The Pomp Podcast - 303: Jeff John Roberts Tells The Coinbase Origination Story

Episode Date: May 27, 2020

Jeff John Roberts writes about intellectual property, blockchain and cyber security for Fortune. He has a new book about Coinbase titled Kings of Crypto: One Startup’s Quest to Take Cryptocurrency Out of Silicon Valley and onto Wall Street. In this conversation, we discuss the Coinbase story, Satoshi Square, the various players that helped build the US' largest crypto exchange, and why Coinbase may tokenize their equity rather than go public one day. ===============================  Blockset by BRD is your hosted blockchain infrastructure. Blockset enables enterprises and developers around the globe to deliver high-quality blockchain-based applications in a fraction of the time, at a fraction of the cost. Using the services provided by Blockset, businesses can build professional custody solutions, accurate and near real-time portfolio management solutions, auditing platforms, commercial block explorers, and much more: blockset.com =============================== Crypto.com is the only all-in-one platform that allows you to BUY / SELL / STORE / EARN / LOAN / INVEST crypto all from one place. Join over 1 million users currently using the Crypto.com app. Download and earn $50 USD using my code ‘pomp2020’, or use the link http://platinum.crypto.com/r/pomp2020 when you sign up for one of their metal cards today. ===============================  Pomp writes a daily letter to over 50,000 investors about business, technology, and finance. He breaks down complex topics into easy to understand language, while sharing opinions on various aspects of each industry. You can subscribe at pompletter.com

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Let's kick this thing off. Jeff John Roberts writes about intellectual property, blockchain, and cybersecurity for fortune. He has a new book about Coinbase titled Kings of Crypto, One Startup's Quest to Take Cryptocurrency Out of Silicon Valley and On to Wall Street. In this conversation, we discuss the Coinbase story, Satoshi Square, the various players that helped build the U.S.'s largest crypto exchange, and why Coinbase may tokenize their equity rather than go public one day. I really enjoyed this conversation with Jeff, and I hope you do as well.

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while sharing my opinion on various aspects of each industry. You can subscribe at Pompletter.com. Again, Pompletter.com or just click the link in the description. All right, let's get into this episode with Jeff. I hope you guys enjoy it. Anthony Pompliano is a partner at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang. Super

We're excited to have Jeff here. Thanks for doing this, man. Paul, great to be on your show. Absolutely. Let's start with your background. Obviously, you've spent a bunch of time covering various industries, but where'd you grow up and what'd you do before you got to Fortune? I grew up in Vancouver, Canada.

I used to be a lawyer. My joke was I got tired of being unpopular, so I picked the only profession maybe less popular than lawyers as a journalist, but no, it's been fun. I've been at Fortune for five years. also uh worked at reuters and i've written for most major publications um i got into crypto it's a fun story in um 2013 in new york city in union square there's a thing for a while called satoshi square where um it was it was crazy it was like crypto anarchists and you know old school bitcoin folks and then wall street traders would meet up and basically sell bitcoin like in the open air

with stacks of benjamins and i went to cover that and uh that kind of whetted my interest in it Never since then, I've been covering crypto on and off. You know, of course, like, you know, there's the peaks and the valleys, but I've watched the scene the whole time. And I, please say, I recently wrote a book about it called Kings of Crypto that tells the history of Bitcoin and to the crypto industry, but through the vehicle of Coinbase, just how they became players. And the big focus is on how Wall Street and Silicon Valley are coming together.

Yeah. So what was the impetus for moving from being a lawyer to a journalist? Because I think a lot of people would say there's not tons and tons of people who go from that field to journalism. But what kind of was the interest there? I guess I like writing. And that's, you know, I like telling stories and writing. And as a lawyer, you do a lot of writing. But it's very, you know, it's kind of joyless.

