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Interesting bit of context (with some loose assumptions): one of the early investors put $300k into this and got to $2 billion recently at the IPO. Not sure whe

Interesting bit of context (with some loose assumptions): one of the early investors put $300k into this and got to $2 billion recently at the IPO. Not sure when he invested, but suppose we assume 2012. The price was about $2 to $10 in that year. That'd have put the equivalent investment at $1.8 to $9 billion in bitcoin. Not sure what would've been the riskier bet. Coinbase of course could have pivoted away from Bitcoin if it didn't work out. But there are plenty of scenarios where Bitcoin succeeded, but this startup didn't. Pretty interesting that Coinbase wasn't an any more interesting investment than Bitcoin at the very start, and that while Coinbase was private, hard to invest in, and illiquid if you held it, Bitcoin was open to all to make the same bet. --- Also find it interesting that the real bet that Brian made here in his post, on building a product to undercut CC fees, didn't really materialize. Coinbase invested heavily into this, building out a marketplace for merchants for payment processing. But virtually all money is being made on being a broker for people speculating on Bitcoin as if they're buying gold, with no significant intent to use bitcoin. And payment processing is still 99.99% non-crypto, with crypto-based payment processing still being slower, costlier and less trusty. If you got me in 2012 in a time-machine to 2021 to only take a peek at the current virtually-zero level of actual use of Bitcoin, and the abundant alternative non-crypto digital banking/financial products available, and asked me to invest in Bitcoin or Coinbase... I'd have said no. (I was optimistic, so I did invest back then). I wouldn't have predicted the current price levels even with information of today.

