The Exchanges

Q I want to close by asking you guys then, for that very reason, to come full circle, because I didn't even ask you this. Like, what actually brought you to crypto in the first place? I mean, Brian, where'd you get the idea for Coinbase?

A You know, there's a few pieces looking back that had to come into place for it to happen. I mean, one was that I studied computer science and economics. I was always interested in how software was going to disrupt These industries which seem to be the holdouts, right? You know, finance and education and healthcare, and so that was the first piece. The second thing was that I spent a year living in Buenos Aires, Argentina, in 2009, and I got to see really what a country looked like that had gone through hyperinflation, and I had never seen that before living in the U.S., and I remember these little details, it affects the whole culture, right? Like I was at a restaurant and there was a menu, and the prices, you know, there was like a sticker on top of a sticker on top of a sticker on the menu, They couldn't print a new menu every week, so they had to keep putting new prices on there. And the third thing, I think, was that, you know, I joined Airbnb. I was, I was probably employee 40 there or something, and I was working on some of their payment integrations, and they were in, you know, maybe a hundred countries or something at that point. And it kind of gave me a front row seat into just how broken the global payment system is. It's this patchwork quilt of different countries. They all have their own proprietary system for pay-ins and pay-outs, and They don't really have an ince…

AI assessment note: “one was that I studied computer science and economics”

Q And there's a lot of people that have come out of Coinbase doing really interesting things. And every classic company has a way. There's the Intel way that Andy Grove wrote about. There's the Toyota way. What is the Coinbase way? How does your container of tribalism, or whatever you're working towards, organize to build something that people can actually use?

A Well, in addition to just being really mission focused, which I mentioned already, And also being a fintech company, meaning, you know, we're about 37% engineers, we have a strong legal and compliance component, you kind of have to marry those things. I would say there's four things which really define the Coinbase way and the Coinbase culture. So, the first one is clear communications. We look for people who are concise, candid, kind, good listeners, just convey information really effectively to help us get work done. The second thing we look for is positive energy, and that's our way of saying, Optimism about the future, determination to get there, intrinsic motivation, and, you know, there's gonna be a lot of setbacks on the way to creating an open financial system for the world. I mean, you're basically trying to reinvent the economy of the entire world, and so it takes a lot of, every setback is an opportunity to, like, come back with optimism. The third one is continuous learning, and this is something I've been really passionate about is, you know, I've had an executive coach throughout being a CEO. We have lots of opportunities for people to learn. We put them in stretch roles. We're really big on two-way feedback, I try to create these environments of really high trust where a team can not be afraid to surface what they're really thinking, and, you know, we'll go aroun…

AI assessment note: “I would say there's four things which really define the Coinbase way”

Q I want to close by asking you guys then, for that very reason, to come full circle, because I didn't even ask you this. Like, what actually brought you to crypto in the first place? I mean, Brian, where'd you get the idea for Coinbase?

A You know, there's a few pieces looking back that had to come into place for it to happen. I mean, one was that I studied computer science and economics. I was always interested in how software was going to disrupt These industries which seem to be the holdouts, right? You know, finance and education and healthcare, and so that was the first piece. The second thing was that I spent a year living in Buenos Aires, Argentina, in 2009, and I got to see really what a country looked like that had gone through hyperinflation, and I had never seen that before living in the U.S., and I remember these little details, it affects the whole culture, right? Like I was at a restaurant and there was a menu, and the prices, you know, there was like a sticker on top of a sticker on top of a sticker on the menu, They couldn't print a new menu every week, so they had to keep putting new prices on there. And the third thing, I think, was that, you know, I joined Airbnb. I was, I was probably employee 40 there or something, and I was working on some of their payment integrations, and they were in, you know, maybe a hundred countries or something at that point. And it kind of gave me a front row seat into just how broken the global payment system is. It's this patchwork quilt of different countries. They all have their own proprietary system for pay-ins and pay-outs, and They don't really have an ince…

AI assessment note: “there's a few pieces looking back that had to come into place”

Q to any investor or potential investor and may not be used to evaluate or make any investment. CNK is not seeking investors. For more details, please also see asynccrypto.com slash disclosures. Thank you guys. So I think the burning question that we're all left with here is what can we do with crypto right now from your vantage point, like today? Can people walk out and do something with this?

A So it's important to note that I think still 90% of what people are doing with crypto is investment or speculation, and that's great as an initial way to get people's interest into crypto, but it's more interesting to think about, you know, the utility phase, which is this 10%, and A few examples that I like to talk about, one of them, which is Augur, right, this global prediction marketplace where people are trying to get the wisdom of the crowds to come together and tell you what's going to happen with weather or elections, and that's a really cool thing that wasn't possible before. The second one is these emerging markets where people in Venezuela, where they can't buy goods or have a stable currency, or they want to leave the country, and the guards at the border are confiscating their wealth.

