Coinbase

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Coinbase
Coinbase logo.jpg
Founded 2012
Headquarters San Francisco, California
Key People Brian Armstrong, CEO; Asiff Hirji, President, COO;

Adam White, former Vice President & General Manager

Products Cryptocurrency wallet, trading platform and processor, crypto index trading, crypto custody services
Twitter @coinbase
LinkedIn Profile
Facebook coinbase
Website Coinbase Home

Coinbase, a cryptocurrency exchange and broker, is one of the largest individual companies in the U.S. cryptocurrency industry. It offers a wallet for storing, spending, buying and accepting bitcoin, Ethereum, Litecoin, and other digital assets as part of its services. It also acts as a bitcoin processor for many merchants and businesses (example; Expedia, Overstock.com, Dell), and is among the top Bitcoin exchanges. Coinbase became the blockchain industry’s first “unicorn” after it raised $100 million in August of 2017, valuing the company at $1.6 billion.

History

The San Francisco-based company was founded by founded by Brian Armstrong and Fred Ehrsam, a former Goldman Sachs trader. It was incorporated in 2012. Coinbase is available in 32 countries.[1][2]

The company received $5 million in funding from the venture capital firm Union Square Ventures in May of 2013[3] and $25 million from the venture capital firms Andreessen Horowitz, Union Square Ventures and Ribbit Capital in December 2013.[4]

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.[5]

In January 2018 Coinbase teamed up with Trading TechnologiesMarketswiki.gif to give TT's clients access to GDAX so that they can trade futures and spot bitcoin side by side on TT's platform.[6] 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.[7]

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 crypto 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 crypto in general needs to be about more than asset prices."[8][9]

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.[10]

In April 2019, Coinbase ranked above JPMorgan Chase and LinkedIn on LinkedIn's top 50 U.S. employers list for 2019.[11]

Bitcoin Cash and Coinbase

In December 2017, Coinbase 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.[12]

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.[13][14]

Execs leaving the company

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.[15] It was later announced that White left Coinbase to become the COO of Bakkt.[16]

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.[17]

In April 2019 Dan Romero, the institutional head of Coinbase, announced that he would be leaving the company.[18] 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.[19]

Neutrino Acquisition

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.[20] 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."[21] 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.[22]

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.”[23]

CoinDesk reported on March 1, 2019, that "the battle cry #DeleteCoinbase" raised in response to the Neutrino acquisition, "was resounding across crypto Twitter."[24]

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."[25] On March 5, a representative of Coinbase told Coindesk that the exchange "never shared our customes' 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.[26]

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.[27]

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.[28]

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.[29]

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.[30][31]

Digital Asset 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.[32] The factors that Coinbase addresses in the framework are technology, including security and scalability; market supply and demand; crypto economics including distribution and incentives; regulatory certainty; and how the coin meshes with Coinbase's core values.[33]

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.[34] Coinbase announced on October 16 that it was fully supporting ZRX and customers could ". . . now buy, sell, send, receive, or store ZRX . . . "[35][36]

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.[37]

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 to provide a limited range of custody services for bitcoin, bitcoin cash, Ethereum, Ether classic, Ripple (XRP) and Litecoin.[38][39]

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.[40][41] According to the blog post, support for Maker tokens is planned for the future.[42]

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.[43][44]

GDAX/Coinbase Pro

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.[45] 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.[46] 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. [47]

OTC Crypto 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.[48]

Crypto-to-Crypto 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.[49]

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.[50] 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).[51]

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.[52]

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.[53]

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.[54]

Key People

  • Brian Armstrong - CEO
  • Asiff Hirji - President, COO
  • Adam White - former Vice President & General Manager

References

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  2. Coinbase. Coinbase.
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  4. Coinbase Raises $25M Led By Andreessen Horowitz To Build Its Bitcoin Wallet And Merchant Services. TechCrunch.
  5. Bitcoin fever exposes crypto-market frailties. Reuters.
  6. Coinbase is teaming up with a Chicago-based tech firm to unlease crypto onto Wall Street. Business Insider.
  7. Conbase is boosting its crypto buying limit to $25K a day. Coindesk.
  8. Coinbase to Bring in $1.3 Billion in Revenue Despite Crypto’s Massive Slump. Bloomberg.
  9. Coinbase, the startup at the core of the crypto craze, is now considered an $8 billion company. Recode.
  10. Coinbase Suspends Ethereum Classic After Blockchain History Rewrites. Coinbase.
  11. Coinbase Tops JPMorgan in LinkedIn List of Most Popular Employers. Coinbase.
  12. Bitcoin: Coinbase Users Get 'Cash' Windfall. Fortune.
  13. Coinbase Reveal Results of Internal Investigation. Coindoo.
  14. Coinbase Finds No Insider Trading of Bitcoin Cash. Fortune.
  15. Crypto Exchange Coinbase Says Institutional Platform Head Is Leavingorg=Bloomberg. {{{org}}}.
  16. Coinbase’s Adam White is joining Bakkt as its COO. The Block.
  17. Coinbase's Head of Trading Resigns After Six Months on Job. Recode.
  18. Dan Romero departs Coinbase, continuing the exodus of institutional talent. The Block.
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  20. Coinbase Acquires Blockchain Analytics Startup Neutrino. CoinTelegraph.
  21. Company. Neutrino.
  22. Former Hacking Team Members Are Now Spying on the Blockchain for Coinbase. Motherboard.
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  25. Living up to our values and the Neutrino acquisition. Coinbase.
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  29. Coinbase Cryptocurrency Wallet Introduces Cloud Storage for Private Keys. NewsBTC.
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  31. Coinbase is shutting down its fund aimed at big investors as it pivots to a new retail product. Coindesk.
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  38. DFS AUTHORIZES COINBASE GLOBAL, INC. TO FORM COINBASE CUSTODY TRUST COMPANY LLC. New York Department of Financial Services.
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  40. Coinbase Gets Approval to Offer Crypto Custody Services in New York. Traders Magazine Online News.
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  42. Coinbase Custody launches staking support for Tezos, MakerDAO governance to follow. Medium.
  43. Crypto Exchange Coinbase to List Stable Coin Backed by Circle. Bloomberg.
  44. Coinbase Adds Its First Stablecoin Tied to the US Dollar. Coindesk.
  45. Bitcoin exchange Coinbase opens Chicago office in bid to attract investors, local talent. Chicago Tribune.
  46. https://blog.coinbase.com/gdax-is-now-coinbase-pro-b062a12758a0. Coinbase.
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  48. Coinbase Quietly Opened Its OTC Crypto Trading Desk This Month. Coindesk.
  49. Coinbase Adds Crypto-to-Crypto Trading for Retail Customers. Coindesk.
  50. Coinbase Users Can Now Easily Make Fiat Withdrawals via PayPal. Coinspeaker.
  51. Coinbase Extends PayPal Withdrawal Option to 32 European Countries. Coindesk.
  52. Coinbase Exchange Users Can Now Withdraw Bitcoin Cash Fork BSV. Coindesk.
  53. Coinbase Exchange Users Can Buy and Sell XRP Starting Tomorrow. Coindesk.
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