10 ms·

Love reading the risk factors section. First thought: how can a lay person possibly understood the risks as laid out here? Also they view this as a major risk:

by anonu 6y ago

Love reading the risk factors section. First thought: how can a lay person possibly understood the risks as laid out here? Also they view this as a major risk: •the identification of Satoshi Nakamoto, the pseudonymous person or persons who developed Bitcoin, or the transfer of Satoshi’s Bitcoins; Second thought, what an incredible business and growth. 1.14bn in revenue on 193bn in trading volume: thats 60bps on every dollar traded. These are insane fees ripe for disruption.

dabeeeenster 6y ago
I don't quite understand what the risk to coinbase is if Satoshi is alive/identified? Do they think he has a hack or something?!
- tristanj 6y ago
  Satoshi's wallets have 1.1 million bitcoins, which are worth $56.4 billion at today's price. That would place Satoshi Nakamoto among the 25 wealthiest people on the planet.
  - lvs 6y ago
    The question is why that fact alone would affect the value of this company's shares. Just identifying him doesn't mean he'd liquidate.
    - simias 6y ago
      It's still a huge known unknown for Bitcoin. What is Satoshi was linked to a shady organization, or something the general public wouldn't want to support for instance? Imagine if Satoshi turned out to be an avatar for the American, Russian or Chinese government for instance, that would both give them a huge leverage on the blockchain and mean that they'd benefit hugely from widespread adoption of the cryptocurrency. In turn that could motivate other governments to heavily regulate bitcoin as they'd see it as a foreign-controlled currency. That's just fiction, but that's the point, nobody knows for sure who or what Satoshi Nakamoto is, and that's a risk.
      - yissp 6y ago
        It already has a pretty strong association with illegal activity, doesn't it? After speculation I'd wager buying drugs is the most common use-case.
    - jki275 6y ago
      It's not just knowing who he is -- if he's identified he might decide to move those coins. If he did that, it could affect the price. I'm not sure anyone knows what the exact impact of that would be. I don't personally believe Satoshi was an actual person, and don't believe he'll ever be identified. Most likely the keys to those early blocks have been destroyed, and most people wouldn't do that unless there was an institutional reason for it.
    - anonymousab 6y ago
      > Just identifying him doesn't mean he'd liquidate True, but it is not a super unlikely outcome either. Identification alone could also result in a loss of trust in the system of Satoshi turned out to be, say, a government. Could go the opposite way too. It's an unknown that is worth calling out.
    - PragmaticPulp 6y ago
      Risk factors don’t mean “this will definitely happen”. It means this is a known risk for the system underpinning their profits. A more likely scenario is that the keys to those coins are compromised, somehow, given their unbelievably high value.
      - azinman2 6y ago
        I’m surprised someone doesn’t spent 10B in computation to brute force those keys.
        meetups323 6y ago
        ~50B in the account at current valuation, if Satoshi starts liquidating the value goes down dramatically; if it gets out that it isn't actually Satoshi acting, the value goes down even more (OMG if the creator of bitcoin can get hacked I can get hacked, this is a terrible investment, I'm out). I don't think it'd be possible to recoup the investment, but if you have a strong argument otherwise I'm sure some billionaire/nation-state investors would love to hear it.
        drexlspivey 6y ago
        You can’t brute force 256 bit keys
  - skrebbel 6y ago
    My pet theory is that all those bitcoins are lost forever, just Satoshi performance tuning the miner he'd hacked together with perl one night and letting it run for a few hours. Close terminal, poof, everything gone. Who cares, can mine more later. Bedtime! (disclaimer, I know nothing about bitcoin, there's likely 100 reasons why this makes no technical sense)
    - kristianp 6y ago
      By the time multiple people were mining, the software was mature enough to keep your coins (I suppose this is true anyway).
- fidrelity 6y ago