AI assessment note: “utility phase, which is this 10%, and A few examples that I like to talk about”

Q And there's a lot of people that have come out of Coinbase doing really interesting things. And every classic company has a way. There's the Intel way that Andy Grove wrote about. There's the Toyota way. What is the Coinbase way? How does your container of tribalism, or whatever you're working towards, organize to build something that people can actually use?

A Well, in addition to just being really mission focused, which I mentioned already, And also being a fintech company, meaning, you know, we're about 37% engineers, we have a strong legal and compliance component, you kind of have to marry those things. I would say there's four things which really define the Coinbase way and the Coinbase culture. So, the first one is clear communications. We look for people who are concise, candid, kind, good listeners, just convey information really effectively to help us get work done. The second thing we look for is positive energy, and that's our way of saying, Optimism about the future, determination to get there, intrinsic motivation, and, you know, there's gonna be a lot of setbacks on the way to creating an open financial system for the world. I mean, you're basically trying to reinvent the economy of the entire world, and so it takes a lot of, every setback is an opportunity to, like, come back with optimism. The third one is continuous learning, and this is something I've been really passionate about is, you know, I've had an executive coach throughout being a CEO. We have lots of opportunities for people to learn. We put them in stretch roles. We're really big on two-way feedback, I try to create these environments of really high trust where a team can not be afraid to surface what they're really thinking, and, you know, we'll go aroun…

AI assessment note: “I would say there's four things which really define the Coinbase way”

Q volatility is actually one of the big topics that comes up in the headlines all the time, and most recently, I think it was, like, an 80% price drop or something very significant, and the headlines are screaming, crypto is dead. You know, and of course we've all seen headlines of the web is dead, email is dead, et cetera, before, but how do we get around this volatility issue?

A So it's funny, volatility is actually a feature if you want to be an investor, but it's a bug if you want to just have a medium of exchange. So crypto kind of now has the best of both worlds. There are some coins that are still going to be quite volatile, but there's this new category of coins coming out called stable coins. You heard about one of them earlier today, DAI, which I think is a really important innovation. There's others that are a little bit, you know, we call it tech light audit heavy, which is a simple idea that you just keep a dollar in a bank account, and you make a one-to-one representation of it. So Coinbase recently became a member of a consortium of companies in the crypto space that have a stablecoin project. But there's a number of stablecoins out there, and I do think that's an important part to not only solve the volatility issue with crypto, but it's also this programmable dollar that can be a part of these smart contracts, like One thing that's important in all contracts is that you need the settlement amount to be in something relatively stable, so now that can be built into the Ethereum world computer.

AI assessment note: “there's this new category of coins coming out called stable coins.”

Q shift now into talking about not just where we are today, but how to get where we want to go. And besides volatility, which you guys mentioned, need for education, community building, you know, more Education around misconceptions, et cetera. What are some other key missing pieces of infrastructure or features that really need to be built out to make crypto a reality in the vision we're describing here today?

A Yeah, I mean, so I, I usually break it down into, there's this investment phase of crypto, then the utility phase, and, and we'll get to an open financial system, which I kind of define as, there's a billion people using the open financial system on a daily basis, and, you know, I think that could be done in five years, like, without a lot of hard work, it could be 10 years, 20 years. But, you know, in the investment phase, we've started, but there's still a long way to go, and the investment phase, to me, is just making it easy for people all over the world to get fiat currency into crypto, being that bridge, if you will, So we're in 33 countries today, and we need to be in about a hundred countries, and get the long tail of payment methods set up, and all over the world where people can just easily get fiat into crypto. That's like retail people. Then institutions are starting to come into this space in a big way, and you know, 90% of the capital out there is actually in institutions, so there's a whole bunch of work that needs to go into making that happen. You know, we launched a qualified custodian under the SEC rules, There's, you know, derivatives, there's SEC-licensed exchanges that need to happen, there's broker-dealer stuff, and a lot of that is just US-focused, but of course, there's a whole broad world out there. So a lot of that you could think of as the investment…

AI assessment note: “making it easy for people all over the world to get fiat currency into crypto”

Q volatility is actually one of the big topics that comes up in the headlines all the time, and most recently, I think it was, like, an 80% price drop or something very significant, and the headlines are screaming, crypto is dead. You know, and of course we've all seen headlines of the web is dead, email is dead, et cetera, before, but how do we get around this volatility issue?

A So it's funny, volatility is actually a feature if you want to be an investor, but it's a bug if you want to just have a medium of exchange. So crypto kind of now has the best of both worlds. There are some coins that are still going to be quite volatile, but there's this new category of coins coming out called stable coins. You heard about one of them earlier today, DAI, which I think is a really important innovation. There's others that are a little bit, you know, we call it tech light audit heavy, which is a simple idea that you just keep a dollar in a bank account, and you make a one-to-one representation of it. So Coinbase recently became a member of a consortium of companies in the crypto space that have a stablecoin project. But there's a number of stablecoins out there, and I do think that's an important part to not only solve the volatility issue with crypto, but it's also this programmable dollar that can be a part of these smart contracts, like One thing that's important in all contracts is that you need the settlement amount to be in something relatively stable, so now that can be built into the Ethereum world computer.

