Yesterday Coinbase became the first major crypto company to go public, closing at $328 a share for an $86 billion valuation. Co-founder and CEO Brian Armstrong’s stake in the company — the largest at 20% — is now worth about $17 billion.
In July of 2017, Armstrong joined Product Hunt for a Live Chat, inviting questions from community. At the time Coinbase was five years old and Coinbase Wallet (originally Toshi) had recently launched on Product Hunt.
We picked out the highlights from our AMA that are as pertinent as ever.
In July of 2017, Armstrong joined Product Hunt for a Live Chat, inviting questions from community. At the time Coinbase was five years old and Coinbase Wallet (originally Toshi) had recently launched on Product Hunt.
We picked out the highlights from our AMA that are as pertinent as ever.
1. Armstrong, like many founders, had to overcome self-doubt
When asked when he decided to go all-in on Coinbase, Armstrong told us:
“I first heard about [cryptocurrency] on HackerNews. It was a link to the Satoshi white paper. This was in December 2010. I remember reading it and thinking it was the most important thing I had read in 5 years.
I had a lot of self-doubt about starting a digital currency company though (my friends didn't get it when I told them about it). The turning point was when YCombinator offered me $150k to quit my job at Airbnb and work on my idea. This is what gave me the confidence to try it.”
He later shared some inspirational words that helped inspire him:
“...a quote that stuck with me: ‘the greatest risk is not taking one."
“I first heard about [cryptocurrency] on HackerNews. It was a link to the Satoshi white paper. This was in December 2010. I remember reading it and thinking it was the most important thing I had read in 5 years.
I had a lot of self-doubt about starting a digital currency company though (my friends didn't get it when I told them about it). The turning point was when YCombinator offered me $150k to quit my job at Airbnb and work on my idea. This is what gave me the confidence to try it.”
He later shared some inspirational words that helped inspire him:
“...a quote that stuck with me: ‘the greatest risk is not taking one."
2. We will likely surpass what Armstrong thought was the #1 risk for the cryptocurrency industry
When asked about the key risks the cryptocurrency industry and community faces, Armstrong replied that the #1 risk was that “digital currency doesn’t go mainstream.”
“Sometimes the industry feels like a bunch of nerds arguing at the kids table, and the rest of the world has no idea what we're talking about (nor should they care). Hard forks, etc mostly fall into this category. Only 10-20 million people own digital currency today - this is basically zero compared the population of the world... The biggest risk is that we don't make something a billion people want (and can understand + get value from)."
Yesterday’s IPO was another major step towards crypto going widely mainstream. In January 2021, Armstrong’s co-founder Fred Ehrsam tweeted that roughly 10 percent of Americans own crypto. While that stat, if accurate still, leaves a lot of Americans without crypto, the numbers are growing. Wall Street banks like JP Morgan are under pressure to adopt it. When asked last month about Bitcoin, JP Morgan co-president Daniel Pinto, responded: “The demand isn’t there yet, but I’m sure it will be at some point.”
Even among the 10% of Americans who do own crypto, it seems unlikely that all of them know or understand crypto lingo like “hard fork.” Although it’s important to understand investment principles before investing, we would argue that crypto gets more mainstream with every new investor who gets in without knowing the deep intricacies of the tech behind blockchain.
“Sometimes the industry feels like a bunch of nerds arguing at the kids table, and the rest of the world has no idea what we're talking about (nor should they care). Hard forks, etc mostly fall into this category. Only 10-20 million people own digital currency today - this is basically zero compared the population of the world... The biggest risk is that we don't make something a billion people want (and can understand + get value from)."
Yesterday’s IPO was another major step towards crypto going widely mainstream. In January 2021, Armstrong’s co-founder Fred Ehrsam tweeted that roughly 10 percent of Americans own crypto. While that stat, if accurate still, leaves a lot of Americans without crypto, the numbers are growing. Wall Street banks like JP Morgan are under pressure to adopt it. When asked last month about Bitcoin, JP Morgan co-president Daniel Pinto, responded: “The demand isn’t there yet, but I’m sure it will be at some point.”
Even among the 10% of Americans who do own crypto, it seems unlikely that all of them know or understand crypto lingo like “hard fork.” Although it’s important to understand investment principles before investing, we would argue that crypto gets more mainstream with every new investor who gets in without knowing the deep intricacies of the tech behind blockchain.
3. Other risks to crypto adoption are still in play, like the shift to its use as a payment method.
Another risk to the crypto community? Whether mainstream companies would start accepting it as a form of payment. We pieced together a couple of Armstrong’s answers here for readability.
“... I think the big shift will be from digital currency being used as an investment, to it being used as a payment network… The initial use case for digital currency has been speculative investment, which is fine as a bootstrapping mechanism for the network...But we'll never reach a billion people until we can shift it into being a payment network. [This] requires a network effect, so it will take a little while to get going, but it is already happening and will only accelerate now that there is a critical mass of people using it.”
While crypto investment still seems to be the dominant activity in this space, we saw a couple of headlining moves earlier this year for crypto into mainstream payment networks. The most notable is Paypal allowing customers to pay for their purchases with crypto.
