What next for crypto? | Brian Armstrong, Co-founder & CEO of Coinbase

Bryce: [00:00:15] Welcome to another episode of Equity Mates, a podcast that follows our journey of investing. Whether you're an absolute beginner or approaching Warren Buffett status, our aim is to help break down your barriers from beginning to dividend. My name is Bryce and as always, I'm joined by my equity buddy, Ren. How you. 

Alec: [00:00:30] I'm very good, Bryce. I'm very excited for this episode. We love speaking to CEOs of listed companies and we've got a massive CEO here over in the US. But exciting news that they're coming to Australia. 

Bryce: [00:00:42] That's it. Really pumped. And it is our absolute pleasure to welcome Brian Armstrong to the studio. Brian, welcome. 

Brian Armstrong: [00:00:48] Thanks, guys, for having me. I appreciate it. Excited to be here. 

Bryce: [00:00:51] So Brian is the co-founder and CEO of Coinbase. Brian and his co-founder Fred Erson founded Coinbase in 2012 as a way for investors to trade Bitcoin and other digital currencies. Ten years later, Coinbase is a $20 billion company listed on the Nasdaq with more than 43 million users worldwide. So we are very fortunate to have Brian with us today. And we're going to unpack the story of Coinbase, its expansion and the future of crypto. So let's get stuck in Ren. [00:01:20][29.5]

Alec: [00:01:20] Let's do it now. Brian We love to start these interviews by having the CEO describe their company in their own words. So to kick us off today, what is Coinbase? [00:01:29][8.2]

Brian Armstrong: [00:01:29] Yeah, sure. So Coinbase is the primary financial account for people accessing the crypto economy. So that basically means we help them buy and sell crypto, we help them store it, and then we actually help them use it in a variety of ways. Whether that's paying for things online, whether that's using Dapps and Web three, which a lot of people are interested in, whether it's using Defi. And of course, trading to trading is kind of an early use case for crypto that kind of kicked this whole thing off. So yeah, we've, we've grown a lot since then. And yeah, actually in the interview I think you said 43 million, we're up to 103 million verified users now. So these are growing a lot in the last ten years. And I just I had to get in that that little correction. But no, you know, it all started with just me on a laptop, you know, hacking on a prototype. And now we're a public company and, you know, almost 5000 people so it's it's pretty crazy journey over the last ten years. [00:02:20][51.2]

Bryce: [00:02:21] Yeah huge growth story and apologies 103 V 43 I'll be correcting that as well. So fair fair play. So Brian, when you started Coinbase, as you said back in 2012, Bitcoin was only a couple of years old. Etherium hadn't even been conceived yet. What did you see in 2012 and how has the journey been watching the development of the crypto ecosystem? [00:02:45][24.4]

Brian Armstrong: [00:02:46] Yeah, so actually the first thing that I saw was was in 2010, it was probably around December or the holiday season in 2010. And I was at that time I was working at Airbnb as a software engineer, product manager type role, and I was really just home for the holidays visiting my family. And, you know, sometimes it gets overwhelming of too many family in the house. And I was kind of upstairs in my room just reading things on the Internet, and I happened to be on his website, Hacker News, which many of your listeners may have heard of. But I happened to see the Bitcoin whitepaper in 2010 at that time, and I remember reading it and it kind of struck me. I was like, Wow, this is a really powerful idea. It's kind of talking about how instead of having, you know, an Internet that's global and decentralised where we can move information around, what if we had something kind of like that? But it was for moving value around and money in all types of value. And I remember reading it and thinking like, that's a really powerful idea because it always seems so broken to me. How money moves around the world, like every country has its own little proprietary, you know, system and product and like, you know, there's usually a local oligopoly of players. And if you want to move money across border or pay out people in various places around the world, which I had seen, you know, as an employee at Airbnb, I had tried creating a company previously that had trouble doing this, and it always seemed like there was just wasn't very much innovation happening in this space. You know, like WhatsApp, for instance, allows you to send a message anywhere in the world instantly for free. Right. And it's just sending some bits of data. Well, payments are just sending bits of data every time you swipe your credit card or you move a wire transfer. But why? Why isn't it free and instant and global in payments to and it's there's so much legacy baggage and and tied up in all of this it's in every country sort of pushing their own system that there's no global open standard for money and value. So I got really excited about that idea over the coming six months and 12 months, I, you know, I couldn't stop thinking about it. And I went to a couple of Bitcoin meetups in around the San Francisco Bay area at that time where I was living. And there was a lot of early people there, you know, they were like kind of half crazy people and half like anarchists and stuff. And and then the other half were like these computer science, Ph.D. type people, like working on various crypto algorithms, cryptography. So it was a really weird environment in that time, and there was already a couple of crypto companies that were out there like Mt. Gox, and there was one in the Bay Area called Trade Hill. So you might laugh at this, but I thought I was actually like, probably I was too late. I remember in 2010 11, I was like going out there. I was like, I think maybe I'm too late to start this company because like, early people are already making these things. It's such a silly idea in hindsight, but I basically just couldn't stop thinking about it for like six months. Told all my friends about it. They thought it was crazy that they thought it sounded stupid, but I couldn't help myself. I started working on a prototype nights and weekends, and that's kind of what eventually led to this. [00:05:36][170.2]