  If Satoshi is identified he might also still be alive. This means that Satoshi's BTC (~1mio.) are potentially liquid which would mean a gigantic influx of fresh bitcoins. It's quite plausible that any movement of these old wallets would crash the Bitcoin price for quite a while.
  - WanderPanda 6y ago
    In the end 1mio btc is just a days swing, right? Should not change much in the long term
  - jcims 6y ago
    This seems strange to me. Relative to the doubling that has recently happened, why would 5% of the total number of bitcoins suddenly moving have any drastic impact on price?
    - bravoetch 6y ago
      It is BTC that has never moved before. It would reveal at least one piece of information about the author of the bitcoin whitepaper - they are alive and engaged. Intent would be unknown, and destabilizing. Many pretenders would claim ownership. It would break a 12 year expectation in the story of Bitcoin.
  - XorNot 6y ago
    It's actually a lot worse then that: if anyone gets access to Satoshi's private wallets (i.e. via finding the keys printed out on paper in a personal effects safe or something) then those coins could move. There's no way to absolutely sure that the keys are gone and inaccessible permanently.
    - jcims 6y ago
      I'm a complete n00b so this is coming from a place of ignorance, why is that such a factor in the current price? Someone is sitting on $50B in a $1T market, who cares?
- nmca 6y ago
  He has many, many BTC and if they move the market will shit the bed.
- base698 6y ago
  Satoshi's water has billions worth of bitcoins. If they moved and were sold suddenly it could move the price.
- jsemrau 6y ago
  Marc Andreesen ?
- purple_ferret 6y ago
  They understand how little inflow actually moves the market. The bigger the market gets, the more likely Satoshi could cripple it.
Tenoke 6y ago
>These are insane fees ripe for disruption. The disruption is already well underway. The only thing that slowed down DEX's eating of a bigger part of the market share is the current high fees on Ethereum.
- swiley 6y ago
  Is there a plan to deal with the high gas prices?
  - Tenoke 6y ago
    Yes, ETH 2.0 is coming in 2022 (unless it gets delayed). There's one proposal for July that might help a little and more transactions are moving to L2 chains (LRC, Matic) where you pay the high fees only on exit/entering the L2 but can do transactions there for cheap. Outside of ETH, BSC (Binance's smart chain, the exchange with 9x Coinbase's volume) already has lower fees but the chain is controlled by binance (its 'stock' is the token BNB valued at 40b currently, possibly a good investment) and has an influx of projects due to low fees and easy ETH-BSC migration. There are some other competitors with active smart chains but less projects and many are waiting on ADA's smart chain in early Q2 as well as on some other competitors that (might) solve that and other problems. ADA (built by an ETH co-founder) specifically solves some of smart contract's current gripes by allowing you to build them in functional languages like Haskell, while being the most decentralized option which might be of interest here.
    - user-the-name 6y ago
      It's been coming "in a year" since 2014.
      - Tenoke 6y ago
        While I don't deny and made sure to include the 'unless it gets delayed' part, they are much further along now. The majority of ETH 2 is live and more and more ETH is locked to it (~12% right now) so the current 2022 estimate is a bit more realistic than past ones (though, of course it can keep being delayed).
TedDoesntTalk 6y ago
> These are insane fees ripe for disruption. No other exchange today has my trust, I don’t care if they compete on fees. When your btc is at real risk of they by an exchange, trust is everything. There is no FDIC insurance for exchanges. Now if Chase were to do BTC exchange at better rates... i would probably switch.
- runako 6y ago
  This is exactly the risk. Once regulators are comfortable that "crypto trading for retail investors" is acceptable as a product, then what stops the big exchanges and brokerages from entering the space and competing the fees down to zero?
- gruez 6y ago