“... I think the big shift will be from digital currency being used as an investment, to it being used as a payment network… The initial use case for digital currency has been speculative investment, which is fine as a bootstrapping mechanism for the network...But we'll never reach a billion people until we can shift it into being a payment network. [This] requires a network effect, so it will take a little while to get going, but it is already happening and will only accelerate now that there is a critical mass of people using it.”
While crypto investment still seems to be the dominant activity in this space, we saw a couple of headlining moves earlier this year for crypto into mainstream payment networks. The most notable is Paypal allowing customers to pay for their purchases with crypto.
4. Bitcoin’s dominance in the crypto market is still a risk to mainstream crypto, too
Armstrong also noted that having multiple competing coins was a key step to addressing the risk of crypto not going mainstream.
“The last thing I can think of to ensure digital currency succeeds is to have multiple of them. Bitcoin could have been the dominant cryptocurrency, and solved 95% of all use cases, but we've seen it stumble in the past few years. What's essential is that there is competitive forces in a free market providing choice to consumers. This will ensure digital currency succeeds, even if anyone coin struggles because it will create a check and balance on any one coin (or developer group behind it) from bad behavior.”
Although we’re watching Bitcoin skyrocket, (it’s gained over 800% during the pandemic), progress according to Armstrong’s indicators is still afoot. Just this week, data from CoinGecko and Messari showed that Bitcoin’s share of the total cryptocurrency market value fell to its lowest level in two years, dropping to about 55%, the lowest since April 2019. This was a result of rallies from altcoins including XRP and binance coin.
“The last thing I can think of to ensure digital currency succeeds is to have multiple of them. Bitcoin could have been the dominant cryptocurrency, and solved 95% of all use cases, but we've seen it stumble in the past few years. What's essential is that there is competitive forces in a free market providing choice to consumers. This will ensure digital currency succeeds, even if anyone coin struggles because it will create a check and balance on any one coin (or developer group behind it) from bad behavior.”
Although we’re watching Bitcoin skyrocket, (it’s gained over 800% during the pandemic), progress according to Armstrong’s indicators is still afoot. Just this week, data from CoinGecko and Messari showed that Bitcoin’s share of the total cryptocurrency market value fell to its lowest level in two years, dropping to about 55%, the lowest since April 2019. This was a result of rallies from altcoins including XRP and binance coin.
5. One of Armstrong’s unique use cases for crypto was crowdfunding, which we saw play out big this year in NFTs
When asked about products and solutions that are uniquely enabled by cryptocurrencies, Armstrong responded:
“If you look at the industry broadly right now, the major use cases are:
a) investment - this is still probably 80% of usage
b) crowdfunding - this has taken off in a big way
c) cross border b2b payments - at least 3 venture-backed companies making decent revenue off this that I'm aware of, using digital currency”
Nonfungible tokens blew up this year, and we’ve covered it more than once. While NFTs have been largely another form of crypto investment, they’ve enabled unique cases of crowdfunding as well, like the case of indie gamers selling dynamic card packs to fund their video game builds.
“If you look at the industry broadly right now, the major use cases are:
a) investment - this is still probably 80% of usage
b) crowdfunding - this has taken off in a big way
c) cross border b2b payments - at least 3 venture-backed companies making decent revenue off this that I'm aware of, using digital currency”
Nonfungible tokens blew up this year, and we’ve covered it more than once. While NFTs have been largely another form of crypto investment, they’ve enabled unique cases of crowdfunding as well, like the case of indie gamers selling dynamic card packs to fund their video game builds.
6. Armstrong’s estimates for the crypto market growth were off, but they were spontaneous guesses to be fair
Mainstream adoption is only the beginning. Armstrong’s vision for cryptocurrency is huge and he made two predictions for the market.
“Digital currency adoption has been growing about 3-5x per year. So if 10-20M people have digital currency today, I’ll make up a random estimate and say 270M-2.5B people will have or use digital currency in 3-5 years. Broad enough range? :)”
When asked if he stands by his statement that bitcoin could surpass the dollar as the reserve currency within 10-15 years: “Yes, I stand by it. Although I'd modify it by saying I'm less sure about it being bitcoin. But I think some digital currency could replace the dollar as a reserve currency in that time frame.”
If we use his co-founders’ stat on 10% of Americans owning crypto, it seems reasonable to re-start the timer now for 3-5 more years.
What do you think: Will we get to 2.5 billion people who own digital currency by then?
“Digital currency adoption has been growing about 3-5x per year. So if 10-20M people have digital currency today, I’ll make up a random estimate and say 270M-2.5B people will have or use digital currency in 3-5 years. Broad enough range? :)”
When asked if he stands by his statement that bitcoin could surpass the dollar as the reserve currency within 10-15 years: “Yes, I stand by it. Although I'd modify it by saying I'm less sure about it being bitcoin. But I think some digital currency could replace the dollar as a reserve currency in that time frame.”
If we use his co-founders’ stat on 10% of Americans owning crypto, it seems reasonable to re-start the timer now for 3-5 more years.
What do you think: Will we get to 2.5 billion people who own digital currency by then?