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Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, did 1.2bn in revenue last quarter with

Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, did 1.2bn in revenue last quarter with 680m net income. Then you have coinbase now trimmming to about the same number 3500, 590m revenue and a net income loss of 550m. That's right, as far as I can see, Coinbase loses $1 for every $1 of revenue. Firstly, I don't see how Coinbase needs as many people as CME. They're meant to be a disruptive start up they should be lean. Secondly, how the hell do they get those unit economics to work? It should be a trivial job, right. People pay you to trade, so how are they losing so much money!? Well, I guess hiring 4,500 people... I think the idea at this point that Coinbase can get their cost structure down to reasonable numbers making them profitable at lower revenue levels is challenging. It's very hard to put that genie back in the bottle.

rvnx 4y ago
About profit, in their SEC fillings, seems like their long position in BTC isn't going well...
jesuscript 4y ago
My best guess is that raising funding helps raise the valuation, especially as they approach IPO. So raise money for the sake of raising the valuation. You don’t really need the money, but you got it. What are you going to do with it to appease the investors? Well you gotta act like you are doing something with it, especially something that shows growth. Hire more. Hire more because we imagine more. Keep imagining until imagining doesn’t work anymore. Then fire, and say sorry. Hopefully you sold enough equity at the ridiculous ipo price. Sorry, but not sorry.
- bfeynman 4y ago
  classic vc growth story, almost a fairy tale.
- rvz 4y ago
  This is no different to other tech companies and startups that have over hired during the low interest hype and have aggressively raised money. It is essentially the VC hype cycle and are meant to dump their holdings on retail once the stock is publicly listed. We're all just see how tech startups and other companies are getting slaughtered over market conditions and NOW need to cut costs, spend less, hire less and turn a profit rather than continued losses. The era of "Lose money for decades just like Amazon did and so can we" is over.
  - eru 4y ago
    > [...] that have over hired during the low interest hype [...] Well, in a sense that's exactly what low interest rates were supposed to accomplish: get people in the economy to spend.
  - forthefuture 4y ago
    Amazon was founded in 1994 and turned their first profit in 2001. A better example would be Uber, which ran negative until they had less than one year of runway remaining and then were somehow allowed to scam pedestrians into keeping their unprofitable taxi business solvent.
    - szpght 4y ago
      what do you mean by scam pedestrians?
      - forthefuture 4y ago
        Uber lost all of the money all of the original investors gave them, and sold that bag of dog shit to the public. Everyone who bought the IPO lost money.
- _fat_santa 4y ago
  I interviewed with them last year and while I didn't get the job, looking back now I'm kind of thankful it turned out how it did. From my limited perspective interviewing there, it seems like they started branching out into all things crypto. One manager I interviewed with explained that they wanted to become the "Amazon of Crypto" where any service related to crypto such as wallets, NFT's, etc are all on Coinbase. It was clear back then to me that Coinbase wanted to dethrone both Metamask as the wallet of choice and OpenSea as the NFT marketplace of choice. You hire a ton of people for these projects but end up letting them all go when they realized those projects weren't going to pan out.
  - Alex3917 4y ago
    > You hire a ton of people for these projects but end up letting them all go when they realized those projects weren't going to pan out. Which is weird, because they're not especially difficult projects. OpenSea was built by like five people.
    - cmsj 4y ago
      Presumably the difference is that those 5 people really wanted to build OpenSea, where Coinbase staff were just assigned to projects.
    - robswc 4y ago
      I agree with your sentiment and I think you would agree with this, just wanted to get it out there. I've seen teams of 10-15 people that do absolutely nothing. Have 10 meetings about specs but space them out over a year, so that by the time the next meeting happens, everyone forgets the entire context of the project... so you have to cover everything again. By the end of year, its gone absolutely no where due to 2-3 layers of bureaucracy. Coinbase _can_ hire good talent... wonder if managing it is the/a problem.
      - vgatherps 4y ago