Alec: [00:05:36] Yeah. Wow. It's it's an amazing story. And the Coinbase story, you know, you've scaled with the crypto ecosystem and and you've really built a reputation for working with regulators and trying to, I guess, take some of the legacy financial players and regulators on the journey with crypto. And it's led you to be one of the first listed cryptocurrency exchanges. I'm interested to know how the conversation has changed from when you were first having it in 2012, 2013, 2014 to now. When you're having it in 2022, how have the legacy players sort of responded to crypto and how has that changed over the journey? [00:06:13][36.9]

Brian Armstrong: [00:06:14] Yeah, so early on, you know, I got a lot of blank looks when I told them nobody had really heard of Bitcoin or anything at that time. And I remember, you know, we were reaching out to like local banks and things like that, like, hey, can we get an account set up for this thing? And we have an exchange for this digital currency platform and we want to be able to process payments. And at first people just didn't even know what it was. Later they were like pretty anti anti this. You know, there were so many other stories that came out early on about like Silk Road and like illicit activity and um, you know, you still see some of that now that it was like ten bucks, the amount of it was like 90% scary stuff back then and now it's like 10% scary stuff, like probably even less right back then. I remember actually one, one bank that I called, I was like kind of trying to find a bank to work with us. And they were like, We do not work with Bitcoin companies, click and they like hung up on me, you know? So I definitely got a little bit of that kind of stuff happening. But you know, basically through our contacts with early investors, we managed to get an early bank partner to work with us. We started investing early on in compliance and having like a really strong kind of know your customer programme. I basically that the thesis I had early on was that this right, this industry is eventually going to become regulated and treated like any other kind of financial services. So the regulatory environment takes a while to evolve, but let's just do something reasonable in the meantime and kind of show good faith effort to build the kinds of system that we think will eventually be required, and then that will help us get off the ground. We also went and, you know, I was a software engineer and normally I would just kind of wear the t shirt or whatever like I'm wearing now in a hoodie or whatever. But, you know, when I'd go meet with regulators, Fred and I would put on the suit and, you know, we went to talk with folks who were kind of doing these money transmitter regulatory regimes in the United States, where it's state by state. And then we eventually started doing it internationally as well and basically trying to be an educational resource, trying to just show up and be reasonable people. It's one of these one of these things I've noticed about human nature is oftentimes that people hear about something in the abstract. They're sceptical, right? They're like, Oh, this is just some crazy person on the Internet saying these things. But when they actually meet you in person, it's a lot harder to, like, be, you know, absurd or like, you know, not trust somebody. Like if you're if you just show up and you're reasonable and you can communicate some stuff and they're like, okay, this this person is not a bad person. They're trying to do something good in the world. Like maybe there's some iteration they need to do. But anyway, that kind of stuff goes a long ways, like these personal relationships matter. And so, yeah, I think Coinbase has built really that's kind of what we're known for is building the most trusted brand in crypto that's compliant, it's regulated, we have great cybersecurity. A lot of people trust us to store their crypto. We've kind of landed deals with like the biggest financial firms out there in the world, like BlackRock. And and then they also trust us for ease of use. Like our products are intended to make crypto easy and understandable to everybody. You don't have to have like a computer science Ph.D. or be some kind of like, you know, quiet trader or whatever. We want to make crypto accessible, although we have we have people, by the way, who are both of those things who also use Coinbase. But, you know, most people in the world are not. And so we want it to be accessible, most trusted, easiest to use. That's kind of how I always think about our product offering. [00:09:30][195.9]

Bryce: [00:09:30] Yeah, I love that you're you're now entering into Australia. We're really excited about that. I guess the question is why, why Australia and and how do you plan to take market share. Because with it what feels like more and more cryptocurrencies coming into the ecosystem every day, there's more and more exchanges now available. So yeah, how do you plan to take take market share from some of the main players here in Australia? [00:09:54][24.1]