It's like writing extended, you know, car manuals, you know, 30, 60-page fact. And I'm not a lot of fun. And also, I mean, I think I was working on a, as a law clerk, I was working on a pharmaceutical patent trial. this went on for 10 days and it was just like it was just like ready to like you know shoot myself it was just so dull same thing day in day out and then with um with with journalism you get to talk to everyone you know get to i've met everyone in crypto you get to hear their stories you get to write something new every day which is which is a lot of fun and it feels real rewarding yeah that's awesome and so then how um how did you first hear about uh the satoshi circle

right? Where people were doing this. I feel like that's a kind of an underground type thing that they weren't exactly running advertisements on television for. So what was, where'd that come from? Probably Twitter, like everything else in crypto. I just heard about it. And then I reached out to a couple of people and I have to confess how ignorant I was at the time. I, you know, I'd planned to go, I bought a Bitcoin to go there because I thought there'd be people selling stuff like, you know, muffins or t shirts or something. And, you know, I thought that's what Satoshi Square was. And so I, you know, bought a Bitcoin from Coinbase for like 70 bucks. And I plan to expense it. And, you know, I'm happy to say I forgot to and it's one of those rare times that

turned out well, because I, you know, so, you know, I don't own any other crypto because I want to keep, you know, impartial as a journalist, but that was a bit of good fortune. Yeah. And then so when you got there, what was everyone doing? If they weren't selling muffins and t shirts, Were they just kind of sitting around and talking about Bitcoin or what was it? Yeah, they were. No, there was like Wall Street guys in $5,000 suits coming up with like stacks of hundreds. I'm not kidding, man. Just like buying, you know, from these like dreadlock dudes.

And they all had a passion for crypto and they all had like their own wallets. And I mean, these guys were, you know, really knew the tech and really knew the economics of it, how they were determining price. I don't know. I think they were just checking the internet and, you know, yeah, they're buying and selling Bitcoin in the open air. It's kind of cool. And so this is probably what, like 2012, 2013, if it was down around 70 bucks, somewhere in that time frame?

Yep. Good memory. 2013, some point in like, you know, May or the summer. And there's just this corner of Union Square in New York that was, every Monday it was called Satoshi Square. I mean, I think similar things popped up elsewhere, but it was kind of cool to, you know, even if I was totally ignorant, it was kind of cool to take it in. Yeah, for sure. And then I guess as part of that, like Coinbase, I think if I remember correctly, 2013 or 2014 was it came around. So really, it's almost like they were doing this out of necessity because there wasn't great U.S.-based infrastructure to go ahead and buy Bitcoin. Is that generally right? Yeah, I mean, that's the sort of the thesis I put in the start of my book. Peter Thiel, you know, the famous investor, you know, wrote his book Zero to One, and he talks about open secrets.

You know, these things in retrospect are so obvious. Like, why don't you start a company to use your phone to hail cars, you know, rather than relying on taxis? Why don't we create an internet distributed system to rent spare rooms in our houses? Airbnb, Uber, in retrospect, so obvious. I know Brian Armstrong's thesis was like, what if we made Bitcoin easy to buy? And there's a lot of obstacles to that, both technical ones, but also cultural. And to this day, I think a lot of the crypto community takes pride in how tech savvy they are. But the reality is most people just are not that good at that or that interested in it. So making it easy was critical. I think that's how they did what they did. And both then and now, it's also got a lot of resentment from what is so-called real crypto people who, you know, people still taunt Coinbase, not your coins, not your keys. And I get it.

But the reality is, you know, 90% of people on crypto weren't going to get there in the first place unless you make it easy. Yeah. And I guess in those early days of crypto, you know, you've done tons and tons of work. Were you able to actually talk to Brian and Fred and were they made available for the book? Or did you have to kind of do this without their participation? No, I was lucky because, I mean, since I've covered it, so I've covered Coinbase since its inception. So I, you know, known Brian Armstrong for years and that makes it sort of easier. And then fortunately, they, you know, for one reason or another, they decided to play ball. you know i didn't you know this isn't like an you know authorized biography i mean because i you

know to put it clearly you know a lot of people talk a lot of shit in the book about coinbase and i relay it i report what i found but i was lucky to have access to brian to fred um olaf carlson we real character really knows this crypto and it was really interesting like startups you know at a certain point any big company is kind of the same the big and bureaucratic and so on but startups are just the energy and the personalities are really interesting so it was neat peeling back the curtain of the early days there. Yeah. And so I guess let's talk about that, right? Because I think a lot of people forget, especially people who are coming into crypto now, you've got Brian and Fred as two of the