        > Coinbase _can_ hire good talent... wonder if managing it is the/a problem. I've worked at a company where at an individual level people were quite talented, moreso than competitors who did better than them .... but getting anything done required Y different meetings with X different teams, satisfying N different gatekeepers who just want to push their own product on you, avoid stepping on the toes of persons X,Y,Z, etc etc. Company multiplied in size a few times over the course of a few years and had just no idea how to handle it.
- spaceman_2020 4y ago
  I think everyone was completely caught off-guard by the ferocity and pace of the crypto drawdown. Volumes have atrophied completely. It's not a cooling of retail interest vis-a-vis the stock market, but complete apathy and/or hatred. See the volume data for OpenSea as an example.
  - kingkawn 4y ago
    Absolutely nobody paying even a drop of honest attention was surprised by any part of the crypto drawdown
    - roflc0ptic 4y ago
      This is silly hyperbole. I was paying honest attention to crypto and I was continually surprised that it didn’t crash. Eventually I gave up and stopped guessing it was going to crash. Then it did :shrug:
      - spaceman_2020 4y ago
        Bitcoin has dropped about the same amount as Netflix, Meta and Tesla (~70-74%) It has significantly outperformed VC darlings like Peloton (-93%) and WeWork (-90%). You can't tell me that WeWork stock wasn't working on the greater fool theory any more than Bitcoin's price works on finding more bagholders. It's all a grift, some worse than others.
        ycombobreaker 4y ago
        Peloton in particular was a beneficiary of the pandemic and lockdowns. With no ill will, I'm content to see their stock price drop if it is correlated with an improvement in the general state of the world. It's absolutely not informative to compare their returns to various crypto.
        dilyevsky 4y ago
        Peloton got massively mismanaged by its ceo.
- deleted 4y ago
  [deleted]
rco8786 4y ago
> They're meant to be a disruptive start up they should be lean. When has this ever been a thing? They raised tons of money in huge valuations and used it to hire a boatload of people. Tale as old as time. Agree with the rest of your post though, it’s unclear what their endgame was/is to get into the black.
- usrusr 4y ago
  And it all makes a certain kind of sense, in a twisted way, when you realize that they owe it to the investors that they spend what they raised. Investors don't give money to pave a seemingly infinite runway, they give money because they want to see that money put to work. An army of employees enthusiastically throwing unrelated stuff at random walls would be one of the least bad possible outcomes, because an army of focused inefficiency is so much worse, so much more likely and so much harder to recover from. Occasionally someone seems to notice and try correcing course, by burning off excess funding through the emergency vent of a ridiculously lavish ad campaign. Remember that time when almost everyone made fun of those Peloton ad interiors?
davidgerard 4y ago
> They're meant to be a disruptive start up they have IPOed and insiders continue to exit as fast as possible
college_physics 4y ago
Is there something in market-making technology (or otherwise) that sets them apart from any other modern exchange? Could they pivot into trading pork bellies (or tokens thereof)?
- bfeynman 4y ago
  exchanges have been around for almost a century now, so coinbase actually has a huge disadvantage in that they have no institutional stickiness or users, exchanges are built on trust and I would not want my money being routed through them if I was a client.
  - college_physics 4y ago
    old exchanges do have their own challenges [0]. I don't know if their dealing in crypto gave them any particular insights into how the broader set of technologies could enhance market-making. there is at least one major busted stock exchange blockchain project that suggests this is not trivial [1]. just scrapping the bottom of the barrel here :-), hoping that as this crypto-decade draws to a close, it was not a complete waste of time for all these people and a major distraction from more meaningful pursuits in digital technology. even if one does not participate, these pervasive hypes, whether crypto, AI don't leave anybody unaffected... [0] https://www.theguardian.com/business/2022/jun/06/london-metal-exchange-sued-cancelled-trades-elliott-management https://www.theguardian.com/business/2022/jun/06/london-meta... [1] https://www.ibtimes.com/australian-stock-exchanges-blockchain-failure-burns-market-trust-3648985 https://www.ibtimes.com/australian-stock-exchanges-blockchai...
  - badestrand 4y ago
    Just curious, which kind of exchanges do you mean that are 100 years young? The first stock exchange came to be >400 years ago and I guess there are currency or other exchanges that were there before. (Sorry if I just seem to want to point out a mistake - your first sentence just sounds so specific that it just got me interested in what you mean.)
    - 4y ago
totetsu 4y ago