  >There is no FDIC insurance for exchanges. https://support.gemini.com/hc/en-us/articles/205823016-Are-my-funds-insured- https://support.gemini.com/hc/en-us/articles/205823016-Are-m... >U.S. dollars in your Gemini Account are eligible for FDIC insurance, subject to applicable limitations. Please see the FDIC Insurance section of our User Agreement for more information.
  - ImprovedSilence 6y ago
    Thats for the cash in your account, not the cash value if you hold coins and geminis wallet gets hacked. Coinbase has the same level of insurance. Its the same ($200k limit it think?) as cash accounts in traditional banks.
- anonisko 6y ago
  Trust is not just in the form of the institution itself being established and trustworthy, though that's important. It's also whether the institution can effectively do cyber and key security. This is where a non tech first company like Chase would have a lot of trust to build.
ketamine__ 6y ago
Satoshi is dead. It was Hal Finney. The coins aren't moving.
- tim333 6y ago
  Probably not Hal. I agree the coins aren't moving in a hurry. Though I'd like to think they may go to a huge charitable foundation one day.
  - ketamine__ 6y ago
    Why do you assume the creator is alive?
ignoramous 6y ago
> These are insane fees ripe for disruption. To think that coinbase started with a no-fee model: Coinbase will make money more like an exchange down the road, 0.5% to convert money into our out of bitcoin, but once you have your money in bitcoin there are no transaction fees (it mentions this on the homepage, but admittedly it's still a bit confusing)... It would be much easier to just say "no fees" - this is simple and shows a clear benefit of using bitcoin. If you have to explain to people that "sometimes there are fees, but they are a lot lower, etc" it loses some of it's punch. Right now we can do zero fees and transactions still get confirmed. In the future we may be able to do it by eating the cost and have this be a cost of doing business, but that is a decision for later." https://news.ycombinator.com/item?id=4206265 https://news.ycombinator.com/item?id=4206265
- beaner 6y ago
  You're conflating things. When they say "transaction fees" here, they're referring to blockchain network fees (which they previously covered for users, before network congestion), not buy/sell fees, which they have always charged.
  - mr_sturd 6y ago
    Though they used to take no fees from market makers.
    - ericpauley 6y ago
      Yep, the market maker fee was added after the beginning of 2018.
    - beaner 6y ago
      Their primary business has always been the brokerage, not the exchange, which came later. The brokerage has always charged fees for both buys and sells.
PaulWaldman 6y ago
> These are insane fees ripe for disruption. Wouldn't this just cause Coinbase to lower their fees like any ofther commodity? Alternatively, they could also be in the position to offer differentiated services. This seems analogous to any other brokerage services. This will likely play out like when discount brokerages arrived on the personal investment secene. The more I think about it, the more this feels like traditional banking/investing.
justapassenger 6y ago
> 1.14bn in revenue on 193bn in trading volume: thats 60bps on every dollar traded. These are insane fees ripe for disruption. They know really well, that best business during gold rush is to sell shovels.
- missedthecue 6y ago
  Wouldn't that be more applicable to the GPU manufacturers? Coinbase is basically a bank.
  - Cthulhu_ 6y ago
    Those too, but Coinbase will generate pretty constant revenue (depending on trading volume) while GPU manufacturers have the additional expense and risk of R&D, production and distribution. Not to diminish Coinbase's work of course, they're dealing with a ton of international regulation. Their trade is probably more a legal one than a software engineering one.
  - justapassenger 6y ago
    Mining is a small, niche part of crypto craziness. Real action is in trading.
  - cco 6y ago
    "Sell shovels or be the bank that the miner sells their gold to" is a bit wordy, but yes, you're correct.
dehrmann 6y ago
My fear is that there are interesting attacks you can do if you control a lot the miner pool, DDOoS it, hack it, are a government that gets access to it, etc. that would destroy confidence in Bitcoin, and it only becomes a bigger and bigger target. Sure, there are others that have mitigated these concerns, but it's the poster child.

