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The Huge Coinbase Experiment



Yesterday, we saw a huge announcement from the leading cryptocurrency exchange in the United States, Coinbase, who are now embarking on a year long study that aims to totally transform the way users of blockchain technology control their data and personal information.

One of the biggest ironies in cryptocurrency is that whilst transactions are anonymous and hidden in most instances, the actual buying of cryptocurrency through registered exchanges like Coinbase require users to give up a lot of personal information, including images of their Passport or identification, as well as giving up contact details and in some instances, even bank details.

Also known as ‘Know Your Customer’ the problem here is that signing up to exchanges is time consuming and quite complicated. Once a user submits this information, it then needs to be checked out for legitimacy, so often it can take days for an application to use an exchange to be approved, assuming you meet all the stringent anti-fraud checks.

Another issue this presents is that exchanges and wallets then need to securely store all of this personal information, meaning they are vulnerable to data hacks going forward. This, is a concern for the exchanges themselves and their customers. Data handling is a hugely sensitive subject in the news at the moment, we only need to look as far as Facebook and Cambridge Analytica to see why too.

So, it really is within the best interests of Coinbase to try and simplify this whole procedure, whilst adhering to important anti-fraud checks and laws. This is where blockchain technology comes to play.

Coinbase Experiment

First reported by CoinDesk, Coinbase have established a research team, led by B. Byrne, the Product Manager of the Coinbase identity team. Byrne and the team wish to simply allow internet users to own more of their own identity online, so this moves past just their own customer base and seems to have implications for a far wider audience too.

The team will be exploring the use of decentralised applications within the blockchain in order to build bridges between Coinbase products, the exploration of dApps will build the backbone for this study. According to CoinDesk:

“In Byrne’s mind, the best way to start lies in identifying a small segment of Coinbase users who would gain real value from controlling more of their personal data, rather than Coinbase repeatedly collecting and storing their know-your-customer (KYC) information across the platform’s products. Over the next 12 months, Byrne said his team aim to scale these experiments from just a few users to a meaningful group of dapp users. In addition to tech-savvy power users, Byrne said identity solutions could have the most immediate impact for customers that aren’t getting access to things because it’s too hard as is.”

How will it work?

As stated, this experiment is expected to last over a 12 month period, starting with an exploration of Coinbase Wallet users in order to find a suitable demographic to build the research upon. This will then move towards developing and testing a decentralised identity solution that will help benefit that small group of users. Once testing is complete, a final application might then be rolled out within Coinbase products that uses a decentralised applications to allow people to control their own identity checks through the blockchain.

This is more than just Coinbase

As stated, this experimentation phase has big implications for more than just Coinbase, therefore the research team won’t be going at this alone:

“Byrne said his team is talking with projects like the W3C Credentials Community Group. W3C co-founder and crypto veteran Christopher Allen told CoinDesk the group aims to launch a Decentralized Identifiers (DIDs) Working Group in January that can recommend standards through the Massachusetts-based World Wide Web Consortium.”


“Even if Byrne’s team develops identity solutions that reduce cross-platform friction or increase customers’ privacy, these solutions will probably rely on public tools and protocols that exist beyond Coinbase. Without commenting on any specific resources or priorities, Byrne agreed Coinbase would need to commit to keeping the infrastructure for future solutions, healthy. Byrne also expressed curiosity about how Coinbase could someday take a more active role in community efforts.”

What will come of this?

Well, this is where we are left to speculate, as Coinbase have not yet made clear what will come of this experiment. I suppose as with any experiment, they cannot predict the results so therefore, the current hypothesis from Byrne et al. is rather vague. The team are expecting to develop some sort of decentralised identity management solution that will give users far more control of their personal data, though the full scope of this solution is yet to be understood.

In an ideal world, we imagine a dApp being created that can be used to verify a users identity across an unlimited number of platforms, by simply just entering a private key, or a block address or something similar. This would be fantastic and would do great things for the adoption of cryptocurrency and most importantly, for the confidence of those in the industry that have to tackle data handling issues on a daily basis.




Brian Armstrong: Institutions make up 60% of trading volume on Coinbase Pro



Coinbase co-founder and CEO Brian Armstrong sat down with Fred Wilson, co-founder of Union Square ventures at Blockchain Week in New York. During the interview, Armstrong revealed institutional investors now make up 60% of all trading volume on Coinbase.

