
Coinbase booked $1B in revenue last year, has told hovering VCs to back off - uptown
https://www.recode.net/2018/1/22/16911692/cryptocurrency-bitcoin-trading-coinbase-revenue-secondary
======
jcrites
If these reports are true, that's really impressive growth in just a few
years!

Congrats on hitting that milestone, Brian, keep it up!

~~~
ActsJuvenile
Wonder why Fred Erhsam quit if CB is crushing it. He doesn't strike me as a
"follow the heart" kinda guy...

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aetherspawn
When are they going to let me sell my coins from Australia... can buy but not
sell and no date advertised, just ‘soon’. I feel like I got scammed.

~~~
jsloss
They only recently put in a disclaimer clearly stating the ability to buy and
not sell, here in Canada. Was deceptive as hell before that.

Set up a GDAX account, send your coins there (save fees), then transfer them
to a better off/on ramp for your location.

------
aardvark291
Does this "$1B in revenue" include the $ that customers have deposited in
order to buy cryptocurrency?

~~~
tomhoward
It wouldn't, according to accounting principles. It would be accounted for as
deposits received, with a balancing liability for when the customer makes a
purchase or withdrawal.

They would only record revenue when they charge a transaction fee, or any
other charge/income that can't be used by/returned to the customer at their
discretion. Revenue is only revenue if it doesn't incur a matching liability.

~~~
aardvark291
I agree that that's how it _should_ work, but I wouldn't be surprised if
Coinbase wasn't completely orthodox in their accounting. Replies below
indicate that they may indeed be counting customer deposits as "revenue".

~~~
sethgecko
They have like 20m users, that would mean $50 deposited per users so.. no

------
goodoldboys
Looks like they can afford at least one FT customer service person now,
awesome!

------
kristianp
So is YC sitting on a 5% holding in a $3B+ company?

~~~
HorizonXP
More like 7%, and yes, YC will typically "sit" and not do anything. In fact,
given that Coinbase has raised recently, YC's share is probably higher than 7%
through the YC Continuity fund.

Who knows what will happen once an IPO happens, but no YC company has reached
that point yet. We'll find out soon with Dropbox.

~~~
kristianp
What do you mean 'who knows what will happen'? YC will have a big payday.

~~~
ActsJuvenile
I wouldn't bet on it. Coinbase valuation will drop drastically when Tether
bubble pops and bear market sets in.

~~~
SwellJoe
One can be short-term bearish, long-term bullish, on cryptocurrency. I am.
Tether is a disaster looming on the horizon for every cryptocurrency investor
and business, but it, too, will pass. Mt. Gox was very bad for crypto for a
while...and, then it didn't matter anymore.

If I were a betting man, I'd wager we'll see Tether play out similarly: Big
spike in price (which we've already seen), massive drop to something
reasonable based on actual demand and participation by real people with real
money (currently ongoing, though surprisingly drawn out...the Tether trick
seems to be working better than I would have believed, if it were pitched as a
film plot), and then long slow climb back to a new all-time high (two years,
perhaps).

Then again, at some point, something that works better is going to replace
Bitcoin. Maybe the terrifying Tether crash will be the straw that breaks BTCs
back. But, Coinbase/GDAX will be well-placed to profit from whatever that next
thing is, as long as they're vigilant for new opportunities and careful as
hell about security. Coinbase can only lose by making mistakes at this point.
They profit whether BTC is going up or down, as they take (very high) fees
regardless.

~~~
AlexCoventry
What's the most worrying news you've heard of, regarding Tether? It seems
sketchy as hell, but I haven't seen anything which would cause me to call it a
looming systemic disaster, yet.

~~~
tehlike
2+ billion dollar in imaginary money, with more coming every week, with no
real audit? I don't know, with wash trading and bots, it could be accounting
for > 80-90% of current marketcap.

~~~
tzakrajs
The market cap of tokens can be deceiving. But is it inherently broken to
suggest that there is fiat to backup each USDT?

~~~
tehlike
It is inherently broken to claim that there is usd for eqch usdt when there
isnt.

------
yorby
They should have enough money to scale up their servers to be able to handle
peek usage... not sure why they don't do it... maybe they like it that way
(they can claim that their servers are down when they want to stop trading?)

------
zerostar07
Why don't they build a competitor? It's not like it will fail.