If any startups want to put me on payroll just to increase their headcount for the purpose of raising more funding I'll happily take the money.
- owenmarshall 4y ago
  You missed the boat on that by a year. What we should all be asking ourselves is “am I on payroll at my current job to act as ballast?”
  - mclightning 4y ago
    What does it mean to act as a ballast? What are some signs? Is there a general terminology for this? Are you talking about "meat-shield headcounts"
    - teratron27 4y ago
      Do you work in a cost centre or a profit centre for the business?
    - red-iron-pine 4y ago
      Yes
  - totetsu 4y ago
    I caught that boat and and was pumped overboard. But I think I was bilge water more than ballast.
- marcinzm 4y ago
  You mean you'll take the risk of having 50% of your comp be near worthless versus getting more liquid comp from an existing public company?
- Nextgrid 4y ago
  Problem is that you'll have to support and maintain a brittle, over-engineered mess and then find creative ways to further over-engineer otherwise-simple solutions to create busywork for yourself and others.
dwighttk 4y ago
>Coinbase loses $1 for every $1 of revenue. Huh, I would call that ~$2 lost for every $1 of revenue.
- robertlagrant 4y ago
  Yes.
- jsnell 4y ago
  They spend $2 for every $1 of revenue. That means they lose $1 for every $1 of revenue.
  - bart_spoon 4y ago
    Spend is loss. If they lost $1 for every $1 of revenue, they’d be breaking even. But they aren’t. They‘d have to double their revenue just to break even. So yes, they lose $2 for every $1 earned.
    - x-complexity 4y ago
      > Spend is loss. Incorrect from a definition perspective: spend = expenditure loss = revenue - expenditure, where expenditure > revenue If I spent $10 to make & market a fancy x-mas box, but only sold it for $5, I didn't lose $10. I lost $5 ($5 - $10 = -$5). To get to a net income loss of $550 mil from a revenue of $590 mil: Net income = Revenue - expenditure -550 mil = 590 mil - expenditure expenditure = 590 mil + 550 mil = 1.14 bil The initial ratio from jsnell is correct: They spent $2 to bring in $1. They lost $1 to expenses to bring in $1.
ptero 4y ago
There was a lot of hype and an expectation (IMO wishful thinking) that NFTs would have a very broad penetration in the society, for example replace physical collectibles. If that did turn out to be true, most people would require a lot of handholding for taxes, complex global regulation, etc. which the Coinbase would provide, as well as collecting the exchange fees. Under this premise it is reasonable to hire up to build this framework if the investors are willing to foot the bill during the discovery phase. I am not saying this is prudent, just that it is a consistent story that they sold. This is not unique to crypto: biotech startups are raising billions a pop in a Series B (not a joke) promising to use generative AI to find miracle drugs.
- krisoft 4y ago
  > for example replace physical collectibles But that is crazy. It is not that hard to understand the collectibles business is emotion based. You tickle the soul of the customers just the right way so they want to own a hoard of your crap. Then you create an artificial scarcity to profit from, and a thin veneer of "but-it-is-not-a-waste-of-money-because-i-can-sell-it-later" feeling to make your customers not instantly regret the transaction. I understand that an NFT might do some of it, but to replace all the physical collectibles? Are rich businessman going to parade around wearing NFTs on their wrists? Crazy. :D
  - ptero 4y ago
    I am not arguing with this, just pointing a narrative I heard many times from otherwise sane people. While I had to work hard not to roll my eyes, the story must have enough converts to pull in some serious money.
    - krisoft 4y ago
      Oh sure! I believe you 100%. I should have been clearer: I'm disagreeing with people you are describing, not with your description of people of such belief.
  - humanizersequel 4y ago
jasode 4y ago
>Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, [...] Firstly, I don't see how Coinbase needs as many people as CME. Coinbase isn't a direct comparable to CME because CME only does the exchange function. Coinbase combines several different types of financial institutions in the crypto space: + exchange : order matching engine of buy & sell -- analogous to NYSE/NASDAQ/CME + broker : custodian of customers' margin accounts -- like Schwab, Vanguard, Fidelity, etc + bank : digital wallet and loans with customers' crypto as collateral -- like JP Morgan, Bank of America + ecommerce payments : analogous to PayPal/VISA/MC Even though CME deals with trading corn commodities, it is not a bank for people to use corn as collateral. Therefore a corn farmer can't go to the CME and get a loan and pay it back when he sells his crop harvest. Regardless of all the various financial areas they're in, Coinbase got overstaffed (like many other tech companies overhired) and so they're making aggressive cuts.
