In this post we’ll outline where we think the digital currency industry is headed and how the world will come to have an open financial system. We believe there will be four major phases (which we compare here to the internet).
Let’s take a closer look at each phase and discuss what role Coinbase will play.
Phase 1: Develop the protocol (1M people)
In this phase, new protocols (, , etc) were invented and people began to tinker with them. Open source communities developed around each protocol and in some cases received help from corporate sponsors. The race is now on to see which protocol can scale and attract application developers.
Coinbase works closely with the open source communities around each protocol, contributing financially in some cases, but we did not play a major role in this phase.
Phase 2: Build a digital currency exchange (10M people)
Investment or speculation is a bootstrapping mechanism for the payment network (in other words, it is the of digital currency). The creation of safe and easy to use exchanges serves as a for people to get their local currency into and out of digital currency.
In this phase, we’ve built for consumers and for institutions and pro traders. This is our core business today, and we’ll use the revenue from this phase to invest in the later phases, while continuing to expand our core businesses to more countries.
Phase 3: Build a mass market interface for digital currency apps (100M people)
Consumers and businesses need an easy interface to start using digital currency and its applications.
With the internet, this happened when HTML and the web browser were introduced on top of TCP/IP. In mobile this happened with the introduction of the iPhone. In digital currency we believe this will happen with an easy to use wallet or account, that allows consumers and businesses to use a growing ecosystem of applications powered by cryptocurrency. This could be a user-controlled wallet, or a hosted wallet. The key feature of this application will be that it dramatically lowers the hurdle for new digital currency applications to be developed and used by ordinary people.
Coinbase will participate here by building or investing in teams who are working on this.
Phase 4: Build the apps of an open financial system (1B people)
The existing financial system needs to be recreated on open networks and made globally accessible in this new consumer interface. Some example apps or components that we believe need to be created include:
Loans (mortgages, small business lending, micro-lending, etc)
Venture Capital (seed, traditional vc, venture debt, etc)
Investing (stocks, index funds, savings accounts, etc)
Identity & Reputation (IDs, authentication, credit scores, etc)
Remittance (sending money cross border)
Merchant Processing (point of sale, internet orders)
Coinbase will participate in this area by buying, building, or investing in various companies. We will also build developer tools and work with regulators to craft appropriate regulation in this space.
We are most likely nearing the end of phase 2 right now, although each phase overlaps a bit. It is still early days in digital currency.
Some new protocols got invented which enable an open financial system
We’ll make it easy for people to invest in digital currency to bootstrap the network
We’ll use the money from this to make a mass market consumer interface
We’ll use the money from this to build or invest in the apps of an open financial system (earn, borrow, invest, spend, etc).
P.S. Our culture at Coinbase is to “default to open”. We value transparency. Hence posting our “secret” strategy publicly on the internet.
About Brian Armstrong
Brian Armstrong is the Chief Executive Officer and Co-founder of Coinbase. As CEO, Brian is responsible for Coinbase’s consumer and institutional arms, which offer an entire suite of products that make accessing cryptocurrencies easy and secure, in addition to new products that operate at the frontiers of crypto and blockchain. Before co-founding Coinbase, Brian worked as a Software Engineer at Airbnb. He holds three degrees from Rice University: Bachelor’s of Computer Science, Bachelor’s of Economics, and a Master’s of Computer Science.
Nov 29, 2023,
3min read time
Nov 28, 2023