All Segments
Coinbase Presents: Building the Cryptoeconomy, with Brian Armstrong and Fred Wilson
46 segments available
During Blockchain Week in NYC, Coinbase CEO Brian Armstrong joined Union Square Ventures' Fred Wilson to discuss their visions for building the cryptoeconomy. Coinbase Custody has worked diligently to create a top tier custodial service. Now it has more than $1 billion in crypto assets under management for 70+ customers, while on-boarding $150 million in assets under management each month. Coinbase Custody operates as a standalone, independently-capitalized business to Coinbase, Inc. Coinbase Custody is a fiduciary under NY State Banking Law. All digital assets are segregated and held in trust for the benefit of our clients. ► Visit Coinbase here: https://www.coinbase.com/about ► Learn more about Coinbase's mission here: https://www.coinbase.com/mission ✅ Subscribe to our channel here: https://www.youtube.com/channel/UCofTOFX4QuhT8OY-3-fFRFw/?sub_confirmation=1 ► Follow us on Twitter: https://twitter.com/coinbase ► Like us on Facebook: https://www.facebook.com/coinbase/ ► Find us on Instagram: https://www.instagram.com/coinbase/ __ This content is being provided to you for informational purposes only. Nothing discussed in this video is intended to be investment advice. This content, and any information contained therein, does not constitute a recommendation by Coinbase to buy, sell or hold any security, financial product or instrument referenced in the content. #Coinbase #CoinbaseCustody #BlockchainWeek Cryptocurrency #Blockchain #CoinbaseExchange #CoinbaseApp #OpenFinancialSystem #CryptoForAll #Finance
Segments Timeline
Welcome to the Conversation
Brian Armstrong and Fred Wilson kick off the discussion at Blockchain Week in NYC, setting the stage for an interactive session focused on the future of the cryptoeconomy. They emphasize the importance of audience participation and the relevance of institutional customers in the crypto space.
"please join me in welcoming Bryan and Fred we've got a great conversation well thank you and thanks for everybody for coming and so what we're gonna do is I'm gonna tee up the conversation ask Bryan a..."
Welcome to the Discussion
Brian Armstrong and Fred Wilson kick off the conversation at Blockchain Week in NYC, setting the stage for an interactive discussion about the future of the cryptoeconomy. They emphasize the importance of audience participation and the significance of institutional customers in the crypto space.
"please join me in welcoming Bryan and Fred we've got a great conversation well thank you and thanks for everybody for coming and so what we're gonna do is I'm gonna tee up the conversation ask Bryan a..."
The Importance of Institutional Investment
Brian Armstrong explains why institutional investment is crucial for Coinbase's growth. He discusses the transition from a retail-focused business to attracting institutional money, highlighting the need for a trusted custodial service to facilitate this shift.
"if you don't have questions then I'm gonna keep asking questions but I have a suspicion that you you got plenty of questions so we'll have a you know get it going and then hopefully we'll turn this in..."
The Importance of Institutional Investment
Brian Armstrong explains why institutional investment is crucial for Coinbase and the broader cryptocurrency industry. He discusses the transition from a retail-focused business to attracting institutional money, highlighting the need for trusted custodial services and the growing role of institutions in Coinbase's trading volume.
"dollars today or this week um why does institutional matter so much to coinbase yeah well you know a few years ago we we were just getting started as a business and coinbase really got started as a re..."
Building Trusted Infrastructure
Armstrong elaborates on the creation of Coinbase Custody as a New York trust charter, addressing the unique requirements of institutional clients. He emphasizes the importance of building a reliable infrastructure to attract more institutional funds into the crypto market.
"yeah well you know a few years ago we we were just getting started as a business and coinbase really got started as a retail brokerage and we'd realized at a certain point that for this industry to ma..."
Custody and Market Structure
Armstrong elaborates on the evolving market structure of crypto, emphasizing the importance of custodians and their role in ensuring asset security. He draws parallels with traditional finance and discusses how custodians are foundational to the new financial system being built around cryptocurrency.
"our trading volume on coinbase Pro as well so these are a really key customer segments for us and I think we're just gonna keep investing more and more in it and how do you think about the interaction..."