- vgatherps 4y ago
  On the other hand, the regulatory requirements on CME are FAR greater and the requirements on their exchange technology are drastically greater as well. CME also has to build risk and margining technology since its customers are generally managing complex derivatives portfolios and CME has to understand what risk those portfolios have under all sorts of tail market events.
- tptacek 4y ago
  CME isn't just "corn commodities"; they're CME, CBOT, NYMEX and COMEX, and they're a clearinghouse, they operate an electronic trading system, they're a colo provider, and a minter of new derivative products like S&P futures and SOFR. I'm sure I'm missing a bunch of other things. They probably have much more code than Coinbase. It's not all code you'd want to work on, but, from passing experience, there is a lot of it.
  - jasode 4y ago
    >CME isn't just "corn commodities"; Yes, I understand that and I wasn't dismissing CME as a simple platform. I used to work across the street from the CME and saw the traders walking around in their yellow jackets every day. The "corn" was only one example to tie it to a bank services scenario. >, and a minter of new derivative products like S&P futures I think Coinbase recently offered something similar: https://www.google.com/search?q=Coinbase+launches+Derivatives+Futures+Products https://www.google.com/search?q=Coinbase+launches+Derivative... Somehow, the wordsmithing in my comment got misconstrued as being dismissive of CME as being too simple and praising Coinbase as being complex.
cm2187 4y ago
Do you mean CME as the Chicago Mercantile Exchange? That's an exchange that deals with 10s of thousands of securities and derivatives, coinbase only deals with a handful of coins. On the other hand coinbase is also broker, which operates not just in the US but in dozens of countries, with KYC on every customer, lots of different regulators, etc. Not that much comparable I would think.
ThrowawayTestr 4y ago
What do all those people even do?
kenniskrag 4y ago
Why should a company make a profit? It's all about managing cash flows.
LatteLazy 4y ago
FYI, CME outsources 101 functions, from technical connections to account management to custody and settlements that Coinbase (has to) do itself.
wolongong942 4y ago
The AML stuff is expensive even for the investment industry which unlike crypto, isn't perfectly catered to hackers, scammers and money launderers. I'm guessing AML and support is big a cost area for COIN. This is just speculation as i don't have time to read their public papers. Take a look at the Coinbase Subreddit to see how many suckers are getting hacked, scammed, locked out for AML reasons on any given day and getting their lawyers to write legal threats to Coinbase. Responding to this all costs money and it's where the Binance model of avoiding AML responsibilities and hiring outside US is superior (until it isn't, when execs end up in a US prison).
- from 4y ago
  Support/compliance officers do not need to be American even for American banks as far as I can tel. Based on a cursory glance at some identity verification companies I don’t think they’re paying more than $1 per selfie and document verification. Chainalysis is probably where things get expensive (probably high 7 figures a year) + I think the government just recently forced them to buy some new compliance tools as part of a settlement. But yes, the Binance model and allowing countries seen as risky does allow them to get substantially more volume.
dcolkitt 4y ago
Two issues here with the comparison. First Coinbase isn't just an exchange in the sense that the CME is an exchange. Coinbase is an exchange, a clearinghouse, a custodian, a broker dealer, a prime brokerage, and a user platform. When you want to trade on CME, you don't just go to CME dot com, open an account with them, and have them hold your money. There's layers of other service providers, with CME itself basically being a B2B platform that also offloads much of the banking and custody to other institutions. Second, Coinbase has ambitions beyond just being an exchange and that's driven a lot of hires. It runs Coinbase Ventures, Coinbase Cloud, an NFT platform, develops tooling (e.g. Coinbase Wallet), and contributes to crypto protocols. A lot of the recent hiring was driven by these "other bets".
makestuff 4y ago
CME group also pays less. They aren't paying 400k for engineers.
rattlesnakedave 4y ago
> Firstly, I don't see how Coinbase needs as many people as CME. For one, they do much more than CME.
deleted 4y ago
[deleted]
tempsy 4y ago
how is CME a good comparison? they aren’t a retail consumer facing company a company like Coinbase needs hundreds if not thousands of support staff like a retail bank would that scales with the total active customer base. the total number of employees doesn’t tell you how many are in a support function.