Brian Armstrong: [00:09:55] Yeah, so we're really excited to launch in Australia and I think one of the reasons is that, you know, Aussies have this history of kind of really embracing innovation and they've been on the forefront of a lot of that kind of. Do your prior question about the regulatory side, I mean, we went in and decided to kind of register. With AUSTRAC and really do this officially. And we created a local entity in Australia. We hired amazing team locally on the ground. We did went and did integrations with Pedi to make it really easy to get Australian dollars into and out of people's accounts. You know, we're even kind of enabling some of the more advanced trading functionality for our users that want to do that right in the app. And so look, you're absolutely correct. There's actually lots of crypto companies now and I consider this to be a good thing. It's kind of like, again, going back to my early example of the Internet when the Internet first came out, it's not like one company is going to win the Internet, right? The Internet is sort of a tool that's going to be embedded into all kinds of different things in the economy. And that's how I feel about crypto, too. So yeah, there's going to be some exchanges and trading that goes on. There's going to be people building crypto games, there's going to be decentralised social networks, there's going to be people creating new kinds of like organisations around dollars or like creative stuff around nfts. So, you know, the way I think of Coinbase is the way we differentiate it. We're not trying to be everything to everyone in crypto, but what I do think we've been able to do is basically, again, build the products that are the most trusted and the easiest to use. So if people, retail customers want to come in and just, you know, they're getting they're still still understanding crypto, they want to buy a little bit of it and get some exposure to it as an asset class and then actually start to use it. Coinbase is a place where you can do all of those things in one app. We're not trying to be just just a trading platform for professional traders. We're trying to also allow people to go use their crypto in a very seamless and easy and trusted way. We're doing that for retail. We're also doing it for institutions, by the way, some of some big investment funds and hedge funds, pension funds. There are also we run the largest kind of institutional platform for crypto as well called Coinbase Prime. So these are all good things that we can do, any market that we go into and hopefully, you know, we want to like help the whole crypto industry grow. It's not really about anything about I'm much less focussed on competition with any other particular crypto company and much more focussed on like how do we grow the size of the pie? 100 X Yeah, yeah. [00:12:14][138.5]

Alec: [00:12:15] Now, Brian, speaking of growing the pie, 100 x in the crypto world, there's so much happening and we want to, I guess, get your thoughts on some of the big things that are happening. But we want to make it a bit of a game. So we're calling it hot or not. We want to throw out some of these, I guess, big moments in crypto or these big concepts and get your thoughts on them, whether you think they're hot or not. But also, I guess a quick why and we've got to start we're recording this here in Australia on the 16th of September. The Etherium merged, happened yesterday. So hot or not, the Etherium merge very hot. [00:12:52][37.4]

Brian Armstrong: [00:12:53] I'm super proud and like, you know, just admire the team that had that that launch finally come together and I think it's great for the merge is great for theory. I mean not only in terms of like scalability and the roadmap they have there, but also in terms of improving the decentralisation of Etherium because it doesn't have to have so much CapEx of these miners and certain data centres or it's also improving, you know, the energy efficiency of Etherium. So anyway, you told me short answer is I'll try to keep it short. I'm on a dream merge. [00:13:22][29.8]

Bryce: [00:13:23] All right then. Hot or not? Central bank, digital currencies. [00:13:26][2.8]

Brian Armstrong: [00:13:28] Okay, so I have to think about this first thing. I mean, central bank digital currencies I think are an important step to get more people bought in who are kind of sceptical on crypto. But honestly I think the decentralised cryptocurrencies are the more important innovation that's going to be much, much bigger. So I'm hot on central bank digital currencies to help people get into crypto, but I don't think it's the actual big opportunity. But that's a diplomatic enough answer. [00:13:51][23.2]

Bryce: [00:13:51] You can it's not you can say no, you can say no. [00:13:53][2.2]

Alec: [00:13:54] You could also say lukewarm if you just want to if you don't want to commit to either side, but hot or not, one of the hottest areas of at least the last couple of years. [00:14:03][9.7]

Brian Armstrong: [00:14:04] Nfts yeah I'm hot on NFT is I think I think they're the real deal. They're here to stay. You know a lot of things in crypto, they go through a big initial hype cycle and then they connect down. And that's kind of where it feels right now. But the long term potential, I think is enormous. And yeah, we've we've launched our own product in that space quite of because we think it's going to be a big deal. [00:14:23][18.8]

Bryce: [00:14:23] All right. A couple to go hot or not Web3. [00:14:25][2.2]

Brian Armstrong: [00:14:27] Again, I'm hot on Web3. So I think, you know, look, it's kind of a buzz word. People are like, what does that even mean? Right. You know, look, web one was all about reading kind of static Web pages. Web two was about reading and writing. You had like interactive web pages. Web three is about reading, writing and owning. So now people can launch these communities. Imagine like Uber or Airbnb or Wikipedia or whatever that, you know, if people had actually who had contributed to growing those marketplaces and platforms, if they enabled being able to own a piece of it for all the work they did, that would have been super cool. So I think Web three is a big deal and more and more apps are going to get built in that style. [00:15:00][33.9]