Evolving Market Structure
The conversation shifts to the evolving market structure of crypto, where Armstrong discusses the separation of custodians and exchanges. He highlights the importance of trusted custodians in ensuring asset security and the foundational role they play in the new financial system.
"right so for instance you know coinbase custody is a New York trust charter they needed a qualified custodian a place to store these crypto assets before they could keep their lp's money there that's ..."
Innovations in Staking
Armstrong introduces the concept of staking on the Tezos blockchain, explaining its significance for institutional clients. He discusses how Coinbase's cold storage system allows clients to earn staking interest securely, marking a new frontier in crypto finance that traditional systems do not offer.
"think crypto is gonna be it's gonna it's gonna be this really new financial system that has all these kind of benefits some of the things we'll have counterparts to what it was in finance 1.0 which ar..."
Innovations in Staking
Armstrong introduces the concept of staking on the Tezos blockchain, explaining its significance for institutional clients. He discusses how Coinbase Custody allows customers to earn staking interest on securely stored funds, showcasing a new financial opportunity in the crypto space.
"our trading volume on coinbase Pro as well so these are a really key customer segments for us and I think we're just gonna keep investing more and more in it and how do you think about the interaction..."
Connecting the Crypto Economy
Armstrong discusses the evolving nature of the crypto economy, introducing the idea of 'nouns and verbs' in this space. He explains how new functionalities like staking and voting are emerging, which will help connect users and create a more integrated economic graph within the crypto ecosystem.
"that's going to be yeah so that's a great example staking is one of these things that a lot of our customers came to us and they said hey we need to get the best return on our money and our lp's money..."
Security as a Core Value
Armstrong reflects on Coinbase's commitment to security from its early days. He details the evolution of their cold storage system, the implementation of cybercrime insurance, and the proactive measures taken to ensure the safety of assets, showcasing Coinbase's leadership in security within the crypto industry.
"the nodes on the network so you touched on cold storage and security you know I've been around your company for a long time and and you know one thing that I've always appreciated is the focus on secu..."
On-Chain Governance and Voting
The discussion continues with Armstrong addressing the growing interest in on-chain governance and voting among institutional investors. He explains how enabling these features can enhance the value of crypto assets and ensure responsible decision-making.
"beneficial to have these this separation a little bit like it has happened in the traditional financial system and it's really important that you know we have these custodians that are trusted and all..."
Nouns and Verbs of the Crypto Economy
Armstrong presents a conceptual framework for the crypto economy, distinguishing between 'nouns' (entities like institutions and retail customers) and 'verbs' (actions like buying, selling, and staking). He emphasizes the need for new verbs to connect participants in this evolving economic landscape.
"important part of that market structure and then the exchanges and the brokerages these are all what we're seeing is really the foundational pieces of this next generation financial system come togeth..."
Assuming Compromise: A Security Strategy
In this segment, Armstrong outlines Coinbase's security strategy, which operates under the assumption that developer laptops may be compromised. He discusses how this mindset has shaped the architecture of their hot wallet system, ensuring that funds remain secure even in the event of a breach.
"were unable to do it and they do all kinds of things these are called you know Red Team drills for those who aren't in the security community so sometimes you will have people come pose as employees i..."
Improving Usability in Crypto Applications
Armstrong addresses the challenges of usability in decentralized applications, emphasizing the need for better user experiences. He references the book 'Don't Make Me Think' by Steve Krug, advocating for intuitive design that minimizes user confusion, and discusses the importance of addressing common issues like forgotten passwords.
"well let's let's open it up for questions if if there aren't any I can keep asking all night long but I suspect that all of you have some things that are on your mind and you want to ask about you kno..."
Security as a Core Value
Armstrong reflects on Coinbase's commitment to security from its early days. He discusses the evolution of their cold storage system and the measures taken to protect customer assets, including cybercrime insurance and proactive security testing.
"validation type things on multiple block chains that is actually something that doesn't map very cleanly into the traditional world of finance can you talk a little bit about you know how important th..."
The Evolution of Cold Storage
Armstrong details the advancements in Coinbase's cold storage architecture over the years. He explains how they have adapted to various potential threats and disasters, ensuring the security of offline funds through a sophisticated consensus mechanism.
"that are stored entirely offline and if anybody's curious I can kind of get share a few details on that but that's a great example of a new thing that didn't really exist in traditional financial worl..."
User-Controlled Wallets and Recovery Solutions
This segment focuses on the challenges of user-controlled wallets, particularly the risks associated with lost passwords and devices. Armstrong discusses potential recovery solutions, such as encrypted backups and social recovery methods, highlighting the industry's efforts to educate users on secure practices.
"long way as well but it's just like anyone to like if you don't know how to use it it's not effective you know anybody who's in the cybersecurity community right now I think has really good job securi..."
Institutional Interest in Crypto
Armstrong explores the growing interest of institutional investors in cryptocurrency, noting the spectrum of inquiries from crypto-forward institutions to more traditional entities. He highlights the overlap in their questions, indicating a shift towards a more integrated approach to crypto investments.
"coinbase is playing in this space too with coinbase wallet we've we've been encountering a lot of these challenges as well you know a couple thoughts one is that I think the whole space needs better u..."
Cybercrime Insurance and Security Testing
Armstrong discusses Coinbase's pioneering efforts in obtaining cybercrime insurance and the importance of hiring security firms to test their defenses. He highlights the comprehensive coverage of their policy and the proactive steps taken to safeguard customer assets.
"evolution is it's not just an asset class where people are investing in it and they're speculating oh that's a great way that got all of us here in the room and you know 50 million people in the world..."
Evolution of Cold Storage Solutions
Brian Armstrong discusses the evolution of Coinbase's cold storage system, detailing how they transitioned from a simple offline storage method to a sophisticated fourth-generation architecture. He highlights the importance of securing funds against various potential disasters and the innovative solutions they've implemented to ensure safety and reliability.
"five or ten people or so and we realized that we needed to take a lot of this these funds offline and that was like really the first generation of our cold storage system we're now on the fourth gener..."
Balancing Institutional Needs with Innovation
In this concluding segment, Armstrong reflects on Coinbase's unique position in the market, balancing the needs of sophisticated institutions while continuing to innovate in the crypto space. He emphasizes the company's commitment to meeting diverse demands and maintaining a cutting-edge approach.
"say it's just so I want to clarify so we make sure Brian answers the question that you intended to answer institutions would be institutional investors yeah so there are I think of it like two ends of..."
The Contrarian Investor
Armstrong reflects on his early admiration for Fred Wilson's contrarian views on Bitcoin, recalling how Wilson's bold predictions inspired him. He shares how this perspective influenced his desire to partner with Wilson when starting his own company, highlighting the importance of recognizing potential in unconventional ideas.
"actually before we move on incredible isn't can I ask you a question yes you can put you in the hot seat okay so I remember back in 2012 you know I was a software engineer all by myself kind of thinki..."
Cybercrime Insurance and Security Drills
Armstrong explains Coinbase's proactive approach to security, including obtaining a robust cybercrime insurance policy and conducting Red Team drills. These measures are designed to identify vulnerabilities and ensure the integrity of their systems against both external and internal threats.
"keep they're really split up amongst in these secured data centers all over the world and we have this data just encrypted offline with HSMs that can bring it back online and there's no you know small..."
Assuming Compromise: A Security Strategy
In this segment, Armstrong shares Coinbase's strategy of assuming that developer laptops could be compromised at any time. He discusses how this mindset has influenced their security architecture, ensuring that funds remain safe even in the event of a breach.
"were unable to do it and they do all kinds of things these are called you know Red Team drills for those who aren't in the security community so sometimes you will have people come pose as employees i..."
Looking Beyond the Current Trends
Fred Wilson shares his investment philosophy, emphasizing the need to focus on future trends rather than current successes. He discusses the importance of recognizing emerging opportunities and the decentralized nature of Bitcoin, drawing parallels to the early internet's resilience and potential.
"noes so I guess my question for you and you saw this with the internet and all these things how do you how do you do that as an investor like what when you're looking at some new thing that's happenin..."
Opening the Floor for Questions
Armstrong invites the audience to ask questions, indicating a shift in the discussion towards addressing concerns and challenges in the cryptocurrency space, particularly around security, usability, and scalability.
"well let's let's open it up for questions if if there aren't any I can keep asking all night long but I suspect that all of you have some things that are on your mind and you want to ask about you kno..."
Decentralization's Importance
Wilson elaborates on the significance of decentralization in Bitcoin, likening it to the foundational principles of the internet. He explains how the lack of a central authority contributes to Bitcoin's resilience and potential, reinforcing his belief in its transformative power.
"then you you you you will just kind of continue to spend your time and energy focused on the same things everybody else's so one is just like making it a point every single day to try to force yoursel..."
Improving Usability in Decentralized Applications
Armstrong emphasizes the need for better usability in decentralized applications. He references the book 'Don't Make Me Think' by Steve Krug, advocating for intuitive design that minimizes user confusion, and discusses the challenges of user-controlled wallets and recovery solutions.
"about all the challenges crypt I mean cryptos facing and security challenges it's also usability you know scalability volatility in particular the security side I mean one thing that we're trying to d..."
Simplicity in Complexity
Armstrong discusses the importance of simplicity in understanding Bitcoin's value, despite its complex mechanisms. He shares how his initial instinct about Bitcoin's potential led him to advocate for investment, emphasizing the need to balance simplicity with deeper understanding.
"along and I was like it was explained to me that you know here's a way to create money and lots of other important things without a central you know entity I was like that's important like I didn't re..."
Hiring with Intention
Armstrong reflects on the importance of personal connection in hiring decisions. He recounts a past conversation with Wilson that emphasized the need to work with people one enjoys, reinforcing the idea that interpersonal dynamics are crucial in building successful teams.
"that's one thing I love about your style is that you don't over complicate things I remember like five years ago I called you on the phone I was like really torn up about whether I should hire this pa..."
Institutional Interest in Cryptocurrency
Armstrong outlines the differing interests of crypto-forward institutions versus traditional ones. He notes the growing overlap in their inquiries, highlighting the need for Coinbase to cater to both sophisticated institutional demands and cutting-edge crypto innovations.
"coinbase is playing in this space too with coinbase wallet we've we've been encountering a lot of these challenges as well you know a couple thoughts one is that I think the whole space needs better u..."
The Early Days of Coinbase
Wilson shares his first impressions of Coinbase during a Y Combinator office hours session, highlighting his immediate interest in the company and its potential. He recounts how he was the first venture capitalist to recognize Coinbase's promise, setting the stage for their future partnership.
"like you know this person gonna get along with others and me yeah okay that was a cool trip down memory lane sorry alright here we go when you first read what sir that conversation was like what your ..."
Reflecting on Early Bitcoin Insights
In a reflective moment, Armstrong recalls his early encounters with Fred Wilson's blog posts about Bitcoin. He shares how Wilson's insights influenced his perspective on the cryptocurrency's potential, emphasizing the importance of visionary thinking in the evolving crypto landscape.
"say it's just so I want to clarify so we make sure Brian answers the question that you intended to answer institutions would be institutional investors yeah so there are I think of it like two ends of..."
Recognizing Future Trends
Fred Wilson explains his approach to identifying emerging trends in technology and investment. He emphasizes the importance of looking beyond current successes to anticipate future innovations, using Bitcoin's decentralized nature as a key example of a transformative concept.
"most VCS are you know it's the other way they're knocking on our door instead of me knocking on 50 doors and getting 50 noes so I guess my question for you and you saw this with the internet and all t..."
Navigating Fundraising Challenges
Armstrong recounts the difficulties of fundraising for Coinbase, detailing the challenges they faced with initial term sheets. He contrasts the unfavorable terms from one investor with the more supportive offer from Wilson, illustrating the importance of finding the right partners in the startup journey.
"why you picked me yeah so probably six months after that we were thinking about doing our Series A and you know went out did a pitch pitch pitch pitch all over Sand Hill Road and we only got we got on..."
Simplicity in Decision-Making
Armstrong shares a personal anecdote about decision-making, highlighting the importance of simplicity in evaluating potential hires. He reflects on how focusing on whether he would enjoy working with someone can lead to clearer, more effective choices.
"of other ways when bit King Bitcoin came along and I was like it was explained to me that you know here's a way to create money and lots of other important things without a central you know entity I w..."
Negotiation Philosophy: The Art of the Deal
Brian discusses his negotiation philosophy, emphasizing the value of presenting good terms upfront to foster a positive relationship with entrepreneurs. He reflects on how this approach has influenced his future negotiations, advocating for transparency and confidence in investment discussions.
"which is if I really want to do something I just send them like a good offer on the first one I don't try to you know set them up for some long negotiation so that was that was how we get the deal don..."
The Genesis of Coinbase's Journey
Fred Wilson recounts his first encounter with Brian Armstrong during Y Combinator, where he recognized Coinbase's potential early on. He describes how his belief in Bitcoin and Armstrong's vision led him to express interest in investing before the company even sought funding.
"instantly I like I like your ability to make it some that's how it went about finding a partner when we started USV that was my number one rule is like I can't be a partner with somebody that I that I..."
Building Long-Term Relationships
Brian shares insights on the importance of establishing long-term relationships with investors, arguing against the use of 'exploding offers' in negotiations. He believes that a collaborative approach fosters trust and encourages a more productive partnership over time.
"be a lot longer than that so this is sort of my philosophy about these things yeah I wish it was more common all right one more question all right who has one alright say cutting-edge innovative proje..."
The Evolution of Asset Custody
Brian outlines Coinbase's strategy for expanding asset custody services, emphasizing the need for institutions to have access to a wide range of assets. He compares the evolution of crypto assets to the growth of the internet, advocating for a more open and agnostic approach to asset trading.
"cutting-edge innovative projects yeah so you know we're gonna keep adding more more assets for retailer institutional and let me just share how I think about that broadly so number one let's start wit..."
Navigating Fundraising Challenges
Armstrong shares the challenges Coinbase faced during their Series A fundraising, including receiving unfavorable term sheets. He contrasts this experience with the more favorable offer from Fred Wilson, illustrating the complexities of securing investment in the early days of the company.
"why you picked me yeah so probably six months after that we were thinking about doing our Series A and you know went out did a pitch pitch pitch pitch all over Sand Hill Road and we only got we got on..."
Simplifying the Onboarding Process
Brian concludes by encouraging potential customers to consider Coinbase Custody, sharing his positive experience with the onboarding process. He contrasts it with traditional banking experiences, highlighting Coinbase's commitment to making crypto asset management accessible and user-friendly.
"encrypt oh yeah so we'll we'll wrap up with that if any of you are thinking about becoming a customer of coinbase custody we would love to speak with you anybody you here with a coinbase name tag or s..."
Philosophy of Investment Offers
Brian shares his philosophy on making investment offers, advocating for confidence and transparency in negotiations. He explains why he prefers to avoid exclusivity and time constraints, fostering a more relaxed decision-making process for entrepreneurs. This segment provides insights into effective negotiation strategies in the venture capital landscape.
"better deal and you think they're a better person the thing I found about that is that it it's like it's it's very in a way it's a little arrogant because it's very confident it's like I think you're ..."
The Evolution of Asset Custody
Brian discusses the evolution of asset custody at Coinbase, emphasizing the need for institutions to have access to a wide range of assets. He compares the early days of cryptocurrency to the growth of the internet, advocating for a more open and agnostic approach to asset trading. This segment outlines Coinbase's vision for the future of asset custody and consumer protection.
"cutting-edge innovative projects yeah so you know we're gonna keep adding more more assets for retailer institutional and let me just share how I think about that broadly so number one let's start wit..."
Simplifying the Onboarding Process
Brian concludes by sharing his positive experience with Coinbase Custody's onboarding process, highlighting its simplicity compared to traditional banking institutions. He invites potential customers to engage with Coinbase, showcasing the ease of entering the crypto space. This segment reinforces Coinbase's commitment to user-friendly services in the cryptoeconomy.
"encrypt oh yeah so we'll we'll wrap up with that if any of you are thinking about becoming a customer of coinbase custody we would love to speak with you anybody you here with a coinbase name tag or s..."