by anonu 6y ago

dabeeeenster 6y ago

I don't quite understand what the risk to coinbase is if Satoshi is alive/identified? Do they think he has a hack or something?!

tristanj 6y ago
Satoshi's wallets have 1.1 million bitcoins, which are worth $56.4 billion at today's price. That would place Satoshi Nakamoto among the 25 wealthiest people on the planet.
- lvs 6y ago
  The question is why that fact alone would affect the value of this company's shares. Just identifying him doesn't mean he'd liquidate.
  - simias 6y ago
    It's still a huge known unknown for Bitcoin. What is Satoshi was linked to a shady organization, or something the general public wouldn't want to support for instance? Imagine if Satoshi turned out to be an avatar for the American, Russian or Chinese government for instance, that would both give them a huge leverage on the blockchain and mean that they'd benefit hugely from widespread adoption of the cryptocurrency. In turn that could motivate other governments to heavily regulate bitcoin as they'd see it as a foreign-controlled currency. That's just fiction, but that's the point, nobody knows for sure who or what Satoshi Nakamoto is, and that's a risk.
    - yissp 6y ago
      It already has a pretty strong association with illegal activity, doesn't it? After speculation I'd wager buying drugs is the most common use-case.
  - jki275 6y ago
    It's not just knowing who he is -- if he's identified he might decide to move those coins. If he did that, it could affect the price. I'm not sure anyone knows what the exact impact of that would be. I don't personally believe Satoshi was an actual person, and don't believe he'll ever be identified. Most likely the keys to those early blocks have been destroyed, and most people wouldn't do that unless there was an institutional reason for it.
  - anonymousab 6y ago
    > Just identifying him doesn't mean he'd liquidate True, but it is not a super unlikely outcome either. Identification alone could also result in a loss of trust in the system of Satoshi turned out to be, say, a government. Could go the opposite way too. It's an unknown that is worth calling out.
  - PragmaticPulp 6y ago
    Risk factors don’t mean “this will definitely happen”. It means this is a known risk for the system underpinning their profits. A more likely scenario is that the keys to those coins are compromised, somehow, given their unbelievably high value.
    - azinman2 6y ago
      I’m surprised someone doesn’t spent 10B in computation to brute force those keys.
      - meetups323 6y ago
        ~50B in the account at current valuation, if Satoshi starts liquidating the value goes down dramatically; if it gets out that it isn't actually Satoshi acting, the value goes down even more (OMG if the creator of bitcoin can get hacked I can get hacked, this is a terrible investment, I'm out). I don't think it'd be possible to recoup the investment, but if you have a strong argument otherwise I'm sure some billionaire/nation-state investors would love to hear it.
      - drexlspivey 6y ago
        You can’t brute force 256 bit keys
- skrebbel 6y ago
  My pet theory is that all those bitcoins are lost forever, just Satoshi performance tuning the miner he'd hacked together with perl one night and letting it run for a few hours. Close terminal, poof, everything gone. Who cares, can mine more later. Bedtime! (disclaimer, I know nothing about bitcoin, there's likely 100 reasons why this makes no technical sense)
  - kristianp 6y ago
    By the time multiple people were mining, the software was mature enough to keep your coins (I suppose this is true anyway).
fidrelity 6y ago
If Satoshi is identified he might also still be alive. This means that Satoshi's BTC (~1mio.) are potentially liquid which would mean a gigantic influx of fresh bitcoins. It's quite plausible that any movement of these old wallets would crash the Bitcoin price for quite a while.
- WanderPanda 6y ago
  In the end 1mio btc is just a days swing, right? Should not change much in the long term
- jcims 6y ago
  This seems strange to me. Relative to the doubling that has recently happened, why would 5% of the total number of bitcoins suddenly moving have any drastic impact on price?
  - bravoetch 6y ago
    It is BTC that has never moved before. It would reveal at least one piece of information about the author of the bitcoin whitepaper - they are alive and engaged. Intent would be unknown, and destabilizing. Many pretenders would claim ownership. It would break a 12 year expectation in the story of Bitcoin.
- XorNot 6y ago
  It's actually a lot worse then that: if anyone gets access to Satoshi's private wallets (i.e. via finding the keys printed out on paper in a personal effects safe or something) then those coins could move. There's no way to absolutely sure that the keys are gone and inaccessible permanently.
  - jcims 6y ago
    I'm a complete n00b so this is coming from a place of ignorance, why is that such a factor in the current price? Someone is sitting on $50B in a $1T market, who cares?
nmca 6y ago
He has many, many BTC and if they move the market will shit the bed.
base698 6y ago
Satoshi's water has billions worth of bitcoins. If they moved and were sold suddenly it could move the price.
jsemrau 6y ago
Marc Andreesen ?
purple_ferret 6y ago
They understand how little inflow actually moves the market. The bigger the market gets, the more likely Satoshi could cripple it.

Tenoke 6y ago

>These are insane fees ripe for disruption. The disruption is already well underway. The only thing that slowed down DEX's eating of a bigger part of the market share is the current high fees on Ethereum.

swiley 6y ago
Is there a plan to deal with the high gas prices?
- Tenoke 6y ago
  Yes, ETH 2.0 is coming in 2022 (unless it gets delayed). There's one proposal for July that might help a little and more transactions are moving to L2 chains (LRC, Matic) where you pay the high fees only on exit/entering the L2 but can do transactions there for cheap. Outside of ETH, BSC (Binance's smart chain, the exchange with 9x Coinbase's volume) already has lower fees but the chain is controlled by binance (its 'stock' is the token BNB valued at 40b currently, possibly a good investment) and has an influx of projects due to low fees and easy ETH-BSC migration. There are some other competitors with active smart chains but less projects and many are waiting on ADA's smart chain in early Q2 as well as on some other competitors that (might) solve that and other problems. ADA (built by an ETH co-founder) specifically solves some of smart contract's current gripes by allowing you to build them in functional languages like Haskell, while being the most decentralized option which might be of interest here.
  - user-the-name 6y ago
    It's been coming "in a year" since 2014.
    - Tenoke 6y ago
      While I don't deny and made sure to include the 'unless it gets delayed' part, they are much further along now. The majority of ETH 2 is live and more and more ETH is locked to it (~12% right now) so the current 2022 estimate is a bit more realistic than past ones (though, of course it can keep being delayed).