co-founders. Olaf's obviously one of the first employees, or I think he might even been the first employee. These guys have all gone on to kind of run different things that are leaders in their specific niches of the crypto space. And so what were those early days like as you're talking to them and talking to others in the space, like, help us understand what's going on in the early days of Coinbase. Yeah, I guess what struck me is how hard these guys worked. I mean, I guess that's just the world of startups. But I mean, they were really like, working 18 hours a day. It was Brian, you know, I mean, there's a bit of intrigue at the start, because he was a Y Combinator company. And, you know, Sam Altman, you know, the founder of Y Combinator told me that

their model is they want co founders because building startups too much work on their own. But when at the outset, I mean, Wired reported this years ago, a guy named Ben Reeves, sort of an old crypto guy, started blockchain. He and Brian entered Y Combinator as co-founders. But right on the cusp of starting, someone at Y Combinator whispered in Brian's ear, hey, you've got to cut this guy loose because there was an ideological division. Because Ben Reeves was like, we can't, you know, have a semi-centralized service. you know it's got to be and then you know but brian was like look the whole point's making it easy and we're you know so basically he he booted his co-founder with the complicity white combinator at the outset built it up but the reality is you know he needed someone else

and um a few months later fred urson was a golden sacks trader who got disillusioned by how technologically stupid goldman was moved to the west coast and um just met brian on reddit and then the two of them just like you know busted their ass building it um olaf carlson we who of course now runs polychain he was a freaking lumberjack i mean he's sort of a character he um was working in the state of washington like as a lumberjack and he uh was reeling to bitcoin and he turned up in san francisco and said hey guys can i work for you and you know that that's how they started real sort of synergy there they added a another engineer named craig hamill and then Charlie Lee, who of course is famous for Litecoin. And that was the original team. And there's

something about when you have people who mesh like that and work hard together. And that's, I think, how they launched it. Yeah. And I guess it's really interesting when you think through not only that small team, but there's some irony in Brian Armstrong and Fred coming together, given Fred's background from Wall Street, which is that there's definitely an ideological divide, like you described, where not only do you get inside of crypto, but crypto is an ideological divide from the traditional Wall Street, right? And so to see somebody cross over like that so early and go build infrastructure there, did Fred kind of give any insight into, I'm assuming his former co-workers thought he was crazy and kind of the classical story, or were they more encouraging

and really wanted to see him kind of go for this? No, he was disillusioned because he was, you know, When in Goldman, and he was a trader, but he had a real, you know, he's got a real talent for software. And obviously, he realized where, you know, this was, I think, when would this be like, yeah, 2012, 2013, where there would have been less the floor traders and the culture of, you know, those firms is like liars poker, it's, you know, kind of like big athletic dudes who, you know, showed each other down in a pit. whereas you know all the while you know they the guys who could build algos were you know coming in but uh you know fred was describing how the goldman people disdained you know the computerized traders treated them as cit staff and you know he just saw where the future was going you know in his words but obviously he's turned out to be right and so that led him to uh to leave and it's funny so apparently his you know his co-workers were like you know haha what's that or i don't know if he knew he's going to do crypto. But when he got into Coinbase, he went to his former

manager, the one guy who did get tech and was like, hey, do you want to buy an early chunk of Coinbase for $25,000? And obviously that guy's sitting very pretty right now. Yeah. And so there's this famous photo of Brian Armstrong. And I forget where it is, but it's in the early days of Coinbase. He's got a Coinbase shirt on, if I remember correctly. It's basically at like a job fair or some sort of event. And he's literally handing out t-shirts. And I remember asking somebody about it and I don't want to say who it is, but they basically were like, yeah, people forget that at one point Coinbase didn't really take off at first. And there was talk of potentially even like, should they shut it down?

