Coinbase founder: I am more looking forward to the next decade of Crypto

Author: Bankless

Compiled by: Rhythm

The cryptocurrency trading platform Coinbase, a publicly listed company in the US, holds a significant position in the industry. As the first compliant platform to go public on Nasdaq, Coinbase has provided astonishing returns for Silicon Valley investors while also helping the industry attract a considerable amount of outside traffic.

A few days ago, Coinbase founder Brian Armstrong appeared on the Bankless podcast, chatting for nearly two hours on a wide range of topics. From the inception of Coinbase to its values, the latest NFT platform, and views on the future of the industry, Brian shared his insights and answers. Rhythm BlockBeats has summarized the podcast content below, hoping to be helpful to readers.

The Founding and Values of Coinbase

Host: Let's welcome our guest—Brian Armstrong. He is the CEO and co-founder of Coinbase.

Brian Armstrong: Thank you for having me. I'm also one of your listeners and I'm very impressed with your podcast.

Host: Thank you for that. I really love Coinbase and have been using it for a while. I bought my first Bitcoin on Coinbase, and it truly made me feel secure and helped me overcome many obstacles. So I want to thank you for founding Coinbase; it's a great product.

Brian Armstrong: Thank you. I'm honored to have helped more people enter the crypto space and improve the industry. But this is just the beginning. Our next challenge is how to get people to actually use crypto and various innovative methods, making them simple and accessible.

Host: I want to take a moment to reminisce. I remember Coinbase started in 2012, so I want to talk about 2013. My friend Dan posted a photo on Twitter of you at the Coinbase booth, which was about nine years ago. I'd like you to share your thoughts from that time.

Brian Armstrong: At the beginning, there were only three of us—me, Fred Ehrsam, and Olaf Carlson-Wee. We were the only three employees in the company, and we wanted to create something that customers needed. When I first read the Bitcoin whitepaper, I thought it was a great idea. It’s a global decentralized protocol that can transmit not just information but also value. As someone who studied economics and computer science, I genuinely thought this technology was cool, but how could we make it usable?

So my first thought was, why not create a Bitcoin wallet? I then worked day in and day out to turn that idea into reality and secured some seed funding. However, at that time, we only had two employees and no users, so I could only post links on Reddit to attract people to sign up.

However, while people would register, they wouldn't actually use the product. So I had to call a few registered users and ask them why they weren't using the software. They said they thought it was a good product but didn't have any Bitcoin to store. Then I thought, wouldn’t it be great if we had a buy button in the software? We went through some processes and eventually implemented that feature. From that moment on, Coinbase truly began to grow rapidly.

Host: I'm also curious about why you founded Coinbase and the values you instilled in the company. Olaf and Fred later moved into the investment field, while you chose to stay at Coinbase. So my question is, why did you initially want to start Coinbase? What made you stay?

Brian Armstrong: I think, on one hand, I've always been passionate about the concept of economic freedom. On the other hand, I felt like I was born a bit late and missed the opportunity to start a large internet company. By the time I graduated, companies like Google, Amazon, and PayPal had already emerged. However, I always wanted to build my own internet company, so when I saw the Bitcoin whitepaper, I felt this was the next internet.

I've always wanted to be an entrepreneur; even in high school, I wanted to start a company that could impact the world. So when you ask me why I'm still at Coinbase, I would say that while this job isn't always fun, most of the time, it brings me joy. I love learning new things. As a CEO, I always need to step out of my comfort zone and take on new challenges. I also enjoy creating with technology; I want to use technology to make the world a better place, which is one of my aspirations in life. I really hope that in the future, a billion people can access the entire open financial system through our products.

Host: I'm curious, in your view, which is more important among money, technology, and values?

Brian Armstrong: I do value technology and want to make money, but what truly interests me about crypto is the values. In 2009, I lived in Buenos Aires for a year, where I witnessed firsthand what a country experiencing severe inflation looks like. Inflation is very insidious because it erodes the wealth of the poor.