rvnx 4y ago

About profit, in their SEC fillings, seems like their long position in BTC isn't going well...

jesuscript 4y ago

My best guess is that raising funding helps raise the valuation, especially as they approach IPO. So raise money for the sake of raising the valuation. You don’t really need the money, but you got it. What are you going to do with it to appease the investors? Well you gotta act like you are doing something with it, especially something that shows growth. Hire more. Hire more because we imagine more. Keep imagining until imagining doesn’t work anymore. Then fire, and say sorry. Hopefully you sold enough equity at the ridiculous ipo price. Sorry, but not sorry.

bfeynman 4y ago
classic vc growth story, almost a fairy tale.
rvz 4y ago
This is no different to other tech companies and startups that have over hired during the low interest hype and have aggressively raised money. It is essentially the VC hype cycle and are meant to dump their holdings on retail once the stock is publicly listed. We're all just see how tech startups and other companies are getting slaughtered over market conditions and NOW need to cut costs, spend less, hire less and turn a profit rather than continued losses. The era of "Lose money for decades just like Amazon did and so can we" is over.
- eru 4y ago
  > [...] that have over hired during the low interest hype [...] Well, in a sense that's exactly what low interest rates were supposed to accomplish: get people in the economy to spend.
- forthefuture 4y ago
  Amazon was founded in 1994 and turned their first profit in 2001. A better example would be Uber, which ran negative until they had less than one year of runway remaining and then were somehow allowed to scam pedestrians into keeping their unprofitable taxi business solvent.
  - szpght 4y ago
    what do you mean by scam pedestrians?
    - forthefuture 4y ago
      Uber lost all of the money all of the original investors gave them, and sold that bag of dog shit to the public. Everyone who bought the IPO lost money.
_fat_santa 4y ago
I interviewed with them last year and while I didn't get the job, looking back now I'm kind of thankful it turned out how it did. From my limited perspective interviewing there, it seems like they started branching out into all things crypto. One manager I interviewed with explained that they wanted to become the "Amazon of Crypto" where any service related to crypto such as wallets, NFT's, etc are all on Coinbase. It was clear back then to me that Coinbase wanted to dethrone both Metamask as the wallet of choice and OpenSea as the NFT marketplace of choice. You hire a ton of people for these projects but end up letting them all go when they realized those projects weren't going to pan out.
- Alex3917 4y ago
  > You hire a ton of people for these projects but end up letting them all go when they realized those projects weren't going to pan out. Which is weird, because they're not especially difficult projects. OpenSea was built by like five people.
  - cmsj 4y ago
    Presumably the difference is that those 5 people really wanted to build OpenSea, where Coinbase staff were just assigned to projects.
  - robswc 4y ago
    I agree with your sentiment and I think you would agree with this, just wanted to get it out there. I've seen teams of 10-15 people that do absolutely nothing. Have 10 meetings about specs but space them out over a year, so that by the time the next meeting happens, everyone forgets the entire context of the project... so you have to cover everything again. By the end of year, its gone absolutely no where due to 2-3 layers of bureaucracy. Coinbase _can_ hire good talent... wonder if managing it is the/a problem.
    - vgatherps 4y ago
      > Coinbase _can_ hire good talent... wonder if managing it is the/a problem. I've worked at a company where at an individual level people were quite talented, moreso than competitors who did better than them .... but getting anything done required Y different meetings with X different teams, satisfying N different gatekeepers who just want to push their own product on you, avoid stepping on the toes of persons X,Y,Z, etc etc. Company multiplied in size a few times over the course of a few years and had just no idea how to handle it.
spaceman_2020 4y ago
I think everyone was completely caught off-guard by the ferocity and pace of the crypto drawdown. Volumes have atrophied completely. It's not a cooling of retail interest vis-a-vis the stock market, but complete apathy and/or hatred. See the volume data for OpenSea as an example.
- kingkawn 4y ago
  Absolutely nobody paying even a drop of honest attention was surprised by any part of the crypto drawdown
  - roflc0ptic 4y ago
    This is silly hyperbole. I was paying honest attention to crypto and I was continually surprised that it didn’t crash. Eventually I gave up and stopped guessing it was going to crash. Then it did :shrug:
    - spaceman_2020 4y ago
      Bitcoin has dropped about the same amount as Netflix, Meta and Tesla (~70-74%) It has significantly outperformed VC darlings like Peloton (-93%) and WeWork (-90%). You can't tell me that WeWork stock wasn't working on the greater fool theory any more than Bitcoin's price works on finding more bagholders. It's all a grift, some worse than others.
      - ycombobreaker 4y ago
        Peloton in particular was a beneficiary of the pandemic and lockdowns. With no ill will, I'm content to see their stock price drop if it is correlated with an improvement in the general state of the world. It's absolutely not informative to compare their returns to various crypto.
        dilyevsky 4y ago
        Peloton got massively mismanaged by its ceo.
deleted 4y ago
[deleted]