Alec: [00:15:02] And then Brian one more we should it the learning the price now taking from this is if we're speaking to a CEO of a crypto company. We should expect you to be hot on most of the things in the crypto ecosystem, but hey, we'll ask it anyway. Hot or not, the metaverse. [00:15:18][16.1]

Brian Armstrong: [00:15:19] Yeah. So you're right. I'm hot on the metaverse too, I think, you know. Look, look, I'm like I'm pro technology. I think technology like one of the best ways to improve the world. And so do I know exactly when these things are going to take off? No. But like as a long term trend, I think they're great. You know. Yeah, the metaverse, by the way, it plays pretty well with crypto, I think in the abstract at least, because if you're going to have a persistent world with different things that you actually own, you don't want it to be like, you know, an in-game item that like some centralised company you control that you want to actually own it like these digital items and have them be provably unique. So to me that sounds a lot like NFT is I think I think a lot of the best metaverse platforms are going to have NFT as sort of like, you know, whether it's a spaceship or some house or, you know, property in Decentraland. These things are going to be the NFT is in my view, and I actually think Coinbase probably should be doing more here to kind of integrate with some of the early metaverse platforms. Like I don't know if you guys have been playing around with any of the latest Oculus stuff like Horizon Worlds and stuff like that. But I think, yeah, there are some cool opportunities there. [00:16:24][65.8]

Bryce: [00:16:25] One of my New Year's resolutions this year was to try and buy some property in Decentraland, but when I logged on it is ridiculously expensive, more, almost more expensive than residential property here in Australia. So anyway, the dream, the dream continues. So Brian. [00:16:39][14.6]

Brian Armstrong: [00:16:39] Where I was surprised how much it cost. [00:16:41][1.4]

Bryce: [00:16:41] Well, yeah, I know. It's ridiculous. So Brian, we're living through a bit of a crypto winter at the moment. Some of us are feeling the pain. How have investors on the Coinbase platform been positioning their portfolios? What are you kind of saying is some of the activity that's been going on? [00:16:57][16.1]

Brian Armstrong: [00:16:58] Yeah. So I think, you know, look, if you're going to be an investor in crypto or even just try to use crypto for a variety of things, you do have to have a strong stomach. You know, this is still an early industry and I've gone through four of these cycles now, so for me it's feels a little bit normal, but each one is still a little difficult. I can only imagine how difficult it is for people going through their their first cycle of I remember actually back, I think it was in 2011, I went out and bought a little bit of Bitcoin. I didn't have any money at the time, but I bought like maybe $500 or a couple hundred dollars or something like that is like and I bought a bitcoin at like $11 and it probably crashed down to like $2 per bitcoin. And I thought I was such an idiot. I was like, Oh my gosh, I'm like the worst investor ever, you know, basically. But I didn't sell. I just kind of held on to it. And obviously over a period of many, many years like that worked out great. And so that's the that's the lesson that I tell a lot of people. If you are going to kind of invest in crypto or anything like that, but start with some de minimis amount that you're not super attached to that you'd be okay if it went down to zero, right? And in theory, not that it's not necessarily that it is, but crypto has gone through some corrections of like 85%. 80%. Right. We just recently went through one of at least 70% or something. So if you can hold through multiple through a cycle at least or multiple cycles, ideally, ideally just put 1% of your net worth and hold it ten years or something, then you're going to be fine. But if you're trying to kind of, you know, trade day to day and I think it can be very stressful and people get into all kinds of crazy situations. So yeah, dollar cost averaging, take a long term mindset, put a small percentage in that that you're not willing, you're not going to be too stressed about and then you'll be able to hold for the long term. I think that part is a much better approach. Yeah. [00:18:42][104.5]

Alec: [00:18:43] Yeah. It is just amazing how resilient bitcoin especially has been, just falling 80% four times in a decade and at least historically coming back every time. It's it's pretty rare that an asset does that. So there's something there. And the other thing that we've sort of seen this year is the some of the big, I guess, companies in the crypto ecosystem collapsing or nearly collapsing. Celsius three Arrows, Terra US de Lune are some of the names that come to mind. How are you sort of thinking about what's happened this year, not just with the price of crypto assets, but also with some of the companies in the crypto ecosystem? [00:19:25][41.4]