The transfer of money between countries incurs high costs and delays. To me, this is unnecessary friction in the global economic system. This is also why I like crypto; I believe it is the future of the financial system. I think in 20 years, it will become an important part of global GDP and bring more freedom.

Host: How do you instill your values into Coinbase? What are Coinbase's values? Are they different from yours?

Brian Armstrong: I believe a founder's values can be reflected in the company they create. We used to distinguish between our values and our corporate culture, but now I've merged them into what I call corporate culture. We want to be the most trusted brand in the field and put effort into cybersecurity. I hope the company can avoid bureaucracy, allowing employees to quickly accomplish a lot of high-quality work and communicate efficiently with each other.

At the same time, I want the company to always be in a state of innovation; I don't want my company to become complacent because technology is always advancing, and new things will keep emerging. Therefore, I consistently allocate 10% of our resources to innovation, while the rest is used for building existing infrastructure.

Host: What does Coinbase want to become in the next 5 or 10 years? A bank or a tech company? I see you've created an NFT platform, but banks would never develop such platforms. So what is Coinbase's ultimate development goal?

Brian Armstrong: I believe Coinbase can be both a bank and a tech company in the future, but for long-term development, we need to become a crypto company. I think a crypto company is an evolved version of a tech company.

Therefore, I would prefer to be a tech company rather than a financial services company, but more than that, I want to be a crypto company. Because in my view, excellent tech companies will ultimately become crypto companies.

Host: So in your view, Coinbase is a third model that transcends banks and financial companies, evolving and upgrading based on the two?

Brian Armstrong: Yes, although we haven't achieved it yet, this is indeed a vision for our future. At the same time, I want to contribute to the decentralization process of Coinbase. Right now, our core business is regulated financial services, which is also our main source of revenue.

To further expand in the crypto space, we must build a bridge connecting finance 1.0 and finance 2.0, allowing money to continuously flow into the crypto economy. But this also means we must collaborate with regulators and traditional banking, though I don't want Coinbase itself to become a bank. What we want to do is continually decentralize and integrate into the crypto economy.

Positioning of Coinbase

Host: Next, I want to talk about Coinbase's product vision. Can you introduce us to Coinbase's products, roadmap, and the purpose and vision behind the upcoming products?

Brian Armstrong: The company currently has three customer groups: retail investors, institutional clients, and developers. For the first group, our goal is to become their preferred crypto platform; for the second group, we also want to be their preferred platform, but unlike the first group, we need to be a qualified custody platform and a primary broker because these institutions often engage in OTC trading and have certain security audit requirements; for the third group, the developers, we are building various services on Coinbase Cloud for them to use.

I believe that in the future, most startups will use crypto to some extent, and many large enterprises like commercial banks are already trying to figure out how to integrate crypto with their products, and of course, they can do this on Coinbase Cloud. Meanwhile, we are also expanding our business globally to promote the globalization of the platform.

Host: I want to hear Coinbase's views on DeFi. Do you see it as a friend, foe, or a mix of both?

Brian Armstrong: I have always viewed DeFi as a partner. It has become increasingly important in recent years, with more and more customers starting to use DeFi, so we want to provide more convenient services for our customers. Coinbase has a custody program, and we want to deploy DeFi services on that software. Additionally, we developed the Coinbase Wallet, which is a self-custody application that has grown about threefold in the past year. So this is another option; people can use this wallet to access the entire DeFi world.

This self-custody wallet is more like a software business because we have never held any customer funds or executed any transactions. Our main strategies in DeFi are primarily Coinbase Custody and self-custody.

Host: I heard that recently, due to SEC policies, your lending product was forced offline. What kind of product was it, and where did its main revenue come from?

Brian Armstrong: It was a centralized product, and we ultimately did not launch it because the SEC told us that if we released this product, they would sue us. I really hope the SEC can establish clearer policies and rules so that we know what we can and cannot do, and enforce these policies fairly and justly. I hope they can achieve that in the future.