spurdoman77 6y ago
The bitcoin blockchain is full of transactions, and lots are probably being made offchain on Lightning Network or on centralized services. Your claim is that all these transactions are for speculation only (which is quite common claim). On what data do you base your claim?
blueblisters 6y ago
> But virtually all money is being made on being a broker for people speculating on Bitcoin as if they're buying gold, with no significant intent to use bitcoin. And there is a ton of other exchanges that are both user-friendly for regular people who are looking to buy Bitcoin (Cash App) and trader-friendly for people looking to trade bitcoin (Kraken/Binance). Most serious Bitcoin enthusiasts don't prefer Coinbase over the alternatives, so I'm not sure what Coinbase's real moat is? How is it able to charge higher fees than most other crypto exchanges?
- thathndude 6y ago
  Great point. Hard to have a moat when your commodity is open by design/nature.
  - SideburnsOfDoom 6y ago
    GitHub managed it, so. Centralisation has benefits.
- exdsq 6y ago
  I think it mostly boils down to a trusted brand and good UX. alternatives are pretty crap atm.
  - qeternity 6y ago
    Fiat onramps. Americans cannot access most of the other crypto venues because they are rampant money laundering machines. Coinbase is one that at least plays by some of the US KYC/AML.
    - CryptoPunk 6y ago
      There is no compelling evidence they are 'rampant money laundering machines'. Even to prove money laundering happened, you have to prove a crime happened that generated illicit revenue that was then laundered, in which case prosecuting for the AML violation would be redundant, as the offender could be successfully prosecuted on the root crime. This is why AML laws make much more than money laundering illegal, why in the vast majority of cases of AML law violation, no money laundering was proven to have taken place, and why none of the analyses on the volume of money laundering use this burden of proof when formulating their estimates on the scale of the phenomenon. What you could say is that other venues are less compliant with warrantless surveillance requirements of US financial crime regulators. That is the phenomenon that is actually provably rampant in non-US-regulated crypto exchanges.
      - qeternity 5y ago
exdsq 6y ago
It’s a good question - if you were willing to bet on coinbase, would you have bet on Bitcoin too or instead? I guess coinbase covered many coins so there’s some backup there. However it’s also a lot more liquid than a seed/series A!
dkrich 6y ago
We are in a speculative mania right now across all markets and I’ve believed for several months that the renewed popularity of Bitcoin is just an offshoot of that speculation. The appetite to buy any old thing is extreme.
- hiq 6y ago
  I've been wondering about that a lot. The last big crisis was 2007 / 2008[0]. Bitcoin had an initial release in 2009 according to Wikipedia, and has performed well in a bull market. I'm almost morbidly curious to see what will happen when the next crisis hits.
  - dkrich 6y ago
    It seems like markets are always cyclical. After the dot com crash nobody would touch a stock that didn’t have profits. Now 20 years later people shit on those who only buy “value” stocks as old and out of touch and insist that we’re in a new world where valuations don’t matter. The hard part isn’t predicting a crash it’s trying time when it will happen.
    - llaolleh 6y ago
      This. If you look at the financials of all companies listing their stock almost all of them have really bad financials.
      - ignoramous 6y ago
        Curious what you mean by bad financials? Coinbase, IIRC, is on track to do more than a $1B in profits for the year ending 2022 with a user base of 50M which is likely to grow even more as crypto breaks into larger markets since the interest in it has only been growing. Of course, the usual caveats apply, but the crypto economy is getting too big too fast for it to disappear overnight.
        dkrich 6y ago
tim333 6y ago
>one of the early investors put $300k into this and got to $2 billion recently at the IPO For those interested, Garry Tan, tells the story here https://youtu.be/x5YApjnTG10 https://youtu.be/x5YApjnTG10
erwan 6y ago
>But virtually all money is being made on being a broker for people speculating on Bitcoin as if they're buying gold, with no significant intent to use bitcoin. You have to wrap your head around the idea that the main way to use a store-of-value is simply by holding it. Holding is using!
- CPLX 6y ago
  This of course has the unstated premise that Bitcoin is the best option for a store of value, or even a good or acceptable option for that. It's really just not. It's wildly unstable and still far more complicated than putting the money in really any other kind of financial instrument. The thing that it is absolutely amazing for is speculation. Which means you're basically correct in a sense: speculating is using. The problem is that the use case of speculation is completely different than the use case of storing value. In face they are fundamentally in tension. So if the speculation use case disappears the store of value use case will not suddenly replace it. A scenario where bitcoin is no longer useful as a speculative instrument would destroy any possible utility it has as a store of value as well, since a store of value needs to, you know, actually keep the value stored rather than collapse in price.
  - Tenoke 6y ago
    >It's wildly unstable and still far more complicated than putting the money in really any other kind of financial instrument. That's simply not true. Where I am (Germany) - it's way simpler to buy Bitcoin than stocks, let alone something more exotic especially if you want to invest a small sum. Tax implications and fees are also currently easier to work out (at smaller sums). It's been the same in other countries I've lived (e.g. UK) for over 5 years.
  - dnautics 6y ago
    Bitcoin isn't the best store f value, it just has to be a orthogonal store of value to dollars, euros, yuan, stocks, etc, which share the same systemic risk. It's just the most liquid thing in that category (vs real estate, gold) and people are willing to mess around, because TINA.
  - 6y ago
deleted 6y ago
[deleted]
Geee 6y ago
"Virtually zero-level of actual usage" isn't true. Bitcoin has evolved into a store of value and settlement layer, and the majority of payment transactions happen on layer 2, with both centralized and decentralized solutions. This is something that wasn't predicted early on, but it's untrue that there aren't transactions which use bitcoin as a source of value. There are a lot, but there aren't any published numbers yet.
- Empact 6y ago
  Fyi, it was predicted very early on. The first reply to Satoshi’s announcement email to the cypherpunks mailing list criticized the idea as unscalable. Satoshi implemented an early version of payment channels in Bitcoin Core around version 0.1. https://en.bitcoin.it/wiki/Payment_channels https://en.bitcoin.it/wiki/Payment_channels Finally, some $49B was transacted yesterday on Bitcoin. Whether billions is virtually zero is a matter of interpretation. https://bitinfocharts.com/bitcoin/ https://bitinfocharts.com/bitcoin/
  - quickthrowman 6y ago
    > Finally, some $49B was transacted yesterday on Bitcoin. Whether billions is virtually zero is a matter of interpretation. There were $2.6T of US treasuries traded last week (approx $520B/day) and average US equity volume is $200B+/day. $49B a day isn’t all that much in comparison.
    - Sammi 6y ago
      So you're saying we're still early?
lpolovets 6y ago
A few random thoughts on investing in Bitcoin vs Coinbase: - The risk of losing your BTC would've been high if you used something like Mt Gox, or maybe you wouldn't have made the purchase because you didn't trust the purchasing channels. - My guess is investing $300k back then would've raised the market price quite a bit before you finished your purchase, but I'm just speculating. - Investing in the company gives you a little more agency. E.g. if you have a great idea, you can help the company become 1.5x or 10x more valuable. Investing in BTC is very passive. This is not worse or better, but a personal preference. - I bet Coinbase contributed to Bitcoin's success by providing an easy onramp. If Bitcoin were 1 or 3 years behind where it is today because of mass adoption starting later, then $300k invested in Bitcoin in 2012 would be worth much less.