Brian Armstrong: [00:19:25] Yeah. So as you mentioned in this in this downturn, which happened to coincide with a broader macro economic downturn, we did see some kind of contagion from certain firms that were a bit over leveraged. And you mentioned a few of them. I guess the way I think about it is that, you know, in that sense, crypto is not too different from the traditional financial system in a in a down market, you know, some hedge funds that get over levered and these things tend to blow up. It's actually not that different from the traditional financial system. The difference in the crypto world, I guess, is that, you know, it didn't require any kind of government intervention or bailout or anything. And that's kind of what's amazing about crypto is that it's built this truly decentralised more global crypto economy and it's so far like operated incredibly well even through a massive correction in the broader macro and foreign. I mentioned that everything went down 70, 80% and still crypto just kind of keeps on functioning. So if there was a couple firms like this that were highly levered and, you know, they should probably do a better job like disclosing these things to customers about exactly what they're doing. And customers need to be made aware of how their funds are being used. That part is like we'll leave that to others to figure out like in the courts or whatnot. But, you know, in general, I think it showed that the crypto economy is very resilient. And luckily Coinbase didn't have any exposure to these particular firms, and we've taken a pretty conservative approach to the long term. So having been around ten years, it's given us a good perspective on how to weather any of these storms. And yeah, that's something we'll keep doing for many decades, hopefully. [00:20:52][86.3]

Alec: [00:20:52] Yeah, I was reading something about Three Arrows and the analogy was made to long term capital management, which was a a stock trading firm in the late nineties that collapsed massively. But the Federal Reserve stepped in to backstop them to bail out a lot of their customers because they were similarly, you know, massively overleveraged. And there was a bit of systemic risk there. I guess the difference in the crypto ecosystem is when three arrows gets overleveraged, the Federal Reserve doesn't step in and bail them out. But you're right, the there hasn't been as much contagion across the industry as as some may have expected. Is that just really good risk management from the point of view of crypto CEOs or like how do you attribute it could have been a lot worse and it wasn't. So what do you sort of put that down to? Oh, was it just Sam Bankman-Fried opening the chequebook and backing up a lot of companies? [00:21:47][55.2]

Brian Armstrong: [00:21:48] There's always opportunities and down markets. So I think, you know, lots of companies are out there sort of looking at opportunities, but at least the way I think of it, just because a company gets in trouble financially, it doesn't mean that it should be bailed out. Right. Like it's part of a healthy function of capitalism is that, you know, good companies get more capital to allocate and that company, sometimes they go away. And so those people can kind of move on to more productive areas of the economy. So it's funny, even if you go back to the Bitcoin Genesis block, you may know this already. I'm not sure some of your listeners may, but it's in the original, the first Bitcoin block there was never mind, you know, Satoshi whoever that was decided to mint into or not meant to mine in that block this headline from the times that chancellor on the brink of bailout and so bitcoin really was born as a as a result of the 2008 or in that in that environment the 28 financial crisis. And it's kind of saying, hey, why do we why why are we taking taxpayer money and bailing out like these these things that create lots of risk and there's like moral hazard issues and all these kinds of things. So, I don't know, maybe, maybe I'm just a diehard capitalist at heart, but I do think that creative destruction is a real thing in capitalism. If something's not working, if it's not creating enough value or it took too much risk, it should probably go away because that's like it's a signal to the rest of the market about how to manage customer funds appropriately and how to build resilient companies that do have long term capital management, not just not just a name. [00:23:18][89.8]

Bryce: [00:23:19] Now, Brian, no doubt you've got your finger on the pulse with what's coming down the pike in over the next decade or so in the crypto ecosystem. So before we touch on that, we're just going to take a very quick break to hear from our sponsors. So Brian, with everything that you're sort of saying at the moment, we we went through in the game nfts web3 metaverse plenty going on, but what are some of the areas of the emerging crypto ecosystem that you're really excited about that you think, you know, this is this is what I'm going to tie myself to. This is what everyone should be sort of following and thinking about. [00:23:52][33.6]

Brian Armstrong: [00:23:53] Yeah. Well, I'll give you an example of a couple of things that are already here today and then a couple on the horizon. So, you know, one thing is staking, right? Like people are now able to earn yield on their crypto assets, kind of like, you know, a savings account or something like that in the traditional world that you can actually direct your own funds and stake them that what you're doing, by the way, that's a fancy word of just saying you're helping these crypto networks achieve consensus is kind of a very high level way to think about it. And Coinbase makes it really easy to kind of flip a button, begin to stake your crypto assets, and then you can earn a yield on this, and then you kind of get payouts from it every every day or week or month. We also have something, a self custodial wallet called Coinbase Wallet. The name is probably a little confusing, but what it means is a lot of times people start off by buying their own crypto and they want to store it on a centralised, you know, brokerage or exchange like Coinbase. And that makes it really easy for them to get started. But increasingly they want to go use their crypto in more and more ways, including in web three and actually sort themselves is a longer conversation. But anyway, we've made it really easy for people to transfer their crypto into something called Coinbase Wallet and now they can go use this whole world of dapps or decentralised apps that are being built in web3, which is really exciting. We also have a product called Coinbase Cloud, which is essentially, you know, it's sort of like Amazon Web services for crypto. And so any kind of business or Start-Up that wants to integrate crypto, we have a suite of APIs that makes it really easy to do that. You know, we even have something called Coinbase Commerce that's letting people accept crypto payments. And we're seeing crypto payments grow in some areas that are like not so much brick and mortar stores, like local coffee or whatever, but more like online marketplaces. And our own applications are sort of like the early adopters of this communities where the only way to pay is with crypto, because it's truly a global online community, it's not based in one particular country. So those are a few things. And, you know, there's a lot of cool stuff coming down the horizon as well, which you're just starting to see in crypto. Like decentralised identity is a way, you know, traditionally people have had their online identity is with a big tech company, Google, Facebook, Apple, or in the traditional world, they have their identity with the local government, where they where they live, you know, there's a printed piece of paper or ID or something. But in the crypto world, you can actually own your own identity. And it uses kind of public private key cryptography, which is probably beyond most people. But the goal of it is like you can own your own data, you can make sure to be the one who signs into any profile and like you own that it's not controlled by some big tech company. There's there's a lot of other stuff we can talk about. There is decentralised social media. There's I think like crypto cities are sort of on the horizon, which could be really cool and you know, daos are going to be pretty interesting, but I'll leave it. There are probably too many things to even answer now. [00:26:35][161.5]