AI assessment note: “I do think that's an important part to not only solve the volatility issue”

Q shift now into talking about not just where we are today, but how to get where we want to go. And besides volatility, which you guys mentioned, need for education, community building, you know, more Education around misconceptions, et cetera. What are some other key missing pieces of infrastructure or features that really need to be built out to make crypto a reality in the vision we're describing here today?

A Yeah, I mean, so I, I usually break it down into, there's this investment phase of crypto, then the utility phase, and, and we'll get to an open financial system, which I kind of define as, there's a billion people using the open financial system on a daily basis, and, you know, I think that could be done in five years, like, without a lot of hard work, it could be 10 years, 20 years. But, you know, in the investment phase, we've started, but there's still a long way to go, and the investment phase, to me, is just making it easy for people all over the world to get fiat currency into crypto, being that bridge, if you will, So we're in 33 countries today, and we need to be in about a hundred countries, and get the long tail of payment methods set up, and all over the world where people can just easily get fiat into crypto. That's like retail people. Then institutions are starting to come into this space in a big way, and you know, 90% of the capital out there is actually in institutions, so there's a whole bunch of work that needs to go into making that happen. You know, we launched a qualified custodian under the SEC rules, There's, you know, derivatives, there's SEC-licensed exchanges that need to happen, there's broker-dealer stuff, and a lot of that is just US-focused, but of course, there's a whole broad world out there. So a lot of that you could think of as the investment…

AI assessment note: “qualified custodian under the SEC rules, There's, you know, derivatives, there's SEC-licensed exchanges”

Q is very exciting. But I have one question actually about Augur. It's really timely given the election happened, you know, yesterday. What is the significance of prediction markets in this world? Because people have been talking about prediction markets for ages. And I actually don't get what the tip is that crypto does differently for prediction markets now that was not possible before. Like, what can come because of that?

A So I think of it as getting the wisdom of the crowds and all the incentives aligned, which is kind of what Ali was talking about, these aligning of incentives. So I don't think it's ever been possible before where you could pose a question to the world, you know, people all over the world could bet on it, and presumably some of them have more information or, you know, better analysis or something like that, and Without knowing the identity of any of these people, you know, 20,000 random people around the world could pool together their collective knowledge, and you could have a better prediction about what's going to happen next. One of the things that blocked that previously was that payments are hard, right, especially on a global scale. Like, think about how many companies have been able to have global reach of all their pay-ins with, like, an army of payment engineers and lawyers and understand the laws and regulations of a hundred countries around the world. So, if you can do this with a native currency of the internet, you can suddenly get everyone around the world to participate in that in real time.

AI assessment note: “if you can do this with a native currency of the internet, you can suddenly get everyone”

Q to some extent. And if you think about it, like, there is a prophet like Satoshi Nakamoto, a Bible, the Bitcoin white paper, there are factions and sects, there is a holy object like the Genesis block, there's a belief, there's rituals, mining. I think Fred Ersom, co-founder of Coinbase, actually pointed this out originally. So my question is, how do you build a company in that type of environment?

A Well, I mean, tribalism runs deep in human beings, right? So it's true in politics, in countries, in your city, your team sports, like everything. So companies are just another way of having tribalism. You know, our particular brand at Coinbase is that we've rallied a bunch of people around to what I think is a very inspiring mission, which is to create an open financial system for the world. And what we mean by that is, Something kind of like the internet, it's global, it's decentralized, nobody owns it, but instead of for moving information around, it's for moving value around. And we think that's going to bring about all kinds of benefits for the world, you know, a lot of innovation, quality of opportunity, economic freedom, strong property rights for people all over the world. So that's what we've done to create, I guess our all hands meetings are a little bit like the sermon at church or something like that.

AI assessment note: “our all hands meetings are a little bit like the sermon at church”

Q to some extent. And if you think about it, like, there is a prophet like Satoshi Nakamoto, a Bible, the Bitcoin white paper, there are factions and sects, there is a holy object like the Genesis block, there's a belief, there's rituals, mining. I think Fred Ersom, co-founder of Coinbase, actually pointed this out originally. So my question is, how do you build a company in that type of environment?

A Well, I mean, tribalism runs deep in human beings, right? So it's true in politics, in countries, in your city, your team sports, like everything. So companies are just another way of having tribalism. You know, our particular brand at Coinbase is that we've rallied a bunch of people around to what I think is a very inspiring mission, which is to create an open financial system for the world. And what we mean by that is, Something kind of like the internet, it's global, it's decentralized, nobody owns it, but instead of for moving information around, it's for moving value around. And we think that's going to bring about all kinds of benefits for the world, you know, a lot of innovation, quality of opportunity, economic freedom, strong property rights for people all over the world. So that's what we've done to create, I guess our all hands meetings are a little bit like the sermon at church or something like that.

AI assessment note: “our all hands meetings are a little bit like the sermon at church”