs and is available to investors in over 100 countries.

Debit cards

In February 2020, Visa granted a principal membership to Coinbase, making it the first cryptocurrency exchange to be given the power to issue debit cards. Coinbase's membership was originally granted to Coinbase in December, although it was not revealed publicly until February. After testing the concept in the U.K. and E.U., the company announced in October 2020 that it planned on offering U.S. customers a one percent rebate paid in bitcoin on purchases made with the debit card starting later that year or in early 2021.

Lending

Coinbase began allowing U.S. retail customers to take out fiat loans against their bitcoin holdings at interest rates of 8 percent in fall of 2020. A company announcement in August said users would be able to borrow against up to 30 percent of their bitcoin holdings, and would not need to pass a credit check but would have to fill out an application. The announcement also said that credit lines would be capped at $20,000 per customer. At the time of the announcement, Coinbase had licenses to offer this service in 17 states in the U.S. (Alaska, Arkansas, Connecticut, Florida, Georgie, Illinois, Massachusetts, New Hampshire, New Jersey, North Carolina, Oregon, Texas, Virginia, Nebraska, Utah, Wisconsin, and Wyoming), but that it was pursuing licenses in other states as well.

On November 23, 2020, Coinbase announced that it would suspend all lending services on Wednesday, November 25, 2020 at 22:00 UTC, as well as cancel any open limit orders. Coinbase said this was due to recent regulation guidance by the CFTC.

Digital assets

Coinbase offers trading services for sixteen digital assets including bitcoin (BTC), Ethereum (ETH), XRP, Bitcoin Cash (BCH), Litecoin (LTC), EOS, Stellar Lumens (XLM), Tezos (XTZ), Chainlink (LINK), Ethereum Classic (ETC), USD Coin (USDC), ZCash (ZEC), Basic Attention Token (BAT), Augur (REP), 0x (ZRX), and Maker (DAI).

XRP

In February 2019, Coinbase announced that it would be adding support for trading XRP on the exchange. This began in "transfer-only" mode, meaning customers could only deposit tokens, not remove them from their Coinbase wallets. The company said that after a minimum of twelve hours after activating "transfer-only" mode for XRP, other trading services would be initiated.

Bitcoin SV

During the Bitcoin Cash hard fork that created Bitcoin SV (BSV) in November 2018, Coinbase users with Bitcoin Cash in their accounts at the time of the fork were given BSV tokens at a 1-to-1 ratio. On February 14, 2019 - three months after the fork - Coinbase told its customers they could withdraw the BSV tokens out of their Coinbase wallets. Since Coinbase did not support BSV trading, users had to export their BSV balance to an external wallet to trade it for other cryptoassets or fiat currency.

Stablecoin

On October 23, 2018, Coinbase announced that it was joining a consortium of cryptocurrency companies called Centre. It also announced the exchange had begun supporting USD Coin (USDC), a stablecoin that it developed jointly with Circle, which is also a member of Centre.

ZRX Listing

ZRX is the coin of 0x project.

On October 11, 2018 Coinbase announced that it was taking ZRX deposits and would launch trading on the Coinbase Pro platform in a limited roll-out once "sufficient liquidity" had been established but not less than 12 hours from the time of that announcement. Coinbase announced on October 16 that it was fully supporting ZRX and customers could ". . . now buy, sell, send, receive, or store ZRX . . . "

The listing of ZRX, which was the first new coin listed after the Digital Asset Framework was announced on September 25, 2018, was controversial with some market observers because the listing announcement was followed by a sharp run-up in the price of ZRX. Some observers said that the listing decision may have been influenced by the existing close ties between Coinbase personnel and persons associated with the 0x project.

ZCash

In August 2019, the U.K. branch of Coinbase announced that it would be dropping support for ZCash (ZEC) trading. The company sent out letters to its U.K. customers urging them to convert, liquidate, or transfer their ZEC holdings to other wallets by August 26th. According to sources close to the matter, the decision was "completely to do with" Coinbase's new relationship with ClearBank, the bank that was to replace the role that Barclays formerly had with the company.

Key People

• Brian Armstrong - CEO
• Emelie Choi - COO
• Adam White - former Vice President & General Manager