Bryce: [00:26:35] I love that, love that, but I want to put our in investing or investor cap on now because a lot of our listeners, you know out there building portfolios in listed markets and you've gone from being a software engineer in 2010 to now as CEO of more than 5000 people, a company with a market cap of $1,728 billion. It's been quite the growth story and I'm sure you've learnt plenty along the way. So what have been some of the, I guess major surprises or major learnings for you over the last sort of ten years in in from you, from your own point of view, leadership, managing people, things that you didn't expect to be the case. Hmm. [00:27:19][44.6]

Brian Armstrong: [00:27:21] Well, I see there's a lot of things we could jump into. Look, one thing I've noticed just about creating companies is that probably the number one skill set is around determination and resilience. You know, it's actually like I don't think, you know, I wasn't like the smartest person who ever tried to build a company in this space. I was not the best at fundraising. I don't think I even necessarily had like the most brilliant idea or anything like that. It's like it's it's it's 99% perspiration and just execution. And you have to be kind of unreasonably determined to be a founder because starting any company, it's just going to be setback after setback. And you know, if you're starting a company because, you know, you just want to make money or something like that, it has to be about something bigger than that, something you're really passionate about, because otherwise you're going to be two, three years in. Nothing's working, you know, someone's suing you, this person quit, you know, your stuff got your code sucks or whatever, and you're just going to give up because it's just you have to move from one setback to the next with enthusiasm is a great quote that I like. So that's one thing I've kind of learnt about determination. Another quote that I like is like you. She produces information, right? So people often will kind of like debate at these things endlessly, like, well, what is this going to happen? Or is that? And I think this and I think that and it's kind of like you're looking at this mountain that's shrouded in fog and you're at the base of the mountain and you're like, I want to get to the top of that mountain, or at least pretty far up it. And look, at some point like the only way to do it is you have to take a few steps into the fog, into the unknown, because once you take a few steps, you can then see a few more steps ahead and maybe you're maybe you're up against a cliff or maybe you have to backtrack or maybe you see another few steps that keep going up. And that's great. But I do I do see this a lot. Like most people in the world, you know, they have ideas and they think about like, what if that and what if this and someday maybe I'll do it. But the entrepreneurial mindset is just like action produces information. Just just do something. Even if it's anything, if it's the wrong thing, it'll, it'll help you think about what the right thing is. And there was many times in my life at Coinbase where I didn't really know what to do, and so I just started doing random things or anything I could think of. And most of them weren't the right thing. But oftentimes, right as I finished doing the thing that was not the right thing, I'd be like, Actually, I know what I know what I should have done, right? And so that's been a great lesson for us as well. [00:29:41][140.3]

Bryce: [00:29:42] Yeah, yeah. I love that. Action produces information. Alec and I, we've only quit our corporate jobs a couple of years ago and sort of feel like we're in the same. Well, not not the same situation, but a situation of, you know, trying to get to that top of the mountain covered in fog. And I think that's a great something that we'll definitely take away. So yeah, that's good. [00:29:58][16.4]

Alec: [00:29:59] Yeah. One thing, keeping our listed stock market investor hat on one. One thing that Bryce and I are really fascinated in are what like the metrics that matter and the metrics that don't, because there's a lot of noise in the world of the stock market. And Bryce and I both come from a retail background and when we were working in retail you realise that there are some metrics that just matter more than most are the ones that the media spend a lot of time speaking about. So I'm interested in your world of crypto of online exchanges. What are the metrics that really matter for you as the CEO? And you know, for us as investors, what are the metrics that we should really pay attention to? [00:30:39][40.4]