Host: We'll discuss regulation later. For now, I want to talk about DeFi. You mentioned that Coinbase sees DeFi as a friend, which reminds me of the term CZ mentioned, CeDeFi, meaning centralized DeFi. Financial companies created this, and it is a fork of Ethereum called Financial Chain, integrating various centralized DeFi. I want to know what your thoughts are on this field. For example, will Coinbase take action to establish its own smart contract platform, or will it adopt a specific smart contract platform? Will you choose to be open? Will you select the most open, trusted, neutral, and decentralized technology? What considerations and plans do you have regarding this?

Brian Armstrong: Good question. I haven't heard of the term CeDeFi, but its existence certainly has its significance. I had some discussions with CZ about BNB, and I think their efforts in scaling are commendable because scaling is an important part of blockchain development. But on the other hand, I think decentralization is also very important because most of the BNB is currently controlled by one company. I believe as a developer, building your application on a platform controlled by a single entity is somewhat risky.

By the way, around 2018, some engineers approached me and said we should build a Coinbase chain. My reaction was that if we really built our own chain, our market cap would definitely increase significantly, potentially reaching $50 billion. On the other hand, I'm glad we didn't build our own chain because I don't like that idea.

Now, I'm thinking, can we build a more decentralized chain that we truly don't control? But I'm also wondering if we can do what other chains can do. Does the world really need another chain? So what we ended up doing was building an internal engineering team, which we call the protocol team, and this team is still in development. Their work is primarily focused on scaling blockchains—not our blockchain, but any existing blockchain. You could say that if we had built our own chain, we could have had a market cap of $50 billion. But again, I'm not in it for the money, so I don't want to get involved in any chain's centralization.

Host: It seems the team is planning to launch a series of public goods in ecosystems like Bitcoin and Ethereum, but currently, the monetization mechanism is unclear. Do you think the team is making efforts for open-source public goods?

Brian Armstrong: Yes, when a platform reaches a certain scale, it will open its SSL and some foundational protocols. The company has always profited from this, and this move is also a way of giving back. Scaling these blockchains is crucial for the development of crypto and allows for the participation of 100 million or even 1 billion users in the future. Using Layer 2, we can scale blockchains to several times their original capacity, which is a good thing for crypto.

Host: I'm curious if Coinbase has an official market positioning. I know the Coinbase platform supports multiple blockchains, and you certainly support open-source and decentralized chains, so do you care which chain will develop better?

Brian Armstrong: Yes, our company indeed has deployments on multiple chains. Personally, I don't want to get involved in the fierce competition in the crypto world. I would prefer to see everyone cooperate amicably rather than competing for personal gain, as that wouldn't be beneficial for the long-term development of crypto.

What I truly care about is that most platforms built in the crypto space should be decentralized, developer-friendly, and scalable, as these platforms can genuinely drive the development of the entire industry. However, at the same time, even though Coinbase is a large company in the crypto space, I don't believe we can dictate this market, and developers are smart; they will know where to build.

Host: Sometimes I think people forget that developers themselves are also economic participants. As you said, in this free economy, if a developer chooses a certain platform, it means they trust that platform enough to build their careers on it. This is a good thing for a platform and ecosystem.

Brian Armstrong: This reminds me of the early days of the internet when developers didn't want to build their applications on proprietary systems because their work could easily be taken away. For example, in the early days of the internet, Microsoft actually tried to create its own proprietary internet called Microsoft Network.

However, developers were reluctant to develop on it because they believed that if their applications gained traction, Microsoft would claim them as its own. So they preferred to build applications on the open internet, even though there were issues with the open internet at that time, they still leaned towards the open internet rather than a proprietary one. However, history is repeating itself now.

Host: Bankless truly hopes that one day Coinbase can defeat all traditional banks and become the place where everyone saves money. I hope one day I can deposit checks into Coinbase. While I don't know if this is Coinbase's vision, it's our vision for Coinbase. So can you give us some reassurance that Coinbase will defeat all banks in the future and not be defeated by them?