~~~
bpicolo
Regulatory requirements are the hard part. The governments (of many different
countries) are by no means required to license you to do what they do - it's
not just a storefront, it's tons of financial regulation, they're even fdic
insured for cash deposits. It’s a legal challenge

~~~
zerostar07
but not much beyond that. almost guaranteed profit

~~~
bpicolo
Not sure that's true. Absolutely massive target for blackhats. Security has to
be off the rails good

------
rrggrr
If we don't start seeing real world DAP adoption and growth in legit crypto-
payments soon - this all comes crashing down. My gut tells me the market will
wait 4-8 months at best.

~~~
thefourthchime
I think the biggest thing that needs to happen is Lightning Network. If it
works like it should it'll be the end of slow transactions / high fees.

~~~
ActsJuvenile
Loading and unloading Lightning channels creates separate transactions.
Depending on how often an open channel is used, Lightning can increase the
transaction load.

~~~
gruez
needlessly opening/closing channels also costs transaction fees, so as long as
most users are rational, this wouldn't happen (too often).

------
debt
Screenshot'd this headline for a year from now, ya know _long_ after the
crypto thing has just absolutely imploded. Figure it'd give me a good laugh.

~~~
bfuller
Why don't you short bitcoin then?

~~~
lucaspm98
Out of curiosity, is there a feasible way to do this currently?

~~~
bitoneill
[https://www.investopedia.com/news/short-
bitcoin/](https://www.investopedia.com/news/short-bitcoin/)

------
pfarnsworth
What we need is the ability for people to do 1:1 forward or options trades on
their existing private shares. So if you have 10,000 RSUs or options in
Coinbase, you can instead write an options contract and sell that to investors
that will only exercise on IPO. The trick is making these contracts tradeable
on a secondary market but I don't see how Coinbase or whoever else could
regulate that, as long as there is a solid legal contract underlying it.

~~~
DenisM
This sort of activity is routinely prohibited by the share purchase agreement,
and exactly for that reason.

------
shepardrtc
I wonder if they're going to put that money toward generating 1099's for their
clients.

------
conanbatt
I like how Coinbase, trading a largely unregulated 'security', has the moral
indignity of telling its own investors that they better not be trading the
assets they purchased.

The fact that people cant buy or sell shares of private companies is
ridiculous in general, but particularly in this case.

~~~
gsylvie
If you don't like the terms of the shareholders agreement, then you don't have
to buy the (private equity) shares. But if you buy the shares and sign the
agreement, I don't see why the directors should honour illegitimate share
transfers you attempt to make in the future.

~~~
conanbatt
So if you signed a terms of service of Apple that said all your assets are
actually Apple's, you would happily comply?

~~~
Pyxl101
All contracts have consideration. If the consideration for the agreement that
all my assets are Apple's is $1 billion USD, then sure I would happily comply,
rather than risk voiding my contract.

More seriously: people should comply with the agreements that they sign. Don't
sign an agreement that says all of your assets are actually Apple's if you're
not happy with it. Read all of the fine print and don't be surprised later.

Don't buy stock in a privacy company if you're not happy with the constraints
on it. One of the common key differences between private and public companies
is that you can't sell or transfer stock in private companies without their
approval. You know that when buying it initially, or when agreeing to receive
it as compensation.