Brian Armstrong: [00:30:39] Yeah, it's a good it's a good question. I mean, what you end up measuring does change the culture of the company. And I guess as an investor, that's even it's even a more interesting question. I'll try the investor piece first, then think about Coinbase. I mean, so on the investor side, you know, look, the simplest thing that people always look at is the price, right? And so much ink has been spilt kind of with people writing in the press about the price of this is up, it's down, you know, this much. And it's really to me, it always strikes me as kind of like a very short term mindset around like if it's up, that's good. And if it's down, it's bad. That never really makes sense to me because, well, first of all, if it's down, maybe, you know, you should buy low. Sell high. If it's if it's up, maybe it's already overvalued. And so this on the face of it, that advice might be wrong. But I think well, I always cared about what crypto was, not so much what the price of it was, although that's nice and it gets more people interested in everything. But the thing I was always more interested in was are people actually using crypto more? Right? So I started looking at things like what are the number of transactions happening on these networks per day or per month or per year? Right. And what I was really excited to see over the last, you know, since maybe 2018 or so, is that, you know, people for the first six, seven years, the company people are always asking like, where are the use cases? This is all just trading. And people are speculating. And you know, around 2018 we started to see things like defi really take off and then we saw, you know, like crowdfunding and, you know, and fees. And now there's all this stuff like tons of apps and start-ups being built to the space. And so that is starting to I started to look at how many transactions per day are happening on these networks as a good indication of like real utility. So I don't know. That's just one high level idea. You can also look at like the number of GitHub commits for these different, different blockchains and and sort of get a sense of what the developer community looks like. I mean, you have to kind of tease apart the data because you don't want to just get fake commits, right? Some of them are just somebody can get in changing one line or whatever. But if you can somehow scrape like the data on GitHub and GitLab, and I think I've seen a lot of investors use that as sort of a proxy to understand, like how where, you know, where are the nerds spending their time on the weekends. That's a good indication of where things are going in the future in terms of Coinbase, in terms of what metrics we look at. So look, a lot of our Northstar, you know, our Northstar metric is really around like monthly transacting users. So it's again, it's not necessarily people just trading, it's like although that's one of the types of active user trading users that we have, sorry, transacting users we have. But it's also people, you know, they're, they're doing staking, they're doing peer to peer payments like they're earning money with crypto. They're, they're engaging with Dapps and Defi. And, and so this is another Northstar metric that we have internally is like, you know, how many people are actually engaging in the crypto economy in some meaningful way? Not just, not just like viewing a page or looking. To balance, but actually doing some kind of transaction. And what's cool is that we've seen in our own user base at Coinbase. It used to be like 90% was around trading know and only 5% or even less a few years back was around non-trading activity. Now we're seeing more than 50% of our users are active users are doing something other than trading. In addition to trading, typically with the crypto and different transaction types are really emerging. And that's that's really exciting to me because it shows that this has moved well beyond trading and it's now starting to be a true economy where people are earning money, spending it, you know, borrowing and lending and doing all kinds of things that aren't even anything to do with money, frankly, like identity and social media. So it's been pretty cool to see the evolution of the space. Hmm. [00:34:16][216.4]

Bryce: [00:34:16] Well, Brian, it's been an awesome conversation. We are unfortunately running out of time, so we will move to our final three questions that we ask all of our CEOs when they join us on the show. And it starts with the next 12 months. What's coming down down the product pipeline that you're able to share or major developments for Coinbase over the next 12, 12 months? [00:34:36][19.3]

Brian Armstrong: [00:34:36] Yeah, let's see. There's a few things. So, you know, I mentioned a few times decentralised identity. I'm pretty excited about that. I think being able to have a true identity is like a nice foundational piece of the crypto economy, because then you can have like reputation associated with that and like you can have an even a friend graph and start to follow people and all kinds of things emerge from that. So decentralised identity is something that we're already integrated into our products like Coinbase Wallet, you can go get a DNS name, they call it like a serum name system, and we make it easy and free for any user to go in there and claim a decentralised identity. So that's pretty cool. Another one is, you know, we launched a subscription product kind of kind of like Amazon Prime. It's called Coinbase one. And so for people who use the crypto economy a lot and they don't want to have like high trading fees, you can basically just subscribe to Coinbase one and then you get unlimited trading with no trading fees. So that's pretty cool. And then I would say we're going to keep doubling down on our policy efforts globally. And, you know, being in Australia, that was a big piece of what we did with with AUSTRAC and we worked with a number of kind of the local folks there like Blockchain Australia and the Royal Melbourne Institute of Technology just to kind of collaborate more. But there's a lot that we can do on the policy effort side. We're integrating a lot more of that into our products actually by helping our customers understand, you know, for their their policymakers in their and their local area. What are their positions on crypto? Are they pro-innovation pro crypto, pro sensible policy policies, by the way, around regulation that will help make sure this space is treated with on a level playing field with, you know, traditional financial services, but also preserve the innovation essential or, you know, are they still kind of anti crypto for some reason? And we want to make sure that all of our customers are aware of these kind of things in democracies around the world. So those are some of the things coming down the pipe in the next 12 months. [00:36:28][111.4]

