162 - The Coinbase Long Game with Brian Armstrong

Brian Armstrong is the CEO and Founder of Coinbase. Coinbase started in 2012 as simply a custodial Bitcoin wallet and has grown into the massively successful publicly traded company that we know today. ------ ✨ DEBRIEF | Unpacking the episode: https://shows.banklesshq.com/p/debrief-brian-armstrong-coinbase ------ ✨ COLLECTIBLES | Collect this episode: https://collectibles.bankless.com/mint ------ In this episode, we go over everything you wanted to know from Brian—his reflections on 2022 and his outlook on crypto moving forward. We cover the regulatory situation in America, how SBF infiltrated our halls of power, why Coinbase launched a chain in the worst regulatory environment we’ve ever seen, Wall Street’s understanding of Coinbase, and Brian’s best advice for the settlers and builders sticking around during this crypto winter. The last time we had Brian on the podcast was in November of 2021. We’ve come such a long way since then…and more recently, he also hopped into a livestream with us in the middle of the FTX collapse last November. It was so good to have him back on, enjoy! ------ 📣 RhinoFi | Makes DeFi Frictionless https://bankless.cc/rhino ------ 🚀 JOIN BANKLESS PREMIUM: https://newsletter.banklesshq.com/subscribe ------ BANKLESS SPONSOR TOOLS: ⚖️ ARBITRUM | SCALING ETHEREUM https://bankless.cc/Arbitrum 🐙KRAKEN | MOST-TRUSTED CRYPTO EXCHANGE https://bankless.cc/kraken 🦄UNISWAP | ON-CHAIN MARKETPLACE https://bankless.cc/uniswap 👻 PHANTOM | #1 SOLANA WALLET https://bankless.cc/phantom-waitlist 🦊METAMASK LEARN | HELPFUL WEB3 RESOURCE https://bankless.cc/MetaMask ------ Topics Covered 0:00 Intro 8:18 Learnings From 2022 13:05 Brian’s Thoughts on SBF 14:37 FTX’s Affect on Coinbase 19:44 Crypto’s Backlash 24:06 SBF’s Sneaky Political Game 28:55 The Optimistic Long Game 32:29 Organizing Voters & Crypto 435 38:50 Staking, Derivatives, & Crypto Securities 43:42 Why U. S. Crypto Regulation is Bad 46:38 Stabelcoins 53:17 Coinbase’s L2 Base 59:28 Coinbase’s Long Game 1:02:38 The Future Products of Base 1:07:25 Coinbase’s NFT Platform 1:10:41 Base Token?! 1:11:22 Does Wall Street Understand $COIN? 1:15:52 5-10 Year Coinbase Vision 1:17:45 Wallet-as-a-Service (WaaS) 1:21:17 One River Acquisition 1:23:55 Decentralizing Coinbase 1:26:00 Crypto in 2030 1:28:20 Were Brians's Crypto Expectations Met? 1:30:06 Advice to Builders 1:32:34 Closing, Action Items, & Disclaimers ------ Resources: Brian Armstrong https://twitter.com/brian_armstrong Coinbase https://twitter.com/Coinbase Crypto 435 https://twitter.com/coinbase/status/1630592674020335617 ----- Not financial or tax advice. This channel is strictly educational and is not investment advice or a solicitation to buy or sell any assets or to make any financial decisions. This video is not tax advice. Talk to your accountant. Do your own research. Disclosure. From time-to-time I may add links in this newsletter to products I use. I may receive commission if you make a purchase through one of these links. Additionally, the Bankless writers hold crypto assets. See our investment disclosures here: https://www.bankless.com/disclosures

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:00Speaker 00

  Crypto is going to outlast any administration, any official who has the wrong idea or whatever. And so we can go through good periods and bad periods as long as we keep building. And then the people who are engaged enough on the civic side that who want to do it, that's great. The people who just want to build, that's also great. We need both. I think we'll get there eventually.

• 0:20Ryan Sean Adams?

  Welcome to Bankless, where we explore the frontier of internet money and internet finance. This is how to get started, how to get better, how to front run the opportunity. This is Ryan Sean Adams. I'm here with David Hoffman and we're here to help you become more bankless. Everything you wanted to know from the Coinbase co-founder and CEO Brian Armstrong, including his reflections on 2022 and his outlook on crypto moving forward. That is contained in the conversation that you're about to hear. A few benefits, some takeaways for you, an index of things we talk about. Number one, Brian's reflections on 2022. How bad of a year was it? What was learned? Number two, the regulatory situation that faces America right now in crypto. How did SBF infiltrate our halls of power?

• 1:04Ryan Sean Adams?

  We ask him that question. And how do we undo the damage and win over our legislators? Number three, we talk about base chain. This is the new layer two chain that Coinbase just launched in the absolute worst regulatory environment we've ever seen. Why did they do this? Number four, does Wall Street even understand crypto? Do they understand Coinbase? We talk about the fundamentals. And finally, number five, we get to one of my favorite parts in this whole conversation towards the end, which is Brian's best advice for the settlers and the builders who are sticking around during this crypto winter. David, this was an exceptional episode. What should listeners pay attention to?

• 1:46David Hoffman?

  For me, I think the thing to pay attention to is to try and listen to this episode, viewing the forest for the trees as it relates to Brian. Brian arrived on the scene in crypto 2011 and started making Coinbase in 2012. And ever since then, he's been fully committed to like building out Coinbase laser focused as the high highs of crypto came and then the low lows of crypto came. And then that cycle repeated like three or four more times until where we are today. Brian has been with his builder's hat on focusing on making the best product possible at Coinbase. And so just zooming out and viewing Brian as a builder who is able to make it through the the waves of the market cycles.

• 2:28David Hoffman?

  And wake it make it through the scams of Mt. Gox to FTX. And yet be unfazed and just put on the hat of responsibility for stewarding this industry into where it needs to be into the long term. I think if you you can probably listen to every single sub part of this episode. And still see how that there are certain qualities that people have that make them just really able to survive in crypto. And I think we're just really fortunate as an industry that we got Brian in the industry in 2012 so early. And to be an exemplar of these characteristics, to be a really good crypto person and a really good crypto builder. Uh, I mean, I just have a ton of thanks for it for Brian and everything that he's done. Uh, and so I think you'll also be listening to that in this episode.

• 3:13Ryan Sean Adams?

  Yeah. And also in the debrief, because David, one of the things I want to discuss with you during the debrief is how not a diva Brian Armstrong actually is. Which is actually a pretty satisfying coming out of all of the like egomaniac, maniacal founders and scam artists of 2022. So reminder for bankless citizens, you have access to the debrief, which is our episode after the episode that David and I record. With our thoughts on what we just heard and the conversation we just had. If you would like to upgrade to become a citizen of the bankless nation, there's a link in the show notes where you could do this. Also, David, we we joked during the episode that, hey, we should turn this episode into an NFT. Fun fact, that's actually happening.

• 3:55David Hoffman?

  Yeah, he didn't catch all my joke.

• 3:56Ryan Sean Adams?

  No. Uh, so we turn our Monday podcast into NFTs. We will be releasing this as an NFT. There's usually a launch at 3pm on every Monday. So this will become an NFT and release this for the bankless nation.

• 4:11David Hoffman?

  I'm actually really looking forward to emailing Brian and say, hey, Brian, remember that part about the us turning this podcast into an NFT? Well, we would like to airdrop you one of the 100 NFTs that we're about to make. By the way, that wasn't a joke.

• 4:21Ryan Sean Adams?

  That happens. I don't know if his legal will allow that, but you know, we'll try anyway. Guys, we're going to get right to the conversation with Brian Armstrong. But before we do, we want to thank the sponsors who made this episode possible, including Kraken, which is our 2023 recommended crypto exchange. Go sign up. Start an account now.

• 4:40David Hoffman?

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• 5:23David Hoffman?

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• 6:04David Hoffman?

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• 6:49David Hoffman?

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• 7:29Ryan Sean Adams?

  Bankless Nation, we have Brian Armstrong on the podcast again. He is the CEO and founder of Coinbase, of course. Coinbase started in 2012 as just a custodial Bitcoin wallet back then. Oh my, how far we've come. It's grown into a massively successful publicly traded company that we know today, serving a lot of crypto listeners worldwide. The last time we had Brian on the podcast, actually, was an interesting time. It was November of 2021. What a different world it was back then versus just over a year later, the beginning of 2023. We've got a lot to talk about, including FTX, including catching up with Coinbase products, including 2023.

• 8:12Ryan Sean Adams?

  Brian, it's great to have you back on Bankless. How you doing? I'm doing great. Thanks for having me back, guys. All right, let's pick up where we left off last time, all right? It was a different world back then. 2022 was, in some ways, what we feel like is crypto's worst years. I don't know if you share that, because I know you've been in some pretty bad years, even before we got into the space, and you've seen a thing or two. But what did you learn in 2022? And what are kind of your reflections? Do you agree that it was one of our worst years? Is there ever any silver lining there? And what did you learn?

• 8:48Speaker 00

  Yeah, I'd say 2022 is definitely a pretty bad one. I mean, it reminds me a little bit of the Mt. Gox era, where similarly, the market came down, a bunch of people lost some money. The only thing it seemed like people were asking me about or talking about for six months or 12 months was Mt. Gox, Mt. Gox, Mt. Gox. And we had to kind of go, the industry was so tiny back then, but same thing. We had to go out there and educate the world and let people know that it's not all bad actors. There's a lot of good people trying to build in this space, even if the headlines are disproportionately about the bad actors. And then, you know, a funny thing happened. I think like about 12 months went by and then people sort of moved on and they stopped asking me about it as much. I don't know, it took maybe 12, 18 months, something like that.

• 9:32Speaker 00

  And it was just kind of gone from people's memories. So I'm hoping something similar happens here. We've got a little ways now before we get to that 12, 18 month mark. But that's what a lot of my time has been focused on is getting out there and trying to educate the world, remind people that this industry has a lot of great companies and people in it. And we're not going to let the actions of any one bad actor call the entire industry into question.

• 9:56Ryan Sean Adams?

  What were some of the learnings from 2022 in your mind? Every year presents a new set of learnings. What were some of the lessons you took coming out of that year?

• 10:05Speaker 00

  Yeah, well, I mean, so one was that I think we grew too quickly at Coinbase. In the up markets, I always try to remember that it's never as good as it seems, right? And then down markets, you have to remember it's never as bad as it seems. So I think I, you know, I probably got a little too caught up in the moment, just like everybody, and it felt like we had a line of customers out the door. You know, our biggest challenge was really just how do we even onboard all of the people trying to use our products? And so it was easy to just keep adding more and more headcount. And I think the culture of a company is really strained if you sort of more than double headcount in a year. It's got too many new people who are training the new people who just joined and the culture gets kind of diffused. You know, decision making is unclear, who's in charge of what?

• 10:49Speaker 00

  Communication breaks down, too much game of telephone. And so we definitely exceeded that a bit in 20, that timeframe around 2021, 2022, early 2022, I think we hit almost 3X or something like that over a 12 month period. So that was probably too much. I would have, I would have changed that in hindsight. But I think the big things we got right, which was we always were a company founded that focused on compliance and trust and security. And we invested a lot in doing those things the right way. And that's not always the fastest way. And I have to say, it was definitely very difficult in those moments where we saw companies like FTX come on the scenes and just rocket up.

• 11:30Speaker 00

  And, you know, he was kind of speedrunning the elite conferences of society and all the introductions and everything. And part of me was thinking, man, I've been working on this for 10 years. This guy just kind of is coming, moving so fast after two or three years. Like, how is he doing it? Maybe I'm, maybe I'm the one who's got it wrong. Well, it turned out he was kind of, you know, doping, I guess, if you want to make that analogy and, you know, using customer money in an ethical way. So that wasn't great. You know, I think, I guess the major lesson I learned from that is, yeah, it's never as good as it seems. Like, if it seems too good to be true, maybe there is something that that probably is. And keep focusing on what we know best. I mean, of course, we want to move fast. We want to execute, but we're also, we're not trying to get rich quick or cut any corners.

• 12:15Speaker 00

  We're trying to make sure this company is around for generations to come. And we can serve as this really important, you know, foundation to help people get fiat into crypto, but then also to use crypto in all these different ways. And we can talk about how we're decentralizing more of Coinbase over time. Some people have sort of incorrectly felt like, oh, Coinbase is like just now pivoting to compliance. Like, no, we've, even 10 years ago, when I founded the company, I realized, okay, we're gonna have to go get money transmission licenses and, you know, have compliance teams. And, you know, the centralized actors of crypto are going to be regulated. They should be regulated, like exchanges, custodians and stuff. And so that's how we're going to build trust in this industry and make sure it stands the test of time.

• 12:53David Hoffman?

  I like the rest of the industry. Definitely want to move on from Sam Bankman-Fried and FTX, but I just got to ask a couple more questions on this front. As he was, as FTX was peaking and everyone was just like loving the product and Sam Bankman-Fried was a hero among many different camps outside of crypto, did it like make you like question yourself? It's like, wow, FTX arose so fast. What were you thinking about like Sam Bankman-Fried? Was he like this insane operator? Or did you start to get like your hair stand up on end because something like felt wrong? What was your intuition as this man seemed to be invincible?

• 13:30Speaker 00

  Yeah, well, you know, all of us are driven by ego to some degree and I like I'm no exception to that, right? And I think I always try to pay attention to where, where is my ego getting involved and where is it? Where am I using good judgment? And so I think there were definitely, there were moments where I was like, man, why is this guy getting so much attention so fast? Where, you know, we've been trying to work on this for 10 years and it, and it did feel a little unfair or something like that. But then I would always, the thing that I think actually caused me to be a little bit blind to maybe it was too good to be true, is I always felt like that's just your ego talking and like, you know, get back to work. Like, don't, you can't, you can't ever compare yourself to other people. Just try to do the best that you can. And so I

• 14:11Speaker 00

  basically try, I chalked up a lot of their success to just, I don't know, like, I wasn't gonna let my ego get involved. Now, in hindsight, maybe I should have looked more closely at some of those things. And I have to tell you, if I ever see anybody again who moves that quickly and suddenly is on the cover of all these magazines with people proclaiming them as the next Warren Buffett, like, it's definitely gonna cause me to be more skeptical.

• 14:32David Hoffman?

  Yeah. One of the differences, I really appreciate just the wisdom that you have, Brian, from just being in crypto throughout all of the years and understanding like just the machinations of the crypto cycle and what it'll, what it'll do to you. Like, the bottom is always not as bad as it seems, the top is always too good to be true, etc. But with Mt. Gox, like, Coinbase was a very young company during the Mt. Gox era, I think something just like two years old at the time. There weren't a lot of other structures to get torn down as a result of Mt. Gox to fall down. Fast forward to where we are in 2022, they're like, there's a lot of structures in crypto, there's a lot of big businesses. And now, all of a sudden, that's the big difference that I see, is that when FTX falls, now we've got much more of a mess to clean up. With Mt. Gox, like, we could kind of just like, forget about it. It was like, we'll just

• 15:17David Hoffman?

  wait this one out. This one doesn't seem like we can really wait this one out. This means like, we have to actually fight against the regulatory backlash that Sam Bankman-Fried has left us. So, how has the FTX collapse and Sam Bankman-Fried collapse impacted Coinbase as a business? Like, how have you guys had to deal with this? What's the backlash that you guys have gotten?

• 15:37Speaker 00

  Yeah, well, I think you're right. We're not just gonna sit back and wait for the winds to blow this over. There's a lot that is in our control and we don't want to feel like we're victims or helpless. Luckily Coinbase, I'll talk about there's different orders of ways to look at this. So the first order effect was literally like, what's the counterparty risk? There was contagion, there was others in the other dominos that fell as a result of FTX obviously going down. And one thing I have, this was sort of a learning going back to your prior question, was that the importance of risk controls inside these companies is incredibly important. And we had an incredible finance team and CFO and leader who built a risk function within Coinbase over the prior years. And they were essentially underwriting

• 16:20Speaker 00

  every counterparty where we were storing funds with various things to operate our business. And at some point here during the crisis, we were actually underwriting some of these things daily, even bank partners and things like that, as you saw with Silvergate having issues. So that's kind of taking some of the best practices frankly, from traditional financial services and for the centralized actors in crypto. I think some of those skillsets are actually really, really needed. So that was one of the first things. But I guess just zooming out, what can we do? How can we actually proactively sort of counteract this narrative that's developing out there, which is that crypto is something that needs all this regulatory crackdown? Well, I think one thing is to say, look, we agree with it, right? Like the centralized actors, again, they should be brought within the regulatory

• 17:04Speaker 00

  perimeter. There's a misconception, I'm very surprised to hear this, but occasionally I'll interact with people in DC who still to this day believe that everybody in crypto essentially doesn't believe in regulation. They don't want to do KYC, AML, they're all trying to skirt the rules. And from where I'm sitting, it's almost like impossible to believe, how could this be true? Because for 10 years, we've been working on this, we've been saying this. But you just have to remember, these people are busy, they're not in crypto every day. They only hear things anecdotally through their friends or through the media. They're living in a little bit of an echo chamber sometimes. And so just even repeating the very basic messages like that on the East Coast or in DC when we interact with folks, you can't kind of underestimate the power of that. Now, I think going beyond that and just showing up and having these meetings and building the relationships, and

• 17:48Speaker 00

  I'm spending more and more of my time on the East Coast. The other big thing I think we can do is we need to activate our user base in crypto. And you know, there's some really great polling data that's come out recently, which shows that about 80% of Americans are feel the financial system doesn't work for them. Right. And it's too slow, the fees are too high, it doesn't serve everybody equally. And so there's a real interest in sort of updating the financial system, if you will. And I, I really believe crypto is the, is the most important technology that can update, update the financial system. So you've seen in Coinbase's messaging externally, internally, we've started to go out there and tell that story a little bit more. That's a message that I've seen is resonating with people who are, you know, kind of crypto skeptics or they're on the fence. They're, they're, they're thinking about crypto as being a financial product.

• 18:33Speaker 00

  And they're like, this is some unregulated financial product. And the point we're sort of making to them is, no, this is, this is a technology. It's a technology that can improve financial services in a variety of ways, but it's not itself a financial product per se. And so what we've been doing is, another thing we've been doing is we put out actually this, this post crypto 435. People can, can Google it. What we're trying to do is get the, the community of crypto holders out there organized and say, let's elect leaders in the United States who believe in crypto. They want to make sure that this technology is, the innovation potential of it is protected, but it's also, we protect against bad actors and there's a sensible regulation for centralized players in crypto that could help make that happen.

• 19:18Speaker 00

  You know, I'd encourage anybody to kind of go Google that crypto 435 and it's little, it's simple things. It's like, let's get donations, even like a hundred bucks from, you know, a million crypto holders or something, or show up at town halls, ask these questions.

• 19:32Speaker 00

  These kinds of things can really move the needle. And if we elect representatives in a democracy who believe in our, our values around economic freedom, then all of these regulatory challenges are going to end up in a good place eventually.

• 19:44Ryan Sean Adams?

  Well, let's, let's talk about this. So the analogy we've used at Bankless, like it really felt like this in 2022 is some of the kind of the scammers and the frauds of 2022 had this gigantic house party, right? And they destroyed everything, like the furniture's torn up, like plates are smashed, you know, biggest, craziest house party match, there's a fire, like the cops show up, it's, it's a complete mess. And now they're gone, but we are left to clean up after this party. And I want to get a sense of, of the magnitude of backlash that you guys might be seeing in DC and we as a crypto industry now, now, now face. It feels like everything

• 20:25Ryan Sean Adams?

  got a lot more hostile sometime after November of 2022. And we've talked about things like Operation Choke Point, which is this some strategy to kind of like choke out the banking sector in the US? There's like increased scrutiny on this industry and it feels worse than it's ever been, at least in the US. I think, you know, in Europe and other places, people are still sort of moving forward. Can you kind of just describe what it's like? Are you feeling that too? And like, if so, do we deserve this? Like, is this something that we caused?

• 20:59Speaker 00

  Well, as an industry, I do think we deserve a little more scrutiny. I mean, that's probably fair to say. But yeah, I mean, look, there's a lot of people who they are only tangentially aware of crypto, right? And there's also frankly, a lot of people who, a lot of what they think comes from media headlines, right? Which in the crypto, that's actually increasingly becoming sort of an unpopular, uncommon thing. Most people have sort of realized that there's, each media organization has sort of their own objectives they're trying to push in the world. And they're almost more like lobbying organizations in a way. And so they're getting their news from other things. But that's not true of the majority of people, especially I'd say people over 40 or 50 in the world. They're, they're still, they grew up in a world where traditional media was like the

• 21:41Speaker 00

  main thing that they consume. So there, it's, it's very simple. It's like if they see bad headlines, they start to get more skeptical. If they see positive headlines, they start to get more optimistic. And so that's not really fair. It may not even be accurate. But it is what's happening. And so as we get the media, sort of our messaging out there, we need to make sure we're using new media, like channels like podcasts, like, you know, Bankless, YouTube, everything, Twitter, blogs, and but also engaging with traditional media channels, because sort of some of these gatekeepers, policymakers, etc., they're a different generation, they're an older generation, and they are still using some of these traditional media channels. And it's very interesting to sort of get

• 22:26Speaker 00

  a sense of what kind of messaging really works with those folks, right? You know, for the crypto native audience, probably like a lot of your listeners, this messaging about like economic freedom and decentralization and, you know, like, technical audiences, especially, that's the kind of thing that resonates the most with me when I read the Bitcoin White Paper in the back in the day. For these audiences that are older, they're non-technical, they're not really in crypto necessarily for the same, you know, religion or something like that that we are, but they resonate with these messages around, you know, the financial system needs to be updated. It's slow, it's archaic, the code is from 40 years ago, like, the laws are from 100 years ago. And that message is actually pretty

• 23:07Speaker 00

  widely agreed by 80% of Americans. You know, I'd say for Democrats, they're interested in equality of opportunity, they want to make sure people get fair access to financial services. That resonates with them. I think for Republicans, you know, there's often an argument just about, you know, actually, economic freedom does resonate with Republicans, and also just sort of like in a pro-business, like, national security type argument, they're saying, hey, this is a major tech trend, we need to have this industry built in America, it can't just be pushed offshore, just like what happened with semiconductors and 5G, and now with AI. Like, they're like, this is critical infrastructure to be built in America, we need to support our American companies. So you have to sort of tailor

• 23:49Speaker 00

  the message to the right audience, but this updating the financial system argument is the one we've found that works best in the broadest audience.

• 23:55Ryan Sean Adams?

  That's great. Yeah, we'll come back to this, but I think there's also like huge wins for the US in terms of exporting its monetary policy and exporting the dollar via route of stablecoin, but we'll get There. One question that, because you've spent some time on the East Coast in DC now. One question that I'm still perplexed about is how in the world? This is our last question on SBF, I promise, but like, how in the world did this guy get such influence in America's halls of power? There was like reports of like one third of Congress had received donations, political donations from SBF. He clearly had the attention in DC. Like, how is this game played? And because if it is just kind of a money game,

• 24:38Ryan Sean Adams?

  that does actually not make me very optimistic on like the democratic process and the systems of control and power in the US. But you've seen this from behind the scenes. And like, how is this game played, Brian? And how did this guy get so much influence in our halls of power?

• 24:57Speaker 00

  You know, I've asked myself that same question. And frankly, it's funny, I feel like I show up and I, and I, I'm pretty easy to get along with people. Once they meet me, they're like, okay, this guy is clearly, he's trying to do the right thing. And maybe I agree with him or disagree with him on some stuff. But he's just like a legitimate person trying to build something in the world. You know, I'm an engineer by background. Like I sort of just, if people ask me a question, I'll like, sometimes all I know how to do is say the answer. I think that SBF, so a few things. One, he had an, I think he had like an incredible passion for policy, actually. He was spending an inordinate amount of time in DC. I think that he also, the shibboleths, right? Which was the quote that he put out there. He basically started saying what they wanted to hear.

• 25:41Speaker 00

  Now, it wasn't really fully authentic. And so that ultimately blew up in his face. But he basically was framing these things in a way that they was music to their ears. For some of them, I guess maybe more on the Democrat side. And I think they got duped by it. And it wasn't even authentic. If you look at some of his texts that got released and everything like that. So was that an effective strategy in the short term? Maybe, but it ultimately totally blew up in his face because you just can't be inauthentic with people. That's like, that's one of my learnings. If I disagree with somebody, I'd rather, you know, I'm not going to be a jerk to their face or something, but I'm going to say what I Actually think in a polite, respectful way. Because if I say something I don't believe, like they might leave the meeting feeling good. But then a week later or a year later, when they realize I didn't even believe it, they're just gonna feel even worse.

• 26:26Speaker 00

  And so, um, in a way, I don't think I'm like, I'm not sophisticated in how I play the game. I'm actually playing a very simple game, which is just I show up and I say what I think. But I think that's actually the right solution long term, that it's not a game at all. I'm just trying to be an authentic person. Um, now, by the way, I don't think donating money. I don't know how much his donations move the needle. It's definitely raises some big questions and I hope some of that money gets clawed back in one way or another. Um, I don't think donations are entirely bad. I think, you know, the crypto community, actually, if you look at, um, the banking lobby or, you know, the oil and gas or any of these other industries, the motion, you know, the entertainment industry or whatever, like, they actually do put a lot of dollars behind, um, their lobbying efforts in DC.

• 27:10Speaker 00

  And it's not all just companies doing it, by the way. It's the, it's the individuals, it's, it's people. So there's something like 50 million people in the United States now who've used crypto. I mean, imagine if we only even just got one million of those people, one 50th, um, to become sort of politically active or donate a hundred bucks to the right candidate in their jurisdiction. Um, and in every congressional race, when there's an open seat or whatever, there's gonna be somebody who's more crypto positive and someone who's not. And we've actually started building some of this stuff into the Coinbase app. So people can go look up in their area, you know, what, what's the rating A through F of the, the people in your, in your area? I think if we can get just a million people in the crypto space politically active, you know, show up to the town halls, donate the money, um, you know, like tweet about it

• 27:55Speaker 00

  and like build this movement, it's gonna be incredibly powerful. Um, DC does not yet, I don't think, they don't yet respect the crypto lobby. They don't realize how big of a movement this is in the United States. It's bigger than some of the biggest ones you've thought about, some of the most powerful lobbies. We actually have more people in crypto. And they don't realize that yet.

• 28:14Ryan Sean Adams?

  Oh, my God, where do I sign? Where like, where do I send money? Like, seriously? If this could be organized and aggregated in an effective way, and maybe we'll talk about some ways Coinbase is doing that, like, I, we would be happy to provide, be a megaphone for this. This is for us, this is about, like, it's not, it's about crypto, but like, you know, I also live in the US, so does David. We care very much about the US, like, protecting these digital liberties in the 21st century. And so I think you'd have, we would have a large collective of not only small donations from a large motivated population, but the idea of like, a crypto kind of, you know, movement and a lobby group that is kind of bottom up from the, from, from the people. But like, your comment on the long

• 28:57Ryan Sean Adams?

  game, you still think it's worth playing, Brian? You still think over the, like, in the long run, your strategy of just telling people what you think, what you believe, the truth, like, reminding them is an effective strategy? That this is not a dead end? Because I think there is a certain segment of, of listeners out there, bankless listeners, who, they've just given up on the political process. They just given up on kind of regulators. They've just even given up on, like, voting. They will not show up to town halls because they no longer believe that the process works. And they'll even point to things like 2022, SBF, right? He had, it was pay to play. It was just, you know, lining politicians with, with money. And like, the longer, the long game you're playing sounds nice, Brian, but

• 29:40Ryan Sean Adams?

  like, it doesn't work. It's not effective. These politicians are corrupt. You seem more optimistic than that. Can you give us the, the case for why we should be optimistic?

• 29:50Speaker 00

  Yeah, I mean, look, I understand why people are cynical about it. It is, it raised a whole bunch of questions about the process and does it work? And if, if not, where? There's a really great two by two graph that I love that shows up sometimes. I think it's from Edelman, but it shows sort of trustworthiness and competence, I believe. And it sort of compares different, you know, governments and NGOs and for-profit businesses. And for a while, there was sort of nobody in the top right quadrant who was both trusted and competent. And slowly, people have started to view, and government's not there, by the way, it's viewed as not trusted and incompetent, if you believe this survey. Business is sort of increasingly moving into that top right quadrant.

• 30:32Speaker 00

  If you look at their recent data and I think business basically some for-profit businesses have a role to play as champions in this space of helping organize individuals, helping craft policy. We don't ever want to take credit or inject ourselves into the democratic process because I think there's a line you can cross there as just one private company. But if you're talking about the individual citizens, the voters, I'm talking about there's 50 million people who have used crypto in the United States. I'm talking about the people here and in a democracy, the government works for the people, not the other way around, right? So democracy is slow. I think that that's probably the biggest frustration people have is they're saying,

• 31:15Speaker 00

  this is so obvious, like all my friends are using this, I'm on Twitter every day, like how do people in government not get this? And then in DC, they're sitting in a different world. There's an age generation gap, there's the type of media that they're consuming gap. But the good thing about America, America has many flaws and it's slow and bureaucratic in many ways and it can be wrong for a long time. But what eventually ends up happening is that sentiments shift in the US, a new generation of people emerges, they get people who run for office, the electorate, the voters change. And basically, America has this kind of self-healing system. Imagine how bad it would be if we got someone anti-crypto and they were dictator for life or something like, at least we can just wait four years or eight years in the worst case

• 32:00Speaker 00

  or something and get a new crop of people in, right? So that's very slow by technology standards, but in terms of governments in the rest of the world, it's not bad. And so crypto is going to outlast any administration, any official who has the wrong idea or whatever. And so we can go through good periods and bad periods as long as we keep building and then the people who are engaged enough on the civic side that who want to do it, that's great, the people who just want to build, that's also great, we need both. I think we'll get there eventually.

• 32:30David Hoffman?

  I want to circle back around to the original question that Ryan asked, which was, how did Sam Bankman-Fried get so involved with politics? And Brian, your answer was that he was really playing the game. He was playing the game of politics and he, just by the nature of what happens when you intentionally play that game for playing the game's sake, like that's what happens. Like you just find, you find your way in. And I really appreciate your answer of like, you said that you're just a naturally born engineer. You see a problem and you state an answer. And so what I'm seeing is like, as someone who's known you and we've had like an episode and a half of a podcast now, and I've also thoroughly enjoyed the Coinbase documentary as well. First principles type guy, a problem mindset type guy.

• 33:14David Hoffman?

  And it sounds to me like you're thinking about ways at Coinbase to funnel those people who care about crypto and crypto values into being able to connect to the politicians that will resonate with those values. And as my co-host likes to say, if you adopt crypto protocols, you adopt crypto values. And it sounds to me like you're, you're addressing the same sort of like engineer mindset that you did to build Coinbase to also allow for people, younger generations, because I'm assuming the average Coinbase user is a younger generation customer, to connect to the politicians in question that resonate with our values. And is that, is that my intuition is correct here? Is like perhaps Coinbase is a taking an engineering type approach to solving our regulatory

• 33:59David Hoffman?

  fires?

• 34:01Speaker 00

  I think that's a, that's a fair way of putting it. Yeah, I hadn't actually thought about it that way myself, but you're right. I mean, I'm just, I'm just trying to figure out what is the best way we can get the right outcome. And for me, the right outcome is more economic freedom. How do we make sure that this technology, a billion people or more can benefit from it? And if there's a lot of misunderstanding and mischaracterization about it out there, how do we correct that? And I think, you know, there's many ways to accomplish that, but one of them is just, we have a ton of people in the US and in every country who are now using this. They can see the benefit of it and they're voters. And so let's have them get organized and make sure that politicians understand that if they want the crypto vote, you know, they're going to have to understand how to create better policies here.

• 34:42David Hoffman?

  Right, and you don't just have the people, but you also have the money by definition. And so like, connect all the pieces of the puzzle here. There's representatives that are good or bad as it relates to crypto. There's perhaps interested voters that are also Coinbase users. And by nature that there's their Coinbase users, they also have money on Coinbase. What is this, again, taking this from an engineering mindset? What does this, what does this look like when you put all these pieces together?

• 35:08Ryan Sean Adams?

  Like, there's a feature in an app somewhere, right? In Coinbase where we can look at the politicians? And is there like a?

• 35:15David Hoffman?

  Send money?

• 35:16Ryan Sean Adams?

  Is there a send money or like, I don't know, send likes or something? Show support?

• 35:21Speaker 00

  Yeah, so I mean, there's a product grid in the top left of the Coinbase app. And you can go in there and look up the policy data. But yeah, I mean, we, so by the way, there's a bunch of election rules around this too. We have to be careful about exactly like, you know, requiring or requesting somebody donate specifically to this candidate right in the app. And like, we have lots of lawyers looking into this. But, you know, certainly just making information available to people and things like that is a good first step. And that's why we helped create like this crypto 435. The name, by the way, is referencing 435 congressional districts in the US. So that's a great place through a third party people can start. And I think, yeah, like every, hopefully more and more apps in crypto, people's Twitter accounts, like podcasts, like this one, you know, we can get the word out.

• 36:04Speaker 00

  And then if we, if we, if we organize the crypto lobby or the crypto, you know, user base, I think that it'll be a very powerful feature over time.

• 36:12Ryan Sean Adams?

  So really quick, so we get an action item here. Coinbase's 435 program, what can people go do right now in this? And how can they help get, you know, exercise their voice here if they live in the US?

• 36:24Speaker 00

  Yeah, so I mean, look, it's very early days today, but first thing you can do is just Google it crypto 435 and go sign up. And then you'll basically start to get more information over time. So it'll be about key races that are coming up. You might see A through F type scores of different candidates, based on their public statements of what they've said about crypto in the past or. And then, you know, there hopefully should be opportunities for people who want to donate to those candidates. If they want to show up to town halls, if they want to call their congressman, as I, when I'm in DC, I actually ask people about this sometimes, like I'll be in these, talking with the staffers before a meeting with a senator or something like that. I'm like, do you guys actually, you know, tally up like these phone calls that come in? I'm just curious.

• 37:08Speaker 00

  And they're like, yeah, actually, we do. It's like a big part of their job, you know, and they sort of send aggregate statistics to the, to the senator oftentimes, and they'll say, all right, this week, we got, you know, 30% of calls were about X. That seems to be like the top issue on people's minds. And like, hey, what are we doing about that? And it's not like, it's not like it's going to change their mind overnight or something like that. But it's definitely a way for them to get, get on people's radar. So all these things, yeah, donating, calling, tweeting, showing up in person, and then ultimately, like the voting is going to be what moves the needle into democracy.

• 37:42David Hoffman?

  Man, I just love the fact that the whole point of crypto, the theme of what we talked about here is like coordination technology. This is good coordination technology. And that's really all I'm seeing here is like, we have a lucky enough to be, have a cohort of, I'm guessing that the crypto person is the most likely to be a single issue voter. And they're going to vote about crypto, probably at a higher percentage than most other, other people, at least for others like single issue voter issues. And they have money, right? And so like, the whole coordination behind this thing, I, you really just got to give a hand to the fact that like, we're built on coordination tools, and we know how to coordinate when the time comes. So tip of the hat for, for building the system.

• 38:21Speaker 00

  Yeah, I mean, it's a good chance to try out our, our tools here, right? I mean, somebody, we should probably do this with a DAO or something like that. That would be great. I could imagine people like, you know, getting sort of like NFT type badges around being a crypto advocate and like, what does that mean? You could imagine, why aren't we, you know, why aren't we raising more money or like, kind of giving, giving out NFTs for certain politicians to raise? There's a lot of stuff we could do that's more crypto native in this space.

• 38:50Ryan Sean Adams?

  Can I ask you, Brian, just to get more granular on this before we leave kind of regulatory in the US, which is like, impact on product, like so specifically, what types of things would you love to do at Coinbase that you feel like you can't do in the US right now? I know you've made, you've written editorials, you've made a lot of comments on Twitter about like, hey, regulators, lawmakers, just so you know, you are pushing this outside of the borders and the geography of the United States with these actions. So like granularly. I think a lot of people don't understand, I don't understand, I don't know if you understand yet because it's maybe unclear, but like ETH staking, all right, Coinbase still provides this, but, or staking in general, but Kraken, it was just like turned off.

• 39:34Ryan Sean Adams?

  Is staking like allowed for companies in the US? Do you have a perspective on that? We could also talk about earn, we could talk about stable coins, but let's start with staking.

• 39:45Speaker 00

  Yeah, so you know, Kraken's program that they called staking, in my view, is kind of more like maybe a yield product or something like that, but Coinbase's staking program is not a security, so we feel comfortable defending that in any way that's needed. And we're trying to just work proactively with regulators to help them kind of understand exactly what the product is, if they want any information that's available on that. So staking is one that's sort of been looked at recently. You know, I think another one is just around derivatives, right? Actually, like a huge percentage of crypto trading is now derivatives, and we've been working with the CFTC here to sort of get, you know, our DRODAS platform going. That would be a major, a major thing to be built here in the United States, just in terms of like healthy market structure.

• 40:30Ryan Sean Adams?

  So so far, you've been unable to launch a derivatives market on Coinbase, even though you've wanted to for a while? Is that the case?

• 40:35Speaker 00

  In the US, yeah.

• 40:36Ryan Sean Adams?

  In the US.

• 40:37Speaker 00

  Yeah.

• 40:40Speaker 00

  I mean, also, you know, by the way, I think there should be a robust, healthy crypto securities market in the US, right? I mean, the SEC and the CFTC have this kind of debate over what is what, and, you know, that's great. We need probably Congress to pass new legislation to sort of help clarify that. I mean, it's not great. It's actually been really harmful to the country. But we probably need Congress to come along and pass new legislation on that. But I would love to see if, you know, the minute that we do get clarity about, okay, if somebody is legitimately raising money for their company, or to build something like an apartment complex, or whatever, they should be able to do that with crypto. They should be able to go register that as a security in the US, and then have securities trading platforms, and, you know, broker dealers, and all these kinds of things that help that

• 41:24Speaker 00

  happen. And so I'd like that to happen as well. That's something that Coinbase has been working on for a while, and hopefully, we can eventually get that going in the US. But these are examples. I think the main, the most harmful thing that's happened is just, it's not really, those are all examples of specific things, which we need clarity that how they can, how they can exist with a clear rulebook. But the part that's probably been the most harmful is the negative rhetoric, right? You know, in most industries, what happens is, you ask the regulator, what are the rules? And then everybody just follows the rules, right? And if the rules change, give us the new rules. We'll follow those rules. Like, I think, and most CEOs in crypto that I talk to were perfectly willing to do that. Like, just give us the rulebook. So, since there is no rulebook, people have

• 42:08Speaker 00

  been sort of, you know, doing the best they can in the absence of that clarity. But what's really worst is that we're having this environment of regulation by enforcement, which is, which means, not only is there no clear, clear rules, and there's no engagement with the industry on rulemaking, but just once in a while, a random, you know, kind of, a bunch of subpoenas or enforcement action will show up somewhere at a company. And what this is causing is essentially an environment of fear. And a lot of crypto entrepreneurs are now saying, okay, well, I guess I need to build my company offshore in another country, because, outside the US, I mean, because, you know, the environment is too dangerous in the US. They basically can't afford the legal bills. And that's pretty dangerous. I mean, I think- You know, and the US is really an outlier here, by the way.

• 42:52Speaker 00

  If you look at the UK, Singapore, Hong Kong, all the other financial hubs of the world are basically saying they're putting, they're like, we're open for business. You know, we, we think crypto is exciting. We think it's the future. We want the future of this industry to be built here. Rishi Sunak, the PM of the UK, is pretty pro crypto. You know, Hong Kong just passed legislation. Singapore, I went and met with all the authorities there. They're, they're like, we want to be a web three hub. Europe just passed comprehensive crypto legislation. So then honestly, they're not even thinking that much about FTX in those regions. It's, it's actually surprising. Like this, this whole thing with FTX is a little bit of like a scar because he was so active in DC and everyone there is kind of afraid of being associated with it. But outside the US, the rest of the world is saying, we want to move forward with this.

• 43:37Speaker 00

  And so the US is actually risks kind of falling behind here.

• 43:40Ryan Sean Adams?

  Well, yeah. And so what you're describing is what other people have called a chilling effect. And that seems to definitely been the, be, be the case that this has this uncertainty, this lack of clarity has a, has a chilling effect. Why do you think this is happening in the US specifically? So are, are regulators just overstepping their, their, their powers here? Like, do you have any commentary on the, on the SEC? You know, Gary Gensler has seemed like he's been on a, on a warpath against crypto. And we have, you know, when we talk to folks in the EU, they say, hey, like, we don't have the same sort of securities issues that, that the US has in these jurisdictional things. What about it in the US is, is causing this, this chilling effect and this, this backlash?

• 44:24Ryan Sean Adams?

  If we can't blame it on FTX, what is the cause?

• 44:27Speaker 00

  Yeah. Well, you know, look, I don't want to comment on anything specific individuals here. But I will say, you know, for instance, in the UK, they have one financial regulator that regulates both commodities and securities, the, the FCA, the Financial Conduct Authority. And so they don't have this little, this turf battle that's happening in the US between the CFTC and the SEC, right?

• 44:50Speaker 00

  I don't know. I'll kind of leave people to draw their own conclusions from that. But I do think the American system has many benefits, but in this case, it has some drawbacks too, where the political climate, for whatever reason, in recently, and FTX certainly didn't help, has become a little skeptical of crypto. Now, I don't want to overstate that. I think. It's actually, I would say it's a relatively fringe element almost within the US government that is kind of anti crypto. Most of the people who I interact with there are actually quite reasonable on both the left and the right, I would say. And actually, I'd say there's a general point of view, which is we want this industry to be built in America. We just think it needs to come in within the regulatory perimeter and have appropriate

• 45:35Speaker 00

  consumer protections. I'd say that is probably 80% of Congress, you know, even just people generally who I meet in the government, even outside of the Congress, that's like the mainstream view, I would say. So it's a relatively fringe element that says, hey, we want to try to crack down on this and like, it's all bad, bad, bad. But what we haven't gotten is, you know, Congress to take action and pass new legislation, sort of what happened in the EU with MICA. We haven't had that happen yet. And I think there's three, three different groups I'm aware of that are drafting different bills and those may or may not come to fruition. The thing that's probably holding it back a little bit right now is everyone is just afraid of being associated with FTX. So they're kind of like, I'm just not going to talk about crypto for six months.

• 46:19Speaker 00

  And it's a little bit of lack of courage, to be honest, because, you know, I was hoping that this moment with the FTX collapse was going to be a catalyst to actually say, okay, now's the moment to clean this up. Let's bring it within regulatory perimeter. So maybe, maybe it won't happen in the next three, four months, but I think in the next year or two, there's a good chance we get some, some comprehensive legislation passed.

• 46:37Ryan Sean Adams?

  How about stable coins? Are stable coins under threat? So there's been some action recently against BUSD and folks who have probably listening have been following that casually, but not maybe very closely. But is there worry about something like USDC coming under, under some pressure or fire? Have we been able to paint the picture of all of the wins that the US monetary policy can have through exporting the dollar on crypto rails? Right? I was thinking about this recently. We had Richard Turin on the podcast, I don't know, summer, like China is way farther ahead than the US in terms of its digital central bank, digital, central bank currency.

• 47:19Ryan Sean Adams?

  Right, CDBC and the US is like nowhere. We're like, the US is still like, we're researching it. And here we have entrepreneurs who have basically been like, hey, we did this thing called crypto. It's decentralized. It's like open. It's the internet. It seems to align with with US values. And by the way, our entrepreneurs have come up with, you know, something that can be regulated on chain called a stablecoin like a USDC. This seems like a win. Let's propagate this to the rest of the world, you know, doesn't America want that to the dollar to to remain king and not to be leapfrogged by a competitor in other countries currency? Have we been able to paint that picture? Or is the US actually coming and attacking our stablecoins too?

• 47:59Speaker 00

  Yeah. Well, you're absolutely right on the argument. I mean, the US should be. If they're not going to go out and build this themselves, which would probably be the first choice. I think that at a minimum, they should be embracing private industry that's building this in a trusted way. And it's actually almost, I don't, you know, I don't think it's gonna, it's funny. The biggest thing that they're concerned about is that there'll be some massive withdrawal from the banks of stablecoins. And that'll create liquidity issues in the traditional financial system. But what they, and I think that's that sort of contagion can be pretty well mitigated with just reasonable risk controls. And, you know, the crypto economy is so much smaller than the traditional economy at this point, like it's not actually a threat. There, a lot of the people there are kind of very scarred by 2008 and they went through that financial crisis. So they're thinking about that from that point of view.

• 48:44Speaker 00

  The thing that they're not quite worried about enough yet, I don't think, is that over the next 10 years, 20 years, is the dollar still going to be the global reserve currency if we don't have digitization of our economy? And so they should be celebrating these things like USD coin and and others that are, you know, enabling the dollar to participate in this global digital economy. I think you're absolutely right that China is in a place where they are continually pushing their central bank digital currency into more and more aspects of the global economy. And this falls into, you know, their interaction with Russia and Belt and Road type initiatives. And, you know, I think we saw an article relatively recently that Saudi was going to start to accept like, you know, yuan payments for oil and like, so China very much.

• 49:29Speaker 00

  Has this ambition to plug themselves in as the more of a global reserve currency because that comes with incredible privileges. And so in a way, you know, USD coin should be the best thing ever that the from a national security, you know, foreign policy type thing in the United States. And I don't think people there quite realize how important it is. But anyway, I'm bullish on this. I think strictly by the letter of the law, you know, USD coin is not a security. I don't think it'll, it'll have an issue there. And so, you know, look, we have to follow the rule of law. So does everybody else in the U.S. And so they may have, people may have varying positions on it, but strictly by letter of the law, I think, I think USD coin is in a good place.

• 50:06David Hoffman?

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• 50:47David Hoffman?

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• 51:32David Hoffman?

  Bankless Premium also gets you a 30% discount to the Permissionless Conference, which means it basically just pays for itself. There's also the airdrop guide to make sure you don't miss a drop in 2023. But really, the best part about Bankless Premium is hanging out with me, Ryan, and the rest of the Bankless team in the Inner Circle Discord only for Premium members. Want the alpha? Check out Ben the Analyst's DGEN pit, where you can ask him questions about the token report. Got a question? I've got my own Q&A room for any questions that you might have. At Bankless, we have huge things planned for 2023, including a new website with login with your Ethereum address capabilities, and we're super excited to ship what we are calling Bankless 2.0 Soon TM. So if you want extra help exploring the frontier, subscribe to Bankless Premium.

• 52:15David Hoffman?

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  your transactions in a human-readable format with automatic warnings for malicious transactions or phishing websites. Phantom has already saved over 20,000 users from getting scammed or hacked. So get on the Phantom waitlist and be one of the first to access the multi-chain beta. There's a link in the show notes, or you can go to phantom.app/waitlist to get access in late February. So despite all of the regulatory overhang, all the regulatory backlash, just the adverse regulatory climate, Coinbase decides to launch an entirely new blockchain. And so this is A layer two, yeah. Excuse me, yeah, a layer two chain, yeah. And this is, I think, where we want to turn this conversation next.

• 53:38David Hoffman?

  And I really just think, one unappreciated aspect that I've been talking to a lot of people at East Denver, I just came back from East Denver, that's left half of my voice there, that's probably why I sound a little different, is the conversation was that It was a big vote of confidence from Coinbase to the rest of the industry saying, "In light of everything that's happened, in light of one of the worst years ever, in light of Operation Choke Point and what Ryan and I have been saying is Gary the tyrant, in light of all of that, we're just gonna lick our wounds, move forward, and do something really, really cool, which is build an entirely new Layer 2 that is going to be dedicated to the Coinbase, be the official Coinbase Layer 2."

• 54:21David Hoffman?

  And so like everyone that had this conversation with that ETH member was like, "Yeah, no, that is like the vote of confidence feels very good." And it's just a signal of support that, you know, we're not going anywhere. We're here for the long, long term. And Brian, after talking with Jesse, it really sounds like the idea of a Coinbase chain was accepted a long time ago. My intuition is that Coinbase knew they was always going to do a blockchain, in what form factory it would come in was always going to be a TBD. But eventually, the technology emerged that made Coinbase comfortable to actually do this. And now we have Base, and here we are. Can you talk about why that decision was made way back in the day?

• 55:03David Hoffman?

  That Coinbase ultimately would produce a chain if the technology would present itself? Like, what's in it for Coinbase?

• 55:09Speaker 00

  Yeah. Well, first of all, I really agree with your transition there, which is that despite, you know, the regulatory climate, the negative headlines, we have to make sure we're continuing to innovate in this industry. We can't become paralyzed by, you know, negative headlines or enforcement actions or whatever, because honestly, maybe that's what some people want. And they think that it's just gonna slow this whole thing down. And so we have to be able to hold two things in our minds simultaneously, which is, one, we're gonna go make those policy arguments. We're gonna get organized. We're gonna have the crypto voters get engaged. But we also need to make sure that we're building. And it's actually hard to build sometimes if you're totally distracted. So I've been trying to divide up different parts of the team to go focused on each of those. But getting back to your main point. Yeah, so so base is a really cool thing we've put out.

• 55:53Speaker 00

  It's a layer two solution that's hopefully going to help crypto be much more scalable and usable for eventually a billion people. Try to get the cost of an average Ethereum transaction down to a penny or less. And you're right, there was, there was a long history of this at Coinbase where we actually were looking at different ways. You know, we saw what other people were doing with their own chains, their own coins. Frankly, doing our own coin, we always thought, you know, in some ways it'd be nice, but you know, we didn't want to make, we wanted to make sure, as always, we were being compliant and being secure and not doing anything that was like a short term thing to try to, we wanted to make sure it had real value and everything for our customers. So it's, it's actually funny, when we were becoming a public, a public company, I actually

• 56:35Speaker 00

  really wanted to get like a Coinbase coin registered as a security in the US because as a public company, we could now officially have retail investors trade our, our stock. And so we were going to try to do a list, actually, and have it list on the NASDAQ, but also on crypto exchanges with the Coinbase coin.

• 56:52Ryan Sean Adams?

  Like, like a Coinbase ERC 20 sort of coin?

• 56:55Speaker 00

  Yeah.

• 56:55Ryan Sean Adams?

  That sort of thing?

• 56:56Speaker 00

  Yeah, and it was, it was going to be redeemable for like a share of our actual, of our underlying stock.

• 57:00Ryan Sean Adams?

  But it would be a registered security. It would just be an ERC 20.

• 57:04Speaker 00

  And we, and we wanted to go do that, and we actually couldn't find a way to do it legally in the US. I mean, the, the infrastructure around, you know, broker dealers and national securities exchanges and everything to trade that sort of asset was not in place yet. So that's something still be, be fun to do at some point, and hopefully that sort of infrastructure gets built out as we start to get more regulatory approvals, hopefully.

• 57:24Speaker 00

  But, you know, in the interim, we said, all right, well, why don't we try, we can't do that, so let's try to make a, just a chain. There's no, there's no Coinbase coin associated with it or anything like that. We're not, we're not raising any money and whatever. Nobody's just totally steer clear of that issue, but let's try to make a chain, an L2. And we, we worked with the folks over at Optimism, who are amazing. So it's built on the Optimism stack. And by the way, I want to temper people's expectations. This thing on base got like, it got so much attention. You know, we put it out there just kind of on test net to sort of start to get developers interested. And we wanted to basically talk to a bunch of developers. Somehow, I can never predict what's going to go viral in the news and what's not. It's actually really weird. Sometimes we put something out that I think is awesome and almost no one talks about it.

• 58:08Speaker 00

  And sometimes we put something out just as like a preview for developers. And there was some really cool stuff that Jesse did around how, you know, we got the initial interest and everything. So anyway, this thing has gotten so much attention, I almost want to temper people's expectations a little bit. This is going to be a long journey and like there's lots of stuff to build. We're working with all the developers out there. But it's not like, it's not like a near term monetization thing for Coinbase or anything like that. Yeah. So hopefully we can, we can engage with these developers and keep building stuff that just makes crypto more scalable, more usable. A lot of these basic things are actually really important. I mean, how do we get crypto payments to be as fast and cheap and global as sending a WhatsApp message? You know, it's still too many steps. There's too, it's too

• 58:50Speaker 00

  long to get a confirmation. One thing I think a lot about is, you know, from the average person using crypto, when they pull out their phone, they hit pay, how long does it take for a green check mark to show up on their screen or the other, the point of sale machine or whatever it is? We need to get that to under 1,000 milliseconds, like one, one second, basically, where it's like boom, and it worked every time, one second. That, and right now it's, it's much longer than that. And it depends, it depends if you know, you're trying a different currency underneath. And then anyway, that's just one use case around payments. But we need to get that infrastructure more and more scaled up, kind of like when the internet went from dial up to broadband. And hopefully this is a step in that journey.

• 59:28Ryan Sean Adams?

  You know, I think part of the reason people were so excited is because it just felt like the antidote in some ways to 2022, like just the symbolism of it, because 2022 was about a lot of people taking shortcuts, right? And I remember when we had you on the podcast in November of 2021, we asked you that very question. We're like, hey, Binance has Binance Chain, that's what it was called at the time. FTX has just gone headlong into Solana. That's what it was at the time. And where is the coin chain? Like where's the Coinbase chain? It seemed like there was a perception that Coinbase was not keeping up. And rather than not keeping up, it seems like what you guys were doing was playing the long game.

• 1:00:11Ryan Sean Adams?

  Because I recall part of your answer was like, hey, the tech's not ready. If we're going to do this, we want to do this in a way that is maximally decentralized. And we can't do that yet. So I think part of the reason, Brian, this actually took off in 2023 is because like, man, damn, it feels good to be building again. And there's no token to shill. Like, we find out that Alameda has, God knows how much Solana, like, on their, you know, on their balance sheet. And of course, that's why they want to pump the price of this. And you know, Binance has its reasons for BNB. This has no token. It's a layer two. It's adopting open source decentralized, credibly neutral technology. So that's why it took off. Even if the chain launches and like, there's not much there. I don't really freaking care.

• 1:00:56Ryan Sean Adams?

  This is like a large exchange with 110 million customers actually doing the right thing in this space. That's why I was excited about it. And I think that's why a lot of Bankless listeners are excited about it.

• 1:01:10Speaker 00

  Yeah, well, thank you for saying that.

• 1:01:13Speaker 00

  Yeah, I can't tell you, we were in so many meetings where, you know, a lot of innovation, what's hard about it is you have to innovate on the tech, but you also have to make sure you're following the law. And oftentimes, the law is not clear if you're building something in a new space, right? So we had so many meetings where, yeah, we felt that tension ourselves many times where we said, man, look at these competitors. They're just moving, they're moving so fast. But I think, you know, we need to make sure we're holding ourselves to a high standard, right? I don't want to say anything negative about anybody else. But especially being based in the US and all the rules that we have to follow. We said, okay, well, you know, maybe if we can't do that, what can we do? And so this is, and by the way, I think we did move slower at certain times, right? Like, a big focus of mine has been

• 1:01:57Speaker 00

  How do we now operate efficiently at this new size that we're at? And we've actually reduced our headcount a couple of times. And I think it's giving us a moment, you know, as difficult as that was to actually operate a little bit more like a startup again. I had a whole blog post on this, like, operating efficiently at scale and some of the things we're trying to do. And since we're not hiring a lot this year, it is giving us a chance to really practice operational efficiency at this current size and scale. So I'd say it was like 50%. We actually did slow down as we grew so fast and we became a little too bureaucratic. Trying to fix that now. And then the other 50% was us, again, like you said, playing the long-term game, trying to be, you know, we're trying to follow the rules and I think we've done a really good job of that. So, yeah, it was a combination of both.

• 1:02:39David Hoffman?

  One of the main big conversations at East Denver was the conversation of, well, what can Base really do for Coinbase that Coinbase couldn't do just by building on a native layer two, like Optimism or Arbitrum or Polygon? Like, what does, what does having Coinbase having its own chain really enable it that the other chains don't? And a lot of the answers that I give inside of the Bankless Nation Discord is like, well, of course, when Coinbase builds some, you know, native DeFi app or decentralized service, they're going to want to build it on the land that they live on. That just makes sense. But, but really, like, unpacking that even more is like, okay, but what, what would Coinbase build that they could only build if it was on top of their own chain that they couldn't build on some other, other person's chain?

• 1:03:24David Hoffman?

  So when you envision the future of Base, Brian, what are the products that are uniquely enabled by Coinbase having its own layer two?

• 1:03:30Speaker 00

  Yeah. So this definitely gets a little into the details and I think we don't know all of the areas where this could be useful yet, but I'll give you a couple of examples. And by the way, a good analogy for this is, I think, you know, Android or something like that, right? Like Android's open source. Google is sort of a major contributor to it. But by having a major open source project that they, you know, integrate with, it allows them to sort of... Have better integration with their hardware and things like that for their phones, right? So an example in our case would be if we want to make, you know, USD coin payments, you know, feeless or something like that on base, maybe, maybe that's a way we could integrate that or, you know, we're doing a lot of stuff with NFTs now, right?

• 1:04:14Speaker 00

  And if we want to get that to be lower friction and fast, can we just have like a default that's on an L2 that we have, you know, it's decentralized, but we don't, we want to have like a little bit more of, you know, input on into the direction of it, right? What else? I mean, anything that would like DeFi Gaming, as this comes up, is probably going to be something that uses a lot more of the scalability of the network, right? Either even like future DApps that we create, you know, Coinbase is doing more with, you know, ENS and like, how do we make connecting to DApps easier? And all of these things ideally should just be seamless so that people don't ever have to worry about like bridging between different chains or, you know, choosing the right token

• 1:04:58Speaker 00

  even like it, maybe it can auto exchange something underneath. And so it just, it's one more tool in our toolbox that will allow us to hopefully make the user interface so simple that it quote, "just works." And yeah, that's like the highest level I could, guess I could say about it today.

• 1:05:14David Hoffman?

  You've mentioned USDC payments on base twice now, and this is another topic of conversation I've noticed other people have latched on to is like, the business model behind this is that there's USD dollars or treasury bills in a bank account earning yield on one side, and then transactions going around on base, the layer two on the other side of things. And this is a unique feature that things like Visa or Mastercard cannot compete on by in nature of what they are. So is perhaps a long-term vision of base to be in competition with the global payment networks that are out there?

• 1:05:48Speaker 00

  I don't know if I'd say that exactly. No, I mean, so today, actually, we're partnered with Visa in the sense that we have a Coinbase card and, you know, it uses Visa rails and things like that. And we also, we want to make it easy for people to pay for crypto with credit cards and debit cards. And so we do that today. But yeah, I mean, over time, I actually have been pleasantly surprised to see both Visa and Mastercard actually embrace this technology. They're one of many large financial service businesses actually that are already looking at this because I think they, they see the potential in, okay, if we had more efficient global payment rails that allowed funds to settle instantly instead of, you know, T plus three or whatever it is, that'd be pretty powerful for their business, too. So yeah, I think it'll be more of a collaborative thing with them.

• 1:06:34Speaker 00

  Yeah.

• 1:06:35Ryan Sean Adams?

  And the other products that come to mind are Coinbase Wallet and CBE. How do you, is there any sort of synergies between these more on-chain decentralized-ish products and base? Like, what are the synergies here, if any?

• 1:06:49Speaker 00

  Yeah, well, similar to what I was saying before, what I was saying before about different USDC use cases and NFTs and DApps, I mean, that could happen in Coinbase Wallet as well. Our self-custodial product as opposed to the custodial product that most people think of Coinbase for. So I think it applies equally across both of those. We'd want a great base kind of throughout the stack or throughout the different family of apps.

• 1:07:08Ryan Sean Adams?

  One thing that's cool is you guys are helping to develop some public open source infrastructure through this. And, you know, Jesse shared a lot when he was on Bankless last about how you're contributing to Ethereum roadmap development items like the upcoming EIP. So that is another element that's cool. Let me also ask about, last time we were talking, it was back in November of 2021 again, and it was pre-launch of the Coinbase NFT platform. And there were some hints, there were some rumors that that was, that was coming. NFTs had a big year, of course, in the beginning part of 2022, and then a pretty meteoric crash. And now they're kind of back a little bit. Can you comment on like, what's the future of Coinbase NFT? Do you guys still see

• 1:07:51Ryan Sean Adams?

  potential there? How are you thinking about that platform and that product line?

• 1:07:57Speaker 00

  Yeah. Yeah. So I mean, NFT is definitely one of those ones where we probably had too much hype on it when it came out and you always have to start slow and build. So I'm definitely more in the camp of like, you know, soft launch and then slowly, slowly build. But no, Coinbase NFT has been going well. So actually, one of the things we've been doing is, is really sort of aggregating the different marketplaces out there and surfacing them all in one place. So people can just come in and see, you know, compare prices across the different exchanges and sort of aggregating liquidity, which is cool. And then I think the main thing that we have to offer there is that, you know, oftentimes what people were doing is they'd come to Coinbase first to buy crypto, they would

• 1:08:37Speaker 00

  then move it to a self custodial wallet that had a browser extension like Coinbase Wallet or MetaMask, and then they would connect to, you know, an NFT exchange or a marketplace and begin to trade. And it was actually, what was kind of remarkable is just how many people ended up using NFTs, given that that was the complicated process that you had to go through. And so what we want to do is just kind of make that even simpler and say, well, if you already have crypto on Coinbase, because that's where you keep it, well, it's just one click to buy this NFT if you want. And so we're working on integrating Coinbase NFT more directly into our, our main app. And I'm pretty bullish on NFTs over the long term. I know that some of the recent, you know, NFTs have come up a little bit in the last few months. And I know some of the activity has been around sort of these

• 1:09:22Speaker 00

  pro traders, you know, like with Blur and platforms like that, that are kind of, yeah, like you can buy a bunch of them in a basket and stuff like that. And that's been driving a lot of volume. I think that's, that's cool. And that I'm glad that the market is evolving in different directions. I think the part that I'm even more excited about in terms of NFTs is basically the utility of it, right? Like, if they're decentralized social, where like every post is an NFT, if you can imagine replacements for like, you know, in Web 3 for like Spotify or YouTube or Instagram, where every audio or video or text, like Twitter, you know, or whatever. Or this podcast, Brian. This podcast could be an NFT. Yeah, why not? Yeah, why not? It should be.

• 1:10:05David Hoffman?

  Brian, this is going to turn into an NFT.

• 1:10:08Speaker 00

  Oh, you heard it here first. Okay. Yeah. And then, what else? I mean, concert tickets, like, you know, in-game items in the metaverse, even just like your badge, if you're a company that gets access to somewhere, or these are the things that I think are, make sense to be natively integrated into your wallet or your primary financial account in the crypto economy. So, um, yeah, that's, I'm pretty bullish on NFTs. I think they're going to be, continue to be really big. And just like many things in crypto, they had a big run-up, correction, and now they're going to slowly grow from here. And I think that's still a very exciting space.

• 1:10:43David Hoffman?

  One last question about this base world is the growing sentiment on crypto Twitter. I put out a tweet that was like Coinbase, there will not and is not be a base token. And then crypto Twitter reacts and I just put the Anchorman gif where he like sparks up a cigarette and goes, no, I don't believe you. And I'm, I'll just let you react to that meme, if you will, Brian.

• 1:11:08Speaker 00

  I mean, there's, there's no base token at the moment. So, um, I don't know. I'm having trouble visualizing it exactly, but yes, I'll have to go re-watch Anchorman.

• 1:11:17David Hoffman?

  We all will, honestly. Fantastic movie.

• 1:11:20Speaker 00

  Yeah.

• 1:11:22David Hoffman?

  So this brings me to my, the next line of questioning that we want to go down is, it really does Wall Street understand Coinbase at a high level? Like, what does the trad world really understand about the business models that Coinbase is developing? I think everyone understands Coinbase as an exchange. That's a business model that, you know, the valuation is a tried and true model. There's also like the world where the base chain itself has gas fees and Coinbase as the sole validator makes revenue from all of the transactions on base. There's the CBE staking model. There's the NFT platform, like so many of these things. And there's so, it seems to be so many, like really awesome bullets that Coinbase has in the chamber beyond just taking revenue

• 1:12:06David Hoffman?

  that I think crypto natives understand. And that make me bullish and Ryan bullish too. How much of, do you think like all of these other like potential business models, some are already live today, like CBE, some of them are potential like base? How much do you think Wall Street really understands about all that stuff?

• 1:12:23Speaker 00

  Well, I would say Wall Street really understands our business from a financial picture. I mean, actually, if you go read any of the analyst reports on coin stock, they're really good. I mean, many of them are very good, I should say. There's probably some that aren't, but most of the ones I read are really, really good. And they understand the regulatory environment. They understand the cyclical nature of how crypto is going through these ups and downs. And they understand, I think, the long-term potential. But they're also investors and their job is to sort of, you know, if they think the stock's going to go down in the next six months, they're going to trade on that. If it's going to go up, then they're going to trade on that, too. So from a understanding of our financial picture as a business and our prospects,

• 1:13:06Speaker 00

  I think it's generally pretty good. I think, you know, many of those folks grew up their entire life in the traditional financial system, right? So for them, they probably aren't quite as advanced in their thinking as your listeners, which is that they're probably, a lot of them are still thinking about this. Oh, this is kind of some new asset class. It's kind of like gems or commodities or gold or something. And like, you know, it's relatively small, but it seems to be getting bigger now. And I hear about more and more hedge funds are trading it. And they're like, okay, you know, we should probably put, you know, 1% to 5% of our assets in it or some, a lot of people onboarding to Coinbase Prime or Prime Brokerage for Institutions, that's how they're thinking of it. What they're not yet thinking about it as is, okay, this is actually creating a totally new set of financial services

• 1:13:50Speaker 00

  and a totally new way to build applications on the internet with, you know, ENS and DApps and Web3 and all this kind of stuff. And that still probably hasn't fully clicked. But, you know, honestly, we don't, I'm not sure we deserve credit for that yet because it's a little bit, it's so brand new and it's on the horizon. And what they're often looking at when they, when they, is like, okay, tell me about your products, but like, really, they want to hear about the products which are generating meaningful revenue today. If this is like a pie in the sky thing in the future, like, that's nice. But like, when it's real, let me know. And I think that's, that's fair, by the way. That's not unique to crypto. That's true of like, that's pretty much every public company. They, they hold to that sort of standard.

• 1:14:30Ryan Sean Adams?

  So they see the here and now, but they don't see the future, the potential, the future, the thing that we're kind of very excited about, about crypto. I remember our last conversation, again, we talked about, well, is Coinbase sort of a neo-new financial system or is it a tech company? And I think I recall your answer being like, yes. It's like, it's like both of those things to, and

• 1:14:51Speaker 00

  Yeah. Crypto company, it's both.

• 1:14:53Ryan Sean Adams?

  Right. So Wall Street still doesn't understand that paradigm is, I think what you're saying, they're just seeing the here and now. And also like, I'm not sure even like financial firms understand that new paradigm. I'm not sure even the giant tech companies, that, you know, the Twitters and the Facebooks of the, and the Googles of the world, understand that new paradigm. And maybe, maybe you're right though, Brian, maybe like, they don't understand it because we haven't earned it yet. But I suppose that that is the hope and that is the, the future potential of everything that we're talking about and the future potential of Coinbase as a company.

• 1:15:28Speaker 00

  Yeah. I mean, if we add a couple more zeros on the crypto economy, I think everyone's going to know what it is. And if they're not using it, their kids will be using it. And so that's ultimately how we, we win. We got to get more, we got to get the use cases going and ultimately get a billion people into the crypto economy or more. At that point, everyone will be using it. It's kind of, it's going to be kind of like the internet at that point. It's like, it's just ubiquitous.

• 1:15:52Ryan Sean Adams?

  Brian, when I opened up this conversation, I listed off a bunch of things. There's CBE revenue, which is alive and well. There's exchange revenue, which has always been, been there. And then there's a bunch of potential other line items, right? There's the NFT marketplace that could be a positive revenue generator. There's based transaction fees, which could be a positive revenue generator. If in a world where we zoom forward five, 10 years or so, what are the big like line items that you're bullish on that aren't here yet, that you are hoping here? Like in a world where everything is maximally successful, what's left to add to the big ones?

• 1:16:25Speaker 00

  Yeah. Well, trading fees are going to be big for a long, long time. I think, you know, but the problem is that they're more volatile, right? So what we've been doing over the last five years or so is, is helping to try to shift more of our revenue to what we call a subscription and services, which is a little more predictable, right? So that's things today, it's like USD coin and custody fees and staking and even things like Coinbase card. So what's really cool is actually in our last earnings that we shared about Q4, we shared that 47% of our revenue is now from subscription and services, almost half. And that's allowing us to build a more predictable business. I think that, you know, these crypto cycles are quite challenging to manage through, and it's the high highs

• 1:17:10Speaker 00

  and the low lows. And so having more predictable revenue is actually going to help us a lot as a company, as operators, but also as a public company. One of the areas on the horizon that I am excited about, which was sort of to your question, is around Coinbase Cloud. And so what we're doing is we're trying to take a lot of these internal services we've had to build for our own products. And we have shared services that multiple of our products use, like, you know, about how to connect into the blockchains and how to store crypto securely and how to trade it and how to send it. And we're making those APIs available to external customers through Coinbase Cloud. There's a product that we have coming up, and I think it'll be public by the time this comes out. But, you know, it'll be called Wallet as a Service, Coinbase Wallet as a

• 1:17:51Speaker 00

  Service. So many more companies out there, from Reddit to banks to, you know, Starbucks or whoever, eventually are going to want to have ways for people to store crypto. And we want to make it easy for them to sort of white label or utilize these APIs so they don't have to figure out how to connect to dozens of blockchains with all these tokens and forks and airdrops and sort of security upgrades. And so just having good wallet infrastructure, I think, and by the way, you could build a self custodial wallet off of this, you could build a custodial wallet off of it, where Coinbase is storing it. It's useful across a wide variety of applications. And I think that's a nice foundational piece of Coinbase Cloud we'll be putting out soon.

• 1:18:35David Hoffman?

  And we haven't seen any technology like this, like Wallet as a service, that sounds like the ability to scale out access to wallets as far as the internet goes.

• 1:18:45Speaker 00

  Yeah, well, I mean, I'm hoping we see it in a show up in a variety of applications. So you might, you know, in the metaverse or in Shopify or whatever, you might just see, okay, like, I've got a stored balance of crypto now. And or maybe it's it's some it's an NFT or something like in Reddit that you're that you're earning. People may want to connect their own wallet, a third-party wallet. But if if it's sometimes easier to onboard, you know, a billion people, if it's like, well, you don't have to have a crypto wallet, maybe it's just the thing shows up in that app.

• 1:19:12Ryan Sean Adams?

  The the way I'm thinking about it at high level is wallet as a service. And I think this will be this will be out by the time the podcast is released, Brian, is it's kind of like Stripe in that it's an API and yet it's a self-contained wallet. It's like Stripe, only it's a crypto wallet. And you said it's there's a non-custodial version of this, which uses some like MPC technology to be, you know, non-custodial. Is that a way to think about it, like Stripe, but for crypto wallets?

• 1:19:44Speaker 00

  Yeah, well, Stripe is an amazing developer tool company. And this is right, these are developer tools. Coinbase Cloud is all developer tools, kind of like AWS or Stripe or something like that. And that's right, we it is using MPC multi-party computation technology underneath, which, by the way, is I think that's kind of an underappreciated leap forward. Again, this is one of these things that's been getting built that, you know, doesn't it doesn't get any headlines, but it's actually really powerful because, you know, this whole world that we're living in where we have a 12-word phrase, and if you somehow lose that, or you type it in the wrong piece of malware or whatever, all the money's gone, that's really uncomfortable. And it's hard to imagine that getting to a billion people or, you know, I don't think most people would feel comfortable storing like a huge percentage of their net worth

• 1:20:28Speaker 00

  in something like that, where like one slip up and it could be gone, right? So multi-party computation lets you split up the keys. You can do, you know, two of three, three of five different configurations to construct these wallets in our Wallet as a Service product. And by the way, there's a lot of really cool cryptography behind that. You know, we had to build out a pretty specialized team of people and write some new crypto libraries. Just as a general rule, you'd never want to write new crypto libraries if you can avoid it, because, you know, you want the thing that's battle-tested and it's been around and around. But in this case, nothing existed that was out there. And so we had to write it. And then we did battle test it. We got it audited by all these different firms, like multiple firms who tried to break into it and like, and so.

• 1:21:13Speaker 00

  It's pretty battle tested at this point, and I think that's something that really powerful that we invested in.

• 1:21:18Ryan Sean Adams?

  So Wall Street not understanding crypto fully yet. They do see the here and now. You guys recently acquired One River Digital and Eric Peters, the CIO of One River was just on the podcast, actually, the week before that this is released. Unplanned. Yeah, it was a coincidence. We had no idea, but it's interesting because he has served sort of as a bridge to large institutional money, I think. And I'm curious that perspective because I know Coinbase custody, what services, like 25%? I just read this press release. This is why I know this. 25% of the largest hedge funds in the world, the top 100 or something like this, at least those that are involved in crypto. So what is kind of

• 1:22:02Ryan Sean Adams?

  the institutional play with One River Digital? And then in general, what's kind of the institutional appetite now for crypto?

• 1:22:12Speaker 00

  Yeah, so kind of like what I was saying earlier. By the way, Eric is great. We've been super impressed with the whole One River team. And as we started to think about this subscription and services revenue, like more predictable revenue streams, and we have a couple of different product groups now. We have our consumer group, we have our institutional group, and we have this developer product with Coinbase Cloud and others that I mentioned. So on the institutional product, we started to think about, okay, how do we generate more subscription services revenue? And one thing we looked at was this idea of asset management. And so actually, in a lot of the big banks, Goldman Sachs and Morgan Stanley and JP Morgan, they actually, they do generate a pretty substantial amount of revenue from asset management, and it tends to be more predictable than the trading

• 1:22:55Speaker 00

  fees and things like that. And we got excited, in particular, when we met One River, just on the quality of the team and in some of the clients that they had on boarded and things like that. And so we felt like this would be a really great matchup if we can pair their asset management business with our institutional customer base in Coinbase Prime. And I felt like this could be a pretty cool thing to build out for the ecosystem over time. So yeah, I mean, just I guess to answer the rest of your question, we are still seeing a lot of institutional clients sign up. And they're not necessarily deploying a lot of capital in this environment, but they are onboarding to Coinbase Prime. In fact, in Q4, we saw an increase in the number of institutions onboarding into the space. And so The way I sort of took that was to say this is like, kind of like a coiled

• 1:23:39Speaker 00

  spring of potential where they're sort of saying, okay, we still believe something's going to happen in this space. Let's onboard to make sure we're ready when this thing is, when we're ready to invest. We're not necessarily deploying a ton of capital right now, but you know, the potential is there for this next period when the tide turns.

• 1:23:55Ryan Sean Adams?

  So we've covered so much already in this conversation and including kind of regulatory and 2022 and also, you know, base, which is so exciting, institutions in crypto. I want to jump back to something you said close to the beginning of this conversation though, Brian, that really piqued my ears here is you talked about this idea of decentralizing Coinbase over time. So decentralizing Coinbase over time. What does that mean to you?

• 1:24:26Speaker 00

  Good question. I mean, so Coinbase has always kind of been of two minds because the mission of the company is to increase economic freedom in the world. My belief is to do that. We really need to get a crypto economy that's global and it is decentralized. That's how we're going to get the real innovation potential of it. But in the early days of Coinbase, we realized, okay, well, the first step is we just need to get a bunch of the fiat money of the world into the crypto economy. How do we make a bridge to that? And that turned out to be a pretty centralized business, you know, our exchange, our custodian, et cetera. That's still, by the way, our largest revenue stream. And so, although we're diversifying it with subscription services revenue, as I mentioned. So we really have different product groups now at Coinbase and they're able to tackle different stages of this evolution.

• 1:25:11Speaker 00

  So, you know, we're able to get people's money into the crypto economy with our exchanges and our custodian, et cetera. But we're also starting to build the crypto to crypto, the more decentralized pieces of the economy with self custodial wallet like Coinbase Wallet, things like base, right? Even building things which are, you know, web 2.5, if not closer to web three, like Coinbase NFT. We'll probably build more of our own DApps over time. We want to make sure we're contributing to the open protocols, like, and helping them evolve as well. We've done some work there with the developers in the community. So, yeah, I think it's easy to look at Coinbase on a cursory level and say, oh, it's just a centralized crypto company. And that's true of our early, of our early products. But it's actually more nuanced

• 1:25:56Speaker 00

  than that. And I'm, my hope is we can become more and more decentralized over time.

• 1:26:00Ryan Sean Adams?

  So getting into some closing questions here, I'm wondering if you could kind of look long term. I think you've been looking at Coinbase and crypto long term since you entered the space. Let's fast forward to the end of this decade, so 2030. What does crypto look like to you?

• 1:26:16Speaker 00

  2030, I mean, I think we'll have made substantial progress by then in a number of dimensions. So I think blockchains will be more scalable. I think a lot of the usability will be there in terms of, you know, every time you just send it to someone's ENS name or whatever standard takes off, like, you know, you, payments will arrive instantly for less than a penny anywhere in the world, kind of those sort of just basic things. I think we'll see more central bank digital currencies. I hope that the US essentially grandfather's in these, you know, stable coins that have followed the rules and just are backed with the dollar in the US and they sort of become the de facto CDBC of the

• 1:26:58Speaker 00

  US. I think we'll see more countries around the world adopt crypto. So kind of like what we did with El Salvador and I think we'll see actually probably by 2030, I don't know, I don't know what my prediction is, at least, at least a handful of other ones, if not maybe some even medium sized ones may even start to adopt crypto as a legal form of tender. I think more and more startups will actually sort of like we used to, we used to call them dot com startups and, you know, oh, you're using the internet dot com, but now you just call it a startup. Every startup uses the internet. I think by 2030, there's not going to be a crypto startup. It's just every startup will use crypto in some way, shape or form, whether it's to raise money or collect payments from their customers

• 1:27:39Speaker 00

  or build their community or whatever. Yeah, I hope by 2030, we have a billion people in the world accessing an open financial system every day through products like Coinbase and others around the world. And basically it just, that economic freedom has all these positive downstream effects in society with people having stable currency and the ability to earn a living and to get a loan when they need it. And just having access to good financial infrastructure, it can help uplift, you know, a billion or more people out of poverty and give them more opportunity in life. And we'll probably see a whole nother category of applications that get built that are sort of in this new decentralized way on web three. So that's a, I hope that'd be a lot to get done by 2030, but I think

• 1:28:24Speaker 00

  it's definitely possible.

• 1:28:25David Hoffman?

  Brian, it's been 11 or 12 years, something like this, since you entered and started.

• 1:28:30Speaker 00

  Yeah, 10 and a half, almost 11, maybe.

• 1:28:32David Hoffman?

  10 and a half, okay, so you're on your second decade here.

• 1:28:35Speaker 00

  Yeah.

• 1:28:36David Hoffman?

  Is this where you thought you'd be? Are you kind of surprised at that Coinbase is as large as it is? That crypto is over a trillion dollar asset class? Or is this like for you, right on schedule?

• 1:28:49Speaker 00

  Well, I always hoped that something like this would happen. I mean, I didn't know, I knew for sure that there was a lot of ways that it could not happen. But I thought it was at least possible. You know, before Coinbase, I had actually, I was working at Airbnb. I was like a early employee there and I'd seen Airbnb had gotten quite big, quite fast. And I was like, okay, this is at least possible. It's in my realm of possibility, you know? And, you know, one thing that I underestimated was that I thought crypto payments, like commerce, things like that happening with crypto would have moved a lot faster. I remember in like 2014 and things like that, we were running around signing up all these merchants online. And I was like, I was like, I don't know, within five years, you know, probably 5, 10% of e-commerce

• 1:29:34Speaker 00

  will be happening in crypto or something like pretty big. It turned out I was way too optimistic on that. But a bunch of other things happened that I was totally didn't predict and took off way faster. You know, things like DeFi and NFTs and, I mean, even just like the trading use cases. And I didn't predict, I didn't predict a lot of it. So I was excited about the space and I'm glad that we just started to build things as best we could. But some, you try a lot of things, some of them work, a lot of them don't. And that's, that's just the nature of innovation in entrepreneurship.

• 1:30:06David Hoffman?

  Brian, since you've seen almost everything that there is to see firsthand in this industry, and we are entering, you know, more in the middle of a bear market. And Bankless got built in a bear market, DeFi got built in a bear market. Coinbase got built before I think there really even was a meaningful market at all. What advice do you have for the people that are putting on a builder's hat in 2023? I mean, you started as a builder. I think you still consider yourself a builder, even though you've elevated yourself beyond being an engineer. For the people who are just now starting their first companies or first projects or engaging in any sort of builder capacity, what advice do you have for them in the world of crypto nowadays?

• 1:30:49Speaker 00

  Yeah, well, that's exactly right. I mean, a lot of days and years actually went by where we were just kind of showing up to work every day, hanging out with our friends, writing some code, talking to some customers. And there was periods where people felt really down, you know, in the company and crypto in general. I remember people would come up to me and say like, what are you going to do now that Bitcoin has failed? And I'm like, I don't think it has failed. What do you mean? And they're like, oh, he doesn't realize it. Okay, I was just like, move on.

• 1:31:19Speaker 00

  Yeah, and you know, don't be in it for the glamour, like, you know, just build it, build something if you like building stuff in this industry. And that's what I tried to do is just like tune out the noise. And frankly, like, if all we were going to do is show up every day and like, hang out with our friends and write some cool code and maybe some people would use it on the internet, I thought that was fun. I, you know, I always hoped it would grow and become much more mainstream. But, you know, if I stopped getting invited to fancy conferences, or, you know, the New York Times wrote something, you know, mean about me or whatever, I tried not to let it bother me because that's not really the reason I got into it. I don't really care what other people think. I just want to work on stuff that I think matters and helps the world. And I know not everyone's going to like that. Basically, anytime you're doing something that

• 1:32:02Speaker 00

  is innovative, you have to be willing to be ridiculed for it a little bit. Because if it was a obviously good idea that everybody liked, you know, someone would already be doing it. So that's kind of the nature of disruptive innovation is it has to, it's like Peter, that Peter Thiel thing, it's like, it has to be a good, a good idea that that sounds like a bad idea. It's like, most people have to think it's a bad idea, but it's actually a good idea. It's contrarian.

• 1:32:28Speaker 00

  So if you're not working on, if you're working on something that everyone thinks is a good idea, that's actually probably a bad sign. It means you're about to have a correction back.

• 1:32:34Ryan Sean Adams?

  Well, Brian, this has been a lot of fun. Thanks. Thanks again for coming on and sharing with you. Certainly, it's a different world than it was in 2021. But I just want to say on behalf of Bankless and crypto natives and people who really care about this community and this industry, thanks for not effing it up. Like sincerely, very glad that Coinbase, when there was in the midst of uncertainty and all sorts of platforms were failing and collapsing, Coinbase didn't. And appreciate you playing the long game and getting us through and continuing to build with us into the 2020s and into this decade.

• 1:33:12Speaker 00

  Yeah, thank you for saying that. We're doing our best and I have a feeling we're going to be sitting here in a year or two and things are going to be looking a lot different. So let's keep moving forward.

• 1:33:20Ryan Sean Adams?

  Yeah, let's do it. Action items for you, Bankless Nation. Want to leave something in the show notes. You got to get involved in crypto 435. That is the advocacy that we were talking about earlier in this episode. So if you're in the US and you want to make your voice heard, sign up for that. Of course, got to end like this. None of this has been financial advice. How dare you think it is?

• 1:33:41Speaker 00

  Crypto is risky. You could lose what you put in. We're headed west. This is the frontier. It's not for everyone, but we're glad you're with us on the Bankless journey. Thanks a lot.

• 1:33:49David Hoffman?

  Hey, we hope you enjoyed the video. If you did, head over to Bankless HQ right now to develop your crypto investing skills and learn how to free yourself from banks and gain your financial independence. We recommend joining our daily newsletter, podcast, and community as a Bankless premium subscriber to get the most out of your Bankless experience. You'll get access to our market analysis, our alpha leaks, and exclusive content, and even the Bankless token for airdrops, raffles, and unlocks. If you're interested in crypto, the Bankless community is where you want to be. Click the link in the description to become a Bankless premium subscriber today. Also, don't forget to subscribe to the channel for in-depth interviews with industry leaders, Ask Me Anythings, and weekly rollups where

• 1:34:33David Hoffman?

  we summarize the week in crypto and other fantastic content. Thanks, everyone, for watching and being on the journey as we build out the Bankless Nation.