Because it actually wasn't working. And then it kind of really took off. And so kind of how, when you were writing the book, like, how did you think about the various phases of the company and kind of that, you know, hard work overlaid with just the psychological toll it takes on a founder working on something that not only is just hard to build a company, but it's also in this industry that kind of sort of existed, but not a lot of people really recognized it, you know, in 2014, things like that. Yeah, and that's a great point, because I mean, that's startup life, you know, most of them fail, but they were in a whole

industry, you know, you didn't even know if the whole industry was going to make it. So that's even more existential. Yeah, I mean, you know, it's, you know, the peaks and valleys of crypto So 2013, it went on a bit of a run, and I can't remember what the prices got up to, but then it collapsed entirely again. I think that's where it sort of nudged $1,000. In the early, early days, it went from $30 to $2, but in the next uptick, I think it was 2013, it hit almost $1,000, and then the floor fell out. And yeah, talking there, I mean, they had their venture funding by then, so they could

ride it out. But I do know in the first crypto winter in 2014, people confided in me that they drew up a plan to, you know, to can 40% of their staff, because they always want to keep a two year runway. And then, you know, just as happens every so often, then the prices started ticking up again, and they were able to hold on. So it's, you know, it's a series of events like that. And I think it's true to this day, you know, you'll have these, you know, massive frenzies of trading and all the exchanges, you know, make a bunch of money, and then things go really quiet. And, you know, things shut down, things get acquired, people get laid off. But, you know, here we are again. Yeah. And another player that came from Coinbase and now has gone on to do other really impressive things is Adam White. And I know that there's some stories about Adam in the books. Maybe kind of share one or two of the really interesting things that Adam went through while working at Coinbase. Yeah. I mean, Adam White's one of the good guys in crypto.

You know, he's just a really stand up dude. I think, you know, sort of has no enemies and worked really hard. Interesting story, too. I mean, he was a, you know, a fighter, you know, he's in the fighter pilot in the Air Force. And, you know, so he served his country and then went to come back to Harvard Business School, took him to, you know, and he's so humble, he admitted it took him two tries to get in, he got rejected, he, you know, wrote and rewrote his application, got in, and around then he got into Bitcoin. And it's sort of funny that he uh you know he tried to write about this at harvard business school and they're like no no no this is fringe this is flaky so and you know this is complete self-promotion

i think it's awesome the uh my book's coming out in print it's out in audio right now but it'll be out in print in december and the publisher is harvard business review so this sort of shows how how far things come but um but you know adam yeah he's so he was basically the sales guy he you know he bust his ass to go and get people to sign up to take you know merchants you know and his challenge was fred urson told him you know sign up like you know uh 10 billion dollar companies and he did which is amazing but unfortunately you know as as we learned you know that never was bitcoin's game you know because remember there was this time where everyone thought oh people are going to pay with bitcoin merchants want bitcoin and uh so he signed all these people

up but you know then obviously not much came of that but my favorite story with adam is um later in the game and sort of around i think 2016 around there um when things were taken off uh brian armstrong coinbase sent him as an emissary to new york you know because he's kind of like watching down so you know he looks the part he looks like a banker and he's like go get some of these like old school you know firms on board so he gets a meeting with cantor fitzgerald which you know is sort of as like classic wall street as you can get you know we're talking like scotch and three peat suits and steakhouses and you know so he goes to meet he gets the meeting and he shows up on his own and the ceo of canterfish gerald comes with like 10 guys

and adam has no tie on and his title was like general manager and they start mocking him saying like what's the general manager you're gonna get my coffee and he basically got laughed out of the room you know and i think that's less reflection of adam than it is just the prejudice of wall street not only against crypto but against west coast culture you know and that's something i think the crypto community is reconciling with right now. Silicon Valley and Wall Street are very different places. They're coming together. But just look how people dress in the Valley. Look how they dress in Wall Street. And culture is a big part of companies, a big part of industries. And that's what we're seeing right now. Yeah, it's really interesting that difference

in culture specifically between those two places. You mentioned the dress, but I think also in the way that companies are built. Wall Street, very fundamentally driven. They want to see cash flow and all that fundamental analysis in Silicon Valley, it's very binary. Hey, we know that, you know, some high percentage of these companies are going out of business, but the ones that make it are going to be incredibly valuable. And I see it in a day to day, right? I mean, literally, you will see kind of the Silicon Valley mindