Kings of Crypto, book review: How Coinbase helped to reshape the future of finance

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Kings of Crypto: One Startup’s Quest to Take Cryptocurrency Out of Silicon Valley and onto Wall Street • By Jeff John Roberts • Harvard Business Review • 256 pages • ISBN: 978-1-647820-18-3 • £22 / $30

The biggest chance at large, unearned sums of money that I ever passed up was around 2008, when a guy sitting next to me at a tech conference suggested I should mine a few bitcoin. I looked at all the technical complexity that was necessary to do it and thought it was just too much trouble (it was!).

Where there is technical complexity, as dozens of early internet startups could tell you, there is a market opportunity.

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In Jeff John Roberts’ Kings of Crypto: One Startup’s Quest to Take Cryptocurrency Out of Silicon Valley and onto Wall Street, the founder who seized the opportunity was Brian Armstrong, and the startup whose rollercoaster he rode was Coinbase. Vintage purists will note the use of “crypto” for “cryptocurrencies” — a recent appropriation of the word, which for decades has denoted the more general “cryptography”.

In many ways, the story of Coinbase is little different from that of most startups: guy hits on an idea, seeks funding, has some ups and downs, and becomes book-worthy by either spectacularly flaming out or by building a successful business that’s the envy of other major businesses.

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What’s different about Coinbase is that its fortunes depended on those of the wildly volatile and scam-filled cryptocurrencies market, and on increasingly interested (for both good and bad) regulators and law enforcement. Neither of these external factors mixes well with the seat-of-the-pants we’ll-figure-out-the-legal-stuff-later ethos of many Silicon Valley start-ups, including this one. Otherwise, exploits like Coinbase’s use of geofencing to dupe Apple into thinking its app didn’t have to pay commissions would be less notable than Uber’s similar trick aimed at law enforcement.

Naturally, any company trying to make something complex and technical easy for the masses is divisive among some hardcore techies. Coinbase’s sin — which is the same sin as web farms, blog farms, and social media sites — is that it centralises something whose founding myth included decentralisation and unregulated freedom. In Coinbase’s case, that something is keys and hosted software wallets. At other times, the company’s own Silicon Valley roots got it into trouble: even a Silicon Valley bank rejected them as a customer when it realised the scams for which cryptocurrencies could be used. When the IRS demanded a copy of its entire customer database, the company fought back in court (and won).

Roberts does a good job of making complex background compelling: the hacker-libertarian culture that produced cryptocurrencies, the underlying technology, the conflicting motives of early adopters that were exposed when growth sparked heated disagreement over block sizes, and the passing craze for ICOs (Initial Coin Offerings). Despite all this, Roberts argues that it’s the financial industry’s turn to be fundamentally reshaped, just as others — hospitality, automotive, media — already have been, and Coinbase’s trajectory suggests how it will happen.

Roberts seeks to make some predictions in the final chapter, and argues his main point: that Coinbase will become a bank.

Predicting this stuff is hard. In The Currency Cold War, Dave Birch distinguished between cryptocurrencies, which he saw as an intermediate step, and digital currencies, which are now being studied for adoption by central banks, governments, and credit card companies. But by the time Coinbase becomes a bank — if it does — will banks still matter?

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