rco8786 4y ago

> They're meant to be a disruptive start up they should be lean. When has this ever been a thing? They raised tons of money in huge valuations and used it to hire a boatload of people. Tale as old as time. Agree with the rest of your post though, it’s unclear what their endgame was/is to get into the black.

usrusr 4y ago
And it all makes a certain kind of sense, in a twisted way, when you realize that they owe it to the investors that they spend what they raised. Investors don't give money to pave a seemingly infinite runway, they give money because they want to see that money put to work. An army of employees enthusiastically throwing unrelated stuff at random walls would be one of the least bad possible outcomes, because an army of focused inefficiency is so much worse, so much more likely and so much harder to recover from. Occasionally someone seems to notice and try correcing course, by burning off excess funding through the emergency vent of a ridiculously lavish ad campaign. Remember that time when almost everyone made fun of those Peloton ad interiors?

davidgerard 4y ago

> They're meant to be a disruptive start up they have IPOed and insiders continue to exit as fast as possible

college_physics 4y ago

Is there something in market-making technology (or otherwise) that sets them apart from any other modern exchange? Could they pivot into trading pork bellies (or tokens thereof)?

bfeynman 4y ago
exchanges have been around for almost a century now, so coinbase actually has a huge disadvantage in that they have no institutional stickiness or users, exchanges are built on trust and I would not want my money being routed through them if I was a client.
- college_physics 4y ago
  old exchanges do have their own challenges [0]. I don't know if their dealing in crypto gave them any particular insights into how the broader set of technologies could enhance market-making. there is at least one major busted stock exchange blockchain project that suggests this is not trivial [1]. just scrapping the bottom of the barrel here :-), hoping that as this crypto-decade draws to a close, it was not a complete waste of time for all these people and a major distraction from more meaningful pursuits in digital technology. even if one does not participate, these pervasive hypes, whether crypto, AI don't leave anybody unaffected... [0] https://www.theguardian.com/business/2022/jun/06/london-metal-exchange-sued-cancelled-trades-elliott-management https://www.theguardian.com/business/2022/jun/06/london-meta... [1] https://www.ibtimes.com/australian-stock-exchanges-blockchain-failure-burns-market-trust-3648985 https://www.ibtimes.com/australian-stock-exchanges-blockchai...
- badestrand 4y ago
  Just curious, which kind of exchanges do you mean that are 100 years young? The first stock exchange came to be >400 years ago and I guess there are currency or other exchanges that were there before. (Sorry if I just seem to want to point out a mistake - your first sentence just sounds so specific that it just got me interested in what you mean.)
  - 4y ago

totetsu 4y ago

If any startups want to put me on payroll just to increase their headcount for the purpose of raising more funding I'll happily take the money.