Alec: [00:36:28] Brian, I've got to ask a follow up on Coinbase one. Bryce and I have a running joke that every business now wants a subscription, subscription service and then a streaming service as part of that subscription service. And we saw Walmart, of all people, add a streaming service to their subscription offering. Are you going to have a streaming service as part of Coinbase one? [00:36:49][20.6]

Brian Armstrong: [00:36:50] I totally feel you on that. Like there was that great meme during the pandemic that was like, you know, Netflix is this much like $9 and Amazon Prime and like Hulu. And then it was like Harvard University, you know, like $300,000 a year or whatever. And it's basically just sitting there in front of it streaming you just like, you know, everything else. But yeah, so we're not going to launch any video platform in the near future. But the reason why so many companies love these new streaming things is that especially in the public markets, they give you like a few. There's there's a huge benefit to having predictable revenue streams. Right. And there's it's sort of a call it quality of revenue. Right. And you as investors, I'm sure you're familiar with this, but you know, the trading fee business that we our original products were based around incredibly lucrative when people are doing high volume trading in up markets especially. But it can be so volatile where, you know, things that we just have, it's like feast or famine and that's fine from my point of view. And we don't because we zoom out, we think long term, right? Like maybe these are really good one year and not as good the next year. And we kind of smooth that out over a two or three year period. But in the public markets, they don't like that. They want your revenue to be predictable and there's a real premium for that. And so I think there's a way we can make it win win. It's actually better for customers because they can basically just pay one fee, know exactly what that is, and then have unlimited trading and doing all kinds of other things, not just trading crypto like, you know, and fees and staking get they're getting better rates. And so if it's just like peace of mind, I think if people want to pay that flat fee and then never have to think about it again and it's better for the company because they get their revenue streams are more predictable. So anyway, a little inside baseball there. Um. [00:38:27][97.8]

Bryce: [00:38:28] So Brian, what's the biggest risk to your business at the moment? [00:38:31][2.7]

Brian Armstrong: [00:38:32] The biggest risk is probably that we just have a lot of new employees that haven't gone through a crypto cycle before. So I do feel like a lot of my job is just kind of keeping everybody in the boat and don't let those not get distracted. Let's just keep building great stuff. Traditionally, these down cycles are actually big moments and opportunities to go build the best stuff that's going to help us get out in the next bull run. If you look historically, the down markets have actually been actually really good for us as a company. But the first time people go through it, it's super scary, right? And like, you know, their friends and their family are sending them these these news articles about, oh, my gosh, this isn't like crypto failing or whatever, you know, negative stories out there. So a lot of my job is just combating that and trying to be more visible and vocal in these moments and tell people, you know, look like markets go up, markets go down. And in this case, it's not even a crypto thing. It's like the whole macro economy is down, but it doesn't mean like this trend is changing. Like, our our mission is still really important that we want to create more economic freedom in the world. We think crypto is a good way to do that. These products are going to go through cycles and they have a ton of upside. And so yeah, let's keep building the stuff that's the most trusted, the easiest to use in the crypto space. And I think it's all going to work out great. [00:39:40][67.9]

Alec: [00:39:40] And then, Brian, final question that we like to end all of our interviews with where long term investors here at Equity Mates. And you mentioned there that you like to zoom out and think long term and smooth out different years. If you think A, think about Coinbase in ten or maybe even 20 years, what does success look like? [00:39:59][19.0]

Brian Armstrong: [00:40:00] Yeah, I think that look, in ten years I hope we have at least a billion people accessing the open financial system every day through our products. Success is that we have a more global economy at that point where there's more economic freedom and things are more fair and they're more free. For the average person, it unlocks a whole bunch of innovation. Crypto is kind of considered this new global reserve currency that just, you know, eases and reduces friction in the global economy and unlocks innovation. So that's that's what success looks like to me in ten years. [00:40:32][31.9]

Bryce: [00:40:33] Huge goal. A billion people. Billion people. That is ambition. Love. It will. Brian, it's been an absolute pleasure chatting to you today. You know, I took so much from that episode and I'm sure the Equity Mates community did as well. We appreciate your time. Good luck with the launch here in Australia. We'll be watching closely and hopefully we can catch up in the future again. Thank you very much. [00:40:50][17.0]

Brian Armstrong: [00:40:50] Yeah, thanks, guys. That was great conversation and I love it. If people can go check out the app and let us know how it goes. [00:40:56][5.8]

Alec: [00:40:56] Thanks, Brian.