spurdoman77 6y ago

The bitcoin blockchain is full of transactions, and lots are probably being made offchain on Lightning Network or on centralized services. Your claim is that all these transactions are for speculation only (which is quite common claim). On what data do you base your claim?

blueblisters 6y ago

> But virtually all money is being made on being a broker for people speculating on Bitcoin as if they're buying gold, with no significant intent to use bitcoin. And there is a ton of other exchanges that are both user-friendly for regular people who are looking to buy Bitcoin (Cash App) and trader-friendly for people looking to trade bitcoin (Kraken/Binance). Most serious Bitcoin enthusiasts don't prefer Coinbase over the alternatives, so I'm not sure what Coinbase's real moat is? How is it able to charge higher fees than most other crypto exchanges?

thathndude 6y ago
Great point. Hard to have a moat when your commodity is open by design/nature.
- SideburnsOfDoom 6y ago
  GitHub managed it, so. Centralisation has benefits.
exdsq 6y ago
I think it mostly boils down to a trusted brand and good UX. alternatives are pretty crap atm.
- qeternity 6y ago
  Fiat onramps. Americans cannot access most of the other crypto venues because they are rampant money laundering machines. Coinbase is one that at least plays by some of the US KYC/AML.
  - CryptoPunk 6y ago
    There is no compelling evidence they are 'rampant money laundering machines'. Even to prove money laundering happened, you have to prove a crime happened that generated illicit revenue that was then laundered, in which case prosecuting for the AML violation would be redundant, as the offender could be successfully prosecuted on the root crime. This is why AML laws make much more than money laundering illegal, why in the vast majority of cases of AML law violation, no money laundering was proven to have taken place, and why none of the analyses on the volume of money laundering use this burden of proof when formulating their estimates on the scale of the phenomenon. What you could say is that other venues are less compliant with warrantless surveillance requirements of US financial crime regulators. That is the phenomenon that is actually provably rampant in non-US-regulated crypto exchanges.
    - qeternity 5y ago

exdsq 6y ago

It’s a good question - if you were willing to bet on coinbase, would you have bet on Bitcoin too or instead? I guess coinbase covered many coins so there’s some backup there. However it’s also a lot more liquid than a seed/series A!

dkrich 6y ago

We are in a speculative mania right now across all markets and I’ve believed for several months that the renewed popularity of Bitcoin is just an offshoot of that speculation. The appetite to buy any old thing is extreme.

hiq 6y ago
I've been wondering about that a lot. The last big crisis was 2007 / 2008[0]. Bitcoin had an initial release in 2009 according to Wikipedia, and has performed well in a bull market. I'm almost morbidly curious to see what will happen when the next crisis hits.
- dkrich 6y ago
  It seems like markets are always cyclical. After the dot com crash nobody would touch a stock that didn’t have profits. Now 20 years later people shit on those who only buy “value” stocks as old and out of touch and insist that we’re in a new world where valuations don’t matter. The hard part isn’t predicting a crash it’s trying time when it will happen.
  - llaolleh 6y ago
    This. If you look at the financials of all companies listing their stock almost all of them have really bad financials.
    - ignoramous 6y ago
      Curious what you mean by bad financials? Coinbase, IIRC, is on track to do more than a $1B in profits for the year ending 2022 with a user base of 50M which is likely to grow even more as crypto breaks into larger markets since the interest in it has only been growing. Of course, the usual caveats apply, but the crypto economy is getting too big too fast for it to disappear overnight.
      - dkrich 6y ago