owenmarshall 4y ago
You missed the boat on that by a year. What we should all be asking ourselves is “am I on payroll at my current job to act as ballast?”
- mclightning 4y ago
  What does it mean to act as a ballast? What are some signs? Is there a general terminology for this? Are you talking about "meat-shield headcounts"
  - teratron27 4y ago
    Do you work in a cost centre or a profit centre for the business?
  - red-iron-pine 4y ago
    Yes
- totetsu 4y ago
  I caught that boat and and was pumped overboard. But I think I was bilge water more than ballast.
marcinzm 4y ago
You mean you'll take the risk of having 50% of your comp be near worthless versus getting more liquid comp from an existing public company?
Nextgrid 4y ago
Problem is that you'll have to support and maintain a brittle, over-engineered mess and then find creative ways to further over-engineer otherwise-simple solutions to create busywork for yourself and others.

dwighttk 4y ago

>Coinbase loses $1 for every $1 of revenue. Huh, I would call that ~$2 lost for every $1 of revenue.

robertlagrant 4y ago
Yes.
jsnell 4y ago
They spend $2 for every $1 of revenue. That means they lose $1 for every $1 of revenue.
- bart_spoon 4y ago
  Spend is loss. If they lost $1 for every $1 of revenue, they’d be breaking even. But they aren’t. They‘d have to double their revenue just to break even. So yes, they lose $2 for every $1 earned.
  - x-complexity 4y ago
    > Spend is loss. Incorrect from a definition perspective: spend = expenditure loss = revenue - expenditure, where expenditure > revenue If I spent $10 to make & market a fancy x-mas box, but only sold it for $5, I didn't lose $10. I lost $5 ($5 - $10 = -$5). To get to a net income loss of $550 mil from a revenue of $590 mil: Net income = Revenue - expenditure -550 mil = 590 mil - expenditure expenditure = 590 mil + 550 mil = 1.14 bil The initial ratio from jsnell is correct: They spent $2 to bring in $1. They lost $1 to expenses to bring in $1.

ptero 4y ago

There was a lot of hype and an expectation (IMO wishful thinking) that NFTs would have a very broad penetration in the society, for example replace physical collectibles. If that did turn out to be true, most people would require a lot of handholding for taxes, complex global regulation, etc. which the Coinbase would provide, as well as collecting the exchange fees. Under this premise it is reasonable to hire up to build this framework if the investors are willing to foot the bill during the discovery phase. I am not saying this is prudent, just that it is a consistent story that they sold. This is not unique to crypto: biotech startups are raising billions a pop in a Series B (not a joke) promising to use generative AI to find miracle drugs.

krisoft 4y ago
> for example replace physical collectibles But that is crazy. It is not that hard to understand the collectibles business is emotion based. You tickle the soul of the customers just the right way so they want to own a hoard of your crap. Then you create an artificial scarcity to profit from, and a thin veneer of "but-it-is-not-a-waste-of-money-because-i-can-sell-it-later" feeling to make your customers not instantly regret the transaction. I understand that an NFT might do some of it, but to replace all the physical collectibles? Are rich businessman going to parade around wearing NFTs on their wrists? Crazy. :D
- ptero 4y ago
  I am not arguing with this, just pointing a narrative I heard many times from otherwise sane people. While I had to work hard not to roll my eyes, the story must have enough converts to pull in some serious money.
  - krisoft 4y ago
    Oh sure! I believe you 100%. I should have been clearer: I'm disagreeing with people you are describing, not with your description of people of such belief.
- humanizersequel 4y ago

jasode 4y ago

>Coinbase is a weird company, because it's got such an obvious comparable: CME Group. CME Group has about 3500 employees, [...] Firstly, I don't see how Coinbase needs as many people as CME. Coinbase isn't a direct comparable to CME because CME only does the exchange function. Coinbase combines several different types of financial institutions in the crypto space: + exchange : order matching engine of buy & sell -- analogous to NYSE/NASDAQ/CME + broker : custodian of customers' margin accounts -- like Schwab, Vanguard, Fidelity, etc + bank : digital wallet and loans with customers' crypto as collateral -- like JP Morgan, Bank of America + ecommerce payments : analogous to PayPal/VISA/MC Even though CME deals with trading corn commodities, it is not a bank for people to use corn as collateral. Therefore a corn farmer can't go to the CME and get a loan and pay it back when he sells his crop harvest. Regardless of all the various financial areas they're in, Coinbase got overstaffed (like many other tech companies overhired) and so they're making aggressive cuts.