“90% of the money in the world is tied up in institutions, it’s not just retail. So we started to go talk to these potential customers.” Armstrong goes on, explaining they all had a different set of requirements, such as a qualified custodian, which didn’t exist at the time.

“As we’ve gotten going, institutions have become a bigger and bigger part of our business,” Armstrong says. “We’ve started to enable features like OTC trading through Coinbase custody where these large block trades are starting to happen. Institutions have become I think 60% of our trading volume on Coinbase Pro as well.”

So these are really key customer segments for us and we’re just going to keep investing more and more in it.”

Other more traditional firms like Fidelity have begun entering the market with plans to start Bitcoin trading for institutional investors. Additionally, Bakkt is set to launch in July with the aim of serving institutional investors while being fully regulated by the Commodities Futures Trading Commission, presenting some stiff competition for Coinbase.


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Coinbase CEO Brian Armstrong says institutional investors are important as 90% of the capital is with them



The arrival of institutional investors in the cryptocurrency space had provided a much needed boost to the cause of mainstream adoption of cryptocurrencies as the addition of known entities would push the industry into a more positive light. This was the sentiment shared by Coinbase Chief Executive Officer [CEO] Brian Armstrong as he sat down to discuss the implications of institutional investors and Coinbase Custody in a recent interview.

Armstrong stated that institutions mattered a lot for Coinbase because of the sheer sentiment hold it had over the general population. He claimed that since 90 percent of the capital was with institutions, it would be a great opportunity to tap into the ripe market. In his words:

“A few years ago when we were getting started as a business and a retail brokerage, we realized that we need institutional money for the cryptocurrency industry to mature and grow. Most of the money, take any industry is with the institutions and it is not the case with just crypto like many people think.”

The CEO also spoke about the requirements which institutional investors need, stating that it is a different ball game from retail investors. This also led him to segway into the functions of Coinbase Custody and the reasons for its establishment. According to him:“The Coinbase Custody is a New York charter and we realized that since crypto is booming, we need a service that targets the institutions too. That’s the kind of thing that did not exist back then and we are glad we did it. We wanted to create a trusted body in the market that could handle funs and that was the genesis of Custody.”

Armstrong further added that institutions had become a large part of the crypto-verse with features like Over the Counter [OTC] trading and block trades becoming a regular phenomenon. He revealed that institutional investors made up 60 percent on Coinbase Pro and stated that the organization would continue to invest more resources and assets into it.


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Coinbase-Xapo FUD: Top Coinshares official clears ongoing allegations



The news of Coinbase planning to acquire Xapo, a Bitcoin wallet and cold storage provider had stirred up the cryptocurrency market, with many speculating that the Brian Armstrong-led company was trying to acquire other assets without increasing their prices.

In a way to dissipate the FUD surrounding the planned acquisition, Meltem Demirors, the Chief Strategy Officer of Coinshares shared a Twitter thread detailing the effects of the buyout. Demirors’ first tweet read:

“the @xapo FUD is so silly
  1. the company itself is not being sold. only the *institutional* custody component.

  2. i assume xapo is going to keep the cash on its balance sheet, and continue operations

  3. xapo does not charge for custody. the acquirer will (likely) charge.”

The institutional wing of Xapo has been in Coinbase’s sights for some time now as the world’s largest cryptocurrency exchange in terms of users tried to grapple with integrating institutional funds and normal cryptocurrency assets. Meltem Demirors furthered her argument on the acquisition by tweeting:

“      4. if customers have to now pay, they will likely evaluate the dozen or more competitors

5.xapo may ask large custody clients to sign a 12 month agreement to stay, but difficult to implement

6.liability on institutional custody is *huge*”

Coinbase’s movement towards institutional custody was also evidenced by the company’s launch of Coinbase Custody. The service, although peppered with several critical comments, stood its ground in maintaining customer security as the number one priority. This was made clear again when Sam McIngvale, the Head of Product for Coinbase Custody, claimed that the organization was putting its own funds and not the customers’ funds at risk. He had stated:

“Now, your point about how do you actively participate, there’s bonds [security deposit] for thesenetworks. The way we’re are getting around that is Coinbase custody is actually purchasing the bond on behalf of our clients.


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