There are legitimate reasons why private companies don't want their stock to
be transferred willy-nilly. For one, it makes the cap table larger and more
complex, which complicates further funding or purchase agreements. Two, if the
cap table grows too large, then the company may become subject to onerous SEC
regulations that are more appropriate for public companies (but without
receiving the corresponding benefits). Three, since shareholders are entitled
to certain information about the company, private companies limit ownership so
that they're not obligated to share this information with people they do not
trust. There are probably more reasons.

~~~
conanbatt
> More seriously: people should comply with the agreements that they sign.
> Don't sign an agreement that says all of your assets are actually Apple's if
> you're not happy with it. Read all of the fine print and don't be surprised
> later.

You have read every single word of all the TOS you ever signed? I find that
very hard to believe.

> Don't buy stock in a privacy company if you're not happy with the
> constraints on it. One of the common key differences between private and
> public companies is that you can't sell or transfer stock in private
> companies without their approval. You know that when buying it initially, or
> when agreeing to receive it as compensation.

If we talk about the letter of the law, then you don't need to sell the stock,
you can sell futures of it at your own compliance. The company can't prevent
you from doing that by letter of the law. But the SEC can. The contract is
only enforcible in practical terms because as an employee or investor you are
disallowed from making any legal claim about the stocks you are entitled to.

Also, the argument that it is 'legal' is entirely a different thing. I never
mentioned legality, I said ridiculous. Its not a moral, economic or practical
argument to say that something is 'legal'. Saying something is legal is one of
the lowest forms of defense for an action. Its saying that the only purpose of
it is that they cant put you to jail for doing it.

> There are legitimate reasons why private companies don't want their stock to
> be transferred willy-nilly. For one, it makes the cap table larger and more
> complex, which complicates further funding or purchase agreements. Two, if
> the cap table grows too large, then the company may become subject to
> onerous SEC regulations that are more appropriate for public companies (but
> without receiving the corresponding benefits). Three, since shareholders are
> entitled to certain information about the company, private companies limit
> ownership so that they're not obligated to share this information with
> people they do not trust. There are probably more reasons.

Very nice, but there is a much more important reason why companies want to not
be able to sell off shares: they benefit economically directly because of it.
Because the owners get the shares back when people dont buy them, and they
have information asymmetry with the employees. AS an employee you have a lot
less information.

If employees could sell their stocks willy nilly, every employee that leaves a
startup and doesnt want to buy stock to keep would sell them in the open
market, which would dilute the value of companies big time while making
employees richer.

Hm.

------
tristanj
Tip for people buying on Coinbase: you can avoid their fee entirely by using
GDAX. Deposit the money into your USD wallet first (no cost), then transfer
the money to GDAX (no cost), and place a limit order (no cost). You may need
to babysit your limit order for a couple minutes but this trick saves you $15
for every $1000 you buy.

I think there is little reason not to do this unless 1) you value your time
very highly or 2) you can't be bothered. I honestly think most of Coinbase's
revenue comes from people in the latter group.

~~~
makomk
In order for your limit order to actually get filled if you do this, someone
has to place a taker order that matches against yours and pay the GDAX fee on
that. Coinbase still take their cut no matter what, all you're doing is making
sure it comes out of the other side of the trade. If there aren't any less
patient people willing to pay the trading fee, your order will just hang
around until either someone does or you lose patience and pay it yourself.

Also, there's a risk that the price will move away from where you placed your
order and it'll never fill, in which case you'd have to cancel it and re-
submit the order at a worse price.

~~~
gruez
but if you look at coinbase and gdax's fee schedule, coinbase is as expensive,
if not more than gdax. (0.25%-1% spread vs 0%-0.25% fee depending on whether
you're taker/maker). unless you're in a period of insane volatility, the
spreads are small enough that placing a limit order for highest bid + 0.01 or
lowest ask - 0.01 would get you a trade within seconds.

[https://www.gdax.com/fees/BTC-USD](https://www.gdax.com/fees/BTC-USD)

[https://support.coinbase.com/customer/en/portal/articles/210...](https://support.coinbase.com/customer/en/portal/articles/2109597-coinbase-
pricing-fees-disclosures)

------
PunchTornado
i can't wait for the moment coinbase crashes.

they're the worst of the crypto world.

~~~
lozaning
Do you have anything i can read that would lead me to think along your same
lines? I dont currently think coinbase is any worse and is potentially
slightly better than many of the other online exchanges. Wanna make sure I get
out of my own bubble though and would be interested in the reasoning behind
your dislike.

~~~
PunchTornado
Huge fees if you don't use gdax.

Takes 1 month for my money to get into my account.

Lack of support from their team while I had 50k hanging in the middle of
nowhere for 3 weeks.

------
richard___
Since they make around 1% per transaction, $1billion transacted (I assume this
means revenue) is 10 million net... what am I missing here because that's not
impressive at all.

~~~
peterjlee
I don't think $1B is the transaction amount. In the last 24 hours, trade
volume on GDAX(Coinbase's exchange) for Bitcoin alone was $247 million.[1]
Their trade fees are around 0.25%[2] so in the last 24hr they made over $60M
in Bitcoin trading alone.

[1]
[https://coinmarketcap.com/exchanges/gdax/](https://coinmarketcap.com/exchanges/gdax/)
[2]
[https://support.gdax.com/customer/en/portal/articles/2425097...](https://support.gdax.com/customer/en/portal/articles/2425097-what-
are-the-fees-on-gdax-)

~~~
cobookman
247 * 365 * 0.0025 = 225,387,500 / year. How is that 1B?

~~~
syntheticcdo
$1B in revenue sounds reasonable, seeing as there are higher volume days than
just yesterday, and those trading revenues don't include revenue from fees on
(non-GDAX) Coinbase buy transactions.