tim333 6y ago

>one of the early investors put $300k into this and got to $2 billion recently at the IPO For those interested, Garry Tan, tells the story here https://youtu.be/x5YApjnTG10 https://youtu.be/x5YApjnTG10

erwan 6y ago

>But virtually all money is being made on being a broker for people speculating on Bitcoin as if they're buying gold, with no significant intent to use bitcoin. You have to wrap your head around the idea that the main way to use a store-of-value is simply by holding it. Holding is using!

CPLX 6y ago
This of course has the unstated premise that Bitcoin is the best option for a store of value, or even a good or acceptable option for that. It's really just not. It's wildly unstable and still far more complicated than putting the money in really any other kind of financial instrument. The thing that it is absolutely amazing for is speculation. Which means you're basically correct in a sense: speculating is using. The problem is that the use case of speculation is completely different than the use case of storing value. In face they are fundamentally in tension. So if the speculation use case disappears the store of value use case will not suddenly replace it. A scenario where bitcoin is no longer useful as a speculative instrument would destroy any possible utility it has as a store of value as well, since a store of value needs to, you know, actually keep the value stored rather than collapse in price.
- Tenoke 6y ago
  >It's wildly unstable and still far more complicated than putting the money in really any other kind of financial instrument. That's simply not true. Where I am (Germany) - it's way simpler to buy Bitcoin than stocks, let alone something more exotic especially if you want to invest a small sum. Tax implications and fees are also currently easier to work out (at smaller sums). It's been the same in other countries I've lived (e.g. UK) for over 5 years.
- dnautics 6y ago
  Bitcoin isn't the best store f value, it just has to be a orthogonal store of value to dollars, euros, yuan, stocks, etc, which share the same systemic risk. It's just the most liquid thing in that category (vs real estate, gold) and people are willing to mess around, because TINA.
- 6y ago

deleted 6y ago

[deleted]

Geee 6y ago

"Virtually zero-level of actual usage" isn't true. Bitcoin has evolved into a store of value and settlement layer, and the majority of payment transactions happen on layer 2, with both centralized and decentralized solutions. This is something that wasn't predicted early on, but it's untrue that there aren't transactions which use bitcoin as a source of value. There are a lot, but there aren't any published numbers yet.

Empact 6y ago
Fyi, it was predicted very early on. The first reply to Satoshi’s announcement email to the cypherpunks mailing list criticized the idea as unscalable. Satoshi implemented an early version of payment channels in Bitcoin Core around version 0.1. https://en.bitcoin.it/wiki/Payment_channels https://en.bitcoin.it/wiki/Payment_channels Finally, some $49B was transacted yesterday on Bitcoin. Whether billions is virtually zero is a matter of interpretation. https://bitinfocharts.com/bitcoin/ https://bitinfocharts.com/bitcoin/
- quickthrowman 6y ago
  > Finally, some $49B was transacted yesterday on Bitcoin. Whether billions is virtually zero is a matter of interpretation. There were $2.6T of US treasuries traded last week (approx $520B/day) and average US equity volume is $200B+/day. $49B a day isn’t all that much in comparison.
  - Sammi 6y ago
    So you're saying we're still early?

lpolovets 6y ago

A few random thoughts on investing in Bitcoin vs Coinbase: - The risk of losing your BTC would've been high if you used something like Mt Gox, or maybe you wouldn't have made the purchase because you didn't trust the purchasing channels. - My guess is investing $300k back then would've raised the market price quite a bit before you finished your purchase, but I'm just speculating. - Investing in the company gives you a little more agency. E.g. if you have a great idea, you can help the company become 1.5x or 10x more valuable. Investing in BTC is very passive. This is not worse or better, but a personal preference. - I bet Coinbase contributed to Bitcoin's success by providing an easy onramp. If Bitcoin were 1 or 3 years behind where it is today because of mass adoption starting later, then $300k invested in Bitcoin in 2012 would be worth much less.