TedDoesntTalk 6y ago

> These are insane fees ripe for disruption. No other exchange today has my trust, I don’t care if they compete on fees. When your btc is at real risk of they by an exchange, trust is everything. There is no FDIC insurance for exchanges. Now if Chase were to do BTC exchange at better rates... i would probably switch.

runako 6y ago
This is exactly the risk. Once regulators are comfortable that "crypto trading for retail investors" is acceptable as a product, then what stops the big exchanges and brokerages from entering the space and competing the fees down to zero?
gruez 6y ago
>There is no FDIC insurance for exchanges. https://support.gemini.com/hc/en-us/articles/205823016-Are-my-funds-insured- https://support.gemini.com/hc/en-us/articles/205823016-Are-m... >U.S. dollars in your Gemini Account are eligible for FDIC insurance, subject to applicable limitations. Please see the FDIC Insurance section of our User Agreement for more information.
- ImprovedSilence 6y ago
  Thats for the cash in your account, not the cash value if you hold coins and geminis wallet gets hacked. Coinbase has the same level of insurance. Its the same ($200k limit it think?) as cash accounts in traditional banks.
anonisko 6y ago
Trust is not just in the form of the institution itself being established and trustworthy, though that's important. It's also whether the institution can effectively do cyber and key security. This is where a non tech first company like Chase would have a lot of trust to build.

ketamine__ 6y ago

Satoshi is dead. It was Hal Finney. The coins aren't moving.

tim333 6y ago
Probably not Hal. I agree the coins aren't moving in a hurry. Though I'd like to think they may go to a huge charitable foundation one day.
- ketamine__ 6y ago
  Why do you assume the creator is alive?

ignoramous 6y ago

> These are insane fees ripe for disruption. To think that coinbase started with a no-fee model: Coinbase will make money more like an exchange down the road, 0.5% to convert money into our out of bitcoin, but once you have your money in bitcoin there are no transaction fees (it mentions this on the homepage, but admittedly it's still a bit confusing)... It would be much easier to just say "no fees" - this is simple and shows a clear benefit of using bitcoin. If you have to explain to people that "sometimes there are fees, but they are a lot lower, etc" it loses some of it's punch. Right now we can do zero fees and transactions still get confirmed. In the future we may be able to do it by eating the cost and have this be a cost of doing business, but that is a decision for later." https://news.ycombinator.com/item?id=4206265 https://news.ycombinator.com/item?id=4206265

beaner 6y ago
You're conflating things. When they say "transaction fees" here, they're referring to blockchain network fees (which they previously covered for users, before network congestion), not buy/sell fees, which they have always charged.
- mr_sturd 6y ago
  Though they used to take no fees from market makers.
  - ericpauley 6y ago
    Yep, the market maker fee was added after the beginning of 2018.
  - beaner 6y ago
    Their primary business has always been the brokerage, not the exchange, which came later. The brokerage has always charged fees for both buys and sells.

PaulWaldman 6y ago

> These are insane fees ripe for disruption. Wouldn't this just cause Coinbase to lower their fees like any ofther commodity? Alternatively, they could also be in the position to offer differentiated services. This seems analogous to any other brokerage services. This will likely play out like when discount brokerages arrived on the personal investment secene. The more I think about it, the more this feels like traditional banking/investing.

justapassenger 6y ago

> 1.14bn in revenue on 193bn in trading volume: thats 60bps on every dollar traded. These are insane fees ripe for disruption. They know really well, that best business during gold rush is to sell shovels.

missedthecue 6y ago
Wouldn't that be more applicable to the GPU manufacturers? Coinbase is basically a bank.
- Cthulhu_ 6y ago
  Those too, but Coinbase will generate pretty constant revenue (depending on trading volume) while GPU manufacturers have the additional expense and risk of R&D, production and distribution. Not to diminish Coinbase's work of course, they're dealing with a ton of international regulation. Their trade is probably more a legal one than a software engineering one.
- justapassenger 6y ago
  Mining is a small, niche part of crypto craziness. Real action is in trading.
- cco 6y ago
  "Sell shovels or be the bank that the miner sells their gold to" is a bit wordy, but yes, you're correct.

dehrmann 6y ago

My fear is that there are interesting attacks you can do if you control a lot the miner pool, DDOoS it, hack it, are a government that gets access to it, etc. that would destroy confidence in Bitcoin, and it only becomes a bigger and bigger target. Sure, there are others that have mitigated these concerns, but it's the poster child.