Coinbase has long been one of the most well-known cryptocurrency exchanges, providing a gateway for people to exchange fiat for Bitcoin which can then be held or moved to other exchanges with more trading pairs.
While Coinbase currently only offers Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, most exchanges don’t allow customers to purchase with fiat directly due to regulatory complications associated with doing so, allowing Coinbase to establish itself as a fundamental piece of infrastructure in the crypto-space.
The exchange has an estimated 20 million users and just shy of 1 million followers on Twitter, about 100,000 more than Binance which is the largest exchange in the world by volume.
Founded in 2012, the company dominated the space early on with the Coinbase iPhone app becoming the most downloaded app of last year when the company generated $1 billion in revenue. The company was valued last year at $1.6 billion by a number of firms and raised $100 million in funding from outside investors. At that time Coinbase offered employees a share buyback, which almost none of them accepted due to the idea that the shares would increase in value – and they were right.
Verto Analytics cited over 4 million active monthly users on the exchange as the value and usage increased, and the company is likely now worth billions – in fact, the company recently placed a valuation of $8 billion on itself. Forbes states that Coinbase CEO Brian Armstrong is now a billionaire, or thereabouts with an estimated net worth of $900 million to $1 billion.
The exchange is a vital part of the ecosystem, although not without its own controversies and even rumors that the company will soon change hands.
Facebook Acquisition Incoming?
There have been persistent rumors that Facebook is closing in on Coinbase, seeking to absorb the highly profitable crypto-exchange with its tens of millions of users and connect both firms together, most likely integrating Facebook functions on the Coinbase interface.
The rumors are partly fuelled by the former head of Facebook messenger David Marcus joining the Coinbase board, which he announced over Twitter (probably Facebook too!).
Since 2005 Facebook have acquired 66 companies including Whatsapp for $19 billion, Occulus VR for $2 billion, and Instagram for $1 billion, meaning Coinbase is certainly within their grasp financially.
Director of Communications for DFinity supercomputer told CryptoNewsReview:
“Coinbase is a bargain at any price. If Facebook went ahead with the acquisition they could become the world’s biggest finance company, as well as benefiting from a once-in-a-generation event: the emergence of a new capital market. Coinbase is one of a handful of companies poised to capture uncountable billions of dollars.”
CEO Brian Armstrong on BTC/BCH
The soon-to-be-billionaire is a well-known figure in the cryptocurrency space, and unlike other CEOs of prominent companies, hasn’t been too shy about voicing his personal opinions on controversial issues within the community.
Armstrong has on occasion shown his support for Bitcoin Cash over Bitcoin Core, despite essentially BTC still being the most widely traded currency on the exchange. Coinbase staggered the release of BCH as an exchange asset between December and January.
https://twitter.com/Tom_Horvath/status/949207156338946048
In January 2016 Armstrong voiced his opinion that bigger block sizes was the solution to the scaling problem in a blog post, and Coinbase didn’t immediately adopt SegWit when it was released.
In 2016 r/Bitcoin mod Theymos removed Coinbase from the bitcoin.org’s list of suggested websites along with a number of other helpful and relevant resources as part of the ongoing BTC/BCH feud. Armstrong had previously suggested to the Reddit CEO that Theymos be
removed as moderator from the sub due to the concerning amount of censorship taking place on site.
Regulatory Issues
The site reportedly had some trouble with the IRS over the requirement to disclose user information for the purposes of gathering data pertaining to the payment of capital gains tax in the US, to which Coinbase complied.
Coinbase is now on the way to becoming a federally regulated securities firm, to mixed reactions from within the community, many of whom are strongly opposed to regulation and government interference.
Coinbase COO Asiff Hirji recently published a blog stating that the company was obtaining a broker-dealer license, an alternative trading system license and a registered investment advisor license. At that point the company intends to seek approval from the U.S. Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) to offer blockchain-based securities.
Competition
The company has some pretty stiff competition from emerging startup Robinhood which saw great success with its stock trading app before turning to cryptocurrency. The crypto app is also becoming very widely used and the company is now valued at $5.6 billion, rapidly gaining in valuation on Coinbases somewhat disputed $8 billion valuation.
The Robinhood CEO recently stated his intention to rival Coinbase with a recently acquired funding round of $363 million from investors. Unlike Coinbase, Robinhood is already a licensed broker with the SEC, giving the company a significant advantage in that area.
For many, the question isn’t whether Coinbase or Robinhood should end up on top, but whether such companies are good for the crypto space in general.
Undeniably the entry point Coinbase has provided people with over the last few years has been a fundamental piece of infrastructure that greatly aided adoption in a big way, with Robinhood offering similar ease of access to a world often viewed as overly complicated or technical for the lay investor.
However, the close ties to the SEC make others question the nature and motivations of the exchange – those seeking to escape the situation they are already in with fiat where they are beholden to government authorities to whom they must entrust their earnings do not view regulated exchanges as trustworthy or safe.
However, with the advent of decentralized exchanges like IDEX available, the crypto market arguably has the best of both worlds, with the dApp exchanges serving those wishing to go off-grid with their funds and engage in truly private and peer-to-peer exchange of assets, and giants like Coinbase and Robinhood catering to those who simply want to buy and trade some crypto.
Right now Coinbase is inarguably the crypto community’s biggest institutional evangelist….but is it the hero crypto needs?
Interested in other cool crypto posts….check out Mining Wars: Bitmain vs Dragonmint and The Price of Bitcoin vs Cost of Mining.
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