Brian Armstrong: I think this is a very interesting trend. If you look at the history of the internet, you'll find that it started very fragmented, then a lot of new stars emerged, driving the entire internet's development. Once they became strong enough, they began to merge and consolidate, ultimately forming monopolies.

Once a monopoly is formed, these powerful companies start to go bad, and the internet begins to undergo a renewal process, with a new wave of emerging companies competing against them. Returning to your earlier question, I see that some people are indeed using Coinbase accounts instead of bank accounts to store their wealth, but I believe the real answer to your question is that more and more crypto will shift to self-custody. I think, in the long run, that is the trend of the future.

Host: But if everyone self-custodies their assets, who will still keep their assets in Coinbase? Wouldn't that contradict Coinbase's interests? Can you explain further? I'm glad you brought this up, but I'm curious—doesn't this also tell your users that they no longer need to use Coinbase?

Brian Armstrong: In the short term, even the medium term, this does indeed harm our interests, but in the long term, it definitely aligns with our long-term interests. This is because the company must continuously evolve and strive to better serve our customers. If a company doesn't provide better services for its customers and doesn't consider their long-term interests, then that company will ultimately face extinction.

Host: Let's talk about the future development of Coinbase and Facebook. I'm curious about your thoughts on Facebook's announcement to pivot the entire company towards the metaverse. Will Coinbase consider joining the construction of this new revolution in the crypto space? What does choosing to join the metaverse mean for Coinbase's development strategy?

Brian Armstrong: I think Zuckerberg's move is quite impressive. Facebook is currently the only company making significant strides in the crypto space, and I commend his initiative. I think people may have the impression that Facebook is the big brother in the industry and that user privacy cannot be adequately protected within Facebook, even believing that it influences elections. So, Facebook has accumulated a lot of resentment over the years, and entering the metaverse is a wise choice for them to seize the opportunity to reshape their brand and shed the hatred they've accumulated over the years.

At the same time, I also think this is a tremendous initiative because the future of computing will undoubtedly belong to VR and AR. We have experienced the evolution from mainframes to desktops to laptops to mobile devices, and the future will certainly transition to VR and AR. Notably, Apple and Google completely missed the opportunity to develop AR and VR, which is strange because we always thought they were heading in that direction.

I hope Coinbase can become the place where people store digital goods and currencies, so we need to make it easy for people to connect their Coinbase accounts to any version of the metaverse. I don't think we will build things like games or UIs, but we do hope people can manage their assets themselves or store them in Coinbase accounts for custody.

About NFTs

Host: Next, I want to discuss NFTs, but before that, I have a thought I'd like to hear your opinion on. In the crypto space, with Zuckerberg entering the metaverse, do you think this is an attempt at a collective choice? What crypto is doing is essentially centralization and control, becoming a real-time monitoring device. My view is a bit different; I think due to the trustworthy neutrality of the underlying protocols, Zuckerberg can only build the metaverse on these protocols; he has no other choice, just like Facebook was forced to build on TCP/IP and all open internet protocols. Therefore, I personally believe this move will lead to a bull market for crypto. So, are you bullish or bearish? Or do you think he will be forced to build on crypto, whether he likes it or not?

Brian Armstrong: I share your perspective. In my view, Facebook's efforts in the metaverse are a good thing for the entire crypto space. I also agree with what you said about open protocols; to get more people to use the metaverse, they will have to build on open internet protocols, allowing people's digital products to be interoperable worldwide. I hope other companies can also participate in building the metaverse, and the crypto community can definitely achieve that.

Host: I believe what will truly accelerate Coinbase's development is your newly launched NFT platform. So we want to learn more about the details in this regard. The platform attracted about 2 million registrations within just a few days, and that number has certainly increased since then. If convenient, could you share that with us? Additionally, I'm curious when this platform will officially launch. Will it be an open or closed system? Can people withdraw their NFTs? Where will the images be stored?