vgatherps 4y ago
On the other hand, the regulatory requirements on CME are FAR greater and the requirements on their exchange technology are drastically greater as well. CME also has to build risk and margining technology since its customers are generally managing complex derivatives portfolios and CME has to understand what risk those portfolios have under all sorts of tail market events.
tptacek 4y ago
CME isn't just "corn commodities"; they're CME, CBOT, NYMEX and COMEX, and they're a clearinghouse, they operate an electronic trading system, they're a colo provider, and a minter of new derivative products like S&P futures and SOFR. I'm sure I'm missing a bunch of other things. They probably have much more code than Coinbase. It's not all code you'd want to work on, but, from passing experience, there is a lot of it.
- jasode 4y ago
  >CME isn't just "corn commodities"; Yes, I understand that and I wasn't dismissing CME as a simple platform. I used to work across the street from the CME and saw the traders walking around in their yellow jackets every day. The "corn" was only one example to tie it to a bank services scenario. >, and a minter of new derivative products like S&P futures I think Coinbase recently offered something similar: https://www.google.com/search?q=Coinbase+launches+Derivatives+Futures+Products https://www.google.com/search?q=Coinbase+launches+Derivative... Somehow, the wordsmithing in my comment got misconstrued as being dismissive of CME as being too simple and praising Coinbase as being complex.

cm2187 4y ago

Do you mean CME as the Chicago Mercantile Exchange? That's an exchange that deals with 10s of thousands of securities and derivatives, coinbase only deals with a handful of coins. On the other hand coinbase is also broker, which operates not just in the US but in dozens of countries, with KYC on every customer, lots of different regulators, etc. Not that much comparable I would think.

ThrowawayTestr 4y ago

What do all those people even do?

kenniskrag 4y ago

Why should a company make a profit? It's all about managing cash flows.

LatteLazy 4y ago

FYI, CME outsources 101 functions, from technical connections to account management to custody and settlements that Coinbase (has to) do itself.

wolongong942 4y ago

The AML stuff is expensive even for the investment industry which unlike crypto, isn't perfectly catered to hackers, scammers and money launderers. I'm guessing AML and support is big a cost area for COIN. This is just speculation as i don't have time to read their public papers. Take a look at the Coinbase Subreddit to see how many suckers are getting hacked, scammed, locked out for AML reasons on any given day and getting their lawyers to write legal threats to Coinbase. Responding to this all costs money and it's where the Binance model of avoiding AML responsibilities and hiring outside US is superior (until it isn't, when execs end up in a US prison).

from 4y ago
Support/compliance officers do not need to be American even for American banks as far as I can tel. Based on a cursory glance at some identity verification companies I don’t think they’re paying more than $1 per selfie and document verification. Chainalysis is probably where things get expensive (probably high 7 figures a year) + I think the government just recently forced them to buy some new compliance tools as part of a settlement. But yes, the Binance model and allowing countries seen as risky does allow them to get substantially more volume.

dcolkitt 4y ago

Two issues here with the comparison. First Coinbase isn't just an exchange in the sense that the CME is an exchange. Coinbase is an exchange, a clearinghouse, a custodian, a broker dealer, a prime brokerage, and a user platform. When you want to trade on CME, you don't just go to CME dot com, open an account with them, and have them hold your money. There's layers of other service providers, with CME itself basically being a B2B platform that also offloads much of the banking and custody to other institutions. Second, Coinbase has ambitions beyond just being an exchange and that's driven a lot of hires. It runs Coinbase Ventures, Coinbase Cloud, an NFT platform, develops tooling (e.g. Coinbase Wallet), and contributes to crypto protocols. A lot of the recent hiring was driven by these "other bets".

makestuff 4y ago

CME group also pays less. They aren't paying 400k for engineers.

rattlesnakedave 4y ago

> Firstly, I don't see how Coinbase needs as many people as CME. For one, they do much more than CME.

deleted 4y ago

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tempsy 4y ago

how is CME a good comparison? they aren’t a retail consumer facing company a company like Coinbase needs hundreds if not thousands of support staff like a retail bank would that scales with the total active customer base. the total number of employees doesn’t tell you how many are in a support function.