Brian Armstrong: I think there were about 3.5 million registrations in the first three days, but I'm not sure of the exact number because it keeps rising. People can connect self-custody wallets to Coinbase, and you can use Metamask or Coinbase to store NFTs. Therefore, our overall goal is to make everything in crypto trustworthy and easy to use. The development of NFTs has also brought many participants who are not very familiar with crypto, so we hope to provide them with more social features to help the next billion users join the world of NFTs.

Host: Regarding this NFT platform, I saw many social media elements in the mock version, so is it also a social platform?

Brian Armstrong: I think people really enjoy adding social attributes to the platform. So if there’s a version like Instagram where you can view people's profiles, follow them, and even earn achievement trophies, that would be great. Moreover, I have many other features in mind, like posting bounties, commissioning people to create NFTs, or creating some emojis. Of course, we can also do more fun things in there; what I just mentioned are just a few examples.

Host: I want to talk about the mainstream trends in crypto because I think NFTs give us that feeling. Clearly, you have become a leader in the crypto space, as I see you just became the official crypto platform for the NBA and WNBA. Can you tell us more about that? For example, why did both parties collaborate? What benefits will this partnership bring?

Brian Armstrong: I think for a long time, Coinbase has never really done traditional marketing. Frankly, I'm not very knowledgeable about marketing. But sometimes our board members ask me when we will put some effort into marketing, but I haven't really focused on that. However, now that we are a public company, we need to spend some time on marketing. So we hired a Chief Marketing Officer and are exploring many areas. By the way, there will be many crypto ads during the upcoming Super Bowl. Crypto is becoming mainstream, so we will also conduct more marketing activities.

About Regulation

Host: Next, I want to talk about regulation. Whenever people in crypto discuss regulation, they often say, since crypto is the trend, why worry about regulation? My response is that I'm not worried that the US regulatory system will hinder the development of crypto; what I truly worry about is that overly strict regulation will hinder the development of the country. As a citizen, I don't want my country to fall behind. Can you share your perspective on the regulatory situation in the US? Are you concerned about it? Are there unfavorable regulations being enacted, or is the regulatory enforcement not clear enough?

Brian Armstrong: I think you're right; harmful regulation is not damaging crypto but harming the entire development of the US. As a US citizen, I want to see the US not only remain a financial center but also be at the forefront of various innovations, which is what makes our country strong.

As for the current regulatory situation, I would say it seems the whole world is establishing connections with each other, but the reality is not so. There has always been a gap in understanding. Half of my job involves going to Washington, communicating with traditional finance 1.0 staff, helping them understand crypto, and understanding their concerns. Then, the other half of my time is spent with those at the forefront of crypto, learning the most cutting-edge knowledge about crypto so we can build a better future together and accelerate that process. At the same time, crypto needs to continuously innovate so we can keep building more beneficial things. I am very optimistic that the entire crypto space will continue to accelerate its development, and freedom is just ahead.

Host: That sounds interesting. As you said, you spend half your time acting as a bridge connecting finance 1.0 and finance 2.0. I must say, crypto really needs that right now. I believe that once crypto truly becomes powerful, our community will form a force, with capital and lobbying power, but we still need some industry leaders to represent us, bridging the gap in understanding, like A16z and Coinbase. You both have the strength to accomplish this. Do you think so? We now have a framework suitable for a crypto digital nation, giving holders a fair chance to compete. Is this your goal in establishing a regulatory framework? Do you plan to continue serving regulators and crypto natives within that framework?

Brian Armstrong: Absolutely. If we want this industry to achieve tenfold or hundredfold growth in the future, extending to more users and allowing the next billion people to access this technology and benefit from it, we must continue our efforts in scaling and other areas. However, one of the biggest challenges we face now is how to explain this to current institutional regulators, traditional banking staff, and all relevant parties.

Crypto is undoubtedly the trend of the future. While there are some risks, it is definitely more beneficial than harmful for the world as a whole. As long as we patiently explain this to them, I believe they will fully understand and support us. Coinbase has made significant efforts in this regard; we hired our Chief Policy Officer, who previously worked for Goldman Sachs, primarily responsible for this area. We have established a large team dedicated to policy-related work, and they are continuously making efforts in their fields.

A16z's work is remarkable, and I respect them. They have built a large policy team that writes legal commentary documents for judges. Coinbase is also collaborating with other companies in a group called the Crypto Innovation Council, which is essentially an outreach and think tank that can communicate with lawmakers and policymakers worldwide. Many people in countries around the world are starting to think about this issue.

They just don't have all the information. Therefore, we can help those on the margins understand cutting-edge information. Some people will just hate crypto, regardless of whether they are left or right; some of them just genuinely dislike crypto and won't change their minds. Others are neutral, and that's where we have the opportunity to persuade them. After that, we must build good relationships with crypto supporters and advocates.

Host: Previously, you mentioned that the SEC has been relentlessly pursuing your lending product and sent you that letter warning that if you released the lending product, the SEC intended to sue you. Ryan and I both support Coinbase's confrontation with the SEC for many reasons; one is that we don't want the SEC to bully us. However, as an industry, the crypto space is still too fragmented and hasn't formed a complete system. So if the SEC takes action against Coinbase, they might also target others, and Coinbase is just at the forefront of the industry. But we also want to see someone take on this responsibility. Although, as you mentioned, our chances of winning this battle are 50:50, which isn't very high, even if a company stronger than Coinbase emerges, I don't think their chances of winning would be much greater than Coinbase's. So does Coinbase want to take on this responsibility? Are you willing to continue this battle?

Brian Armstrong: Yes, although I don't think we want this responsibility, we do have it. I agree with your point. I think if we do end up in a legal dispute with the SEC in the next year or two, I wouldn't be surprised. By the way, this is not the end of the world for crypto, right?

If they are unwilling to propose clear rules that everyone can follow, or if we fundamentally disagree with them for not presenting any clear rules—any rules as clear as the ones I've seen—then ultimately our dispute will have to be resolved in court and enforced through legal means.

I believe that if the SEC persists in its current approach, it will not benefit the entire country. However, if they ultimately do not change their regulatory policies, we will have to file a lawsuit. I once spoke with the CEO of the New York Stock Exchange about this matter; they have sued the SEC multiple times. Therefore, in many cases, regulatory agencies are generally good; they are just trying to do what they believe is right to protect the interests of the public, and I truly respect their work.

But there are also times when they just want to grab territory, or they are not interpreting the actual legal provisions fairly and justly. In such cases, we must resort to the courts. Therefore, I do not oppose doing so when necessary.

Host: The first decade of crypto was all about birth, but now we have entered a new decade, and it is already the 2020s. So I want to hear your advice and thoughts on this decade.

Brian Armstrong: I believe that if the first decade of crypto was about birth, where people participated in trading and exchanging coins, the next decade will be about how people use crypto. I personally look forward to this decade more, and I have already seen the continuous development of NFTs, DeFi, the metaverse, voting, decentralized identity, social media, and Bitcloud, indicating that people are beginning to use crypto. I believe that as more people use it, crypto will gradually grow stronger.

Host: I have observed a phenomenon in this industry where some people enter the crypto space, build many trendy things, and become very wealthy. But then they become complacent and unambitious, and new people will replace them. However, I find that you seem to have remained unaffected and have been a leader in this field since 2013. So in the next decade, do you plan to consider retirement?

Brian Armstrong: Thank you for saying that, but I don't plan to retire just yet. My biggest concern is that as I get older, I might start to become out of touch with new things. So I allocate 10% of the company's resources to innovation. For instance, if someone in the team believes a project is feasible, we will invest in it, of course, we will veto some immature proposals. Overall, we will strive to explore new things and maintain innovation; otherwise, the new generation of startups will disrupt us.

Let's stop here for today. This conversation has been fascinating, and I believe everyone has benefited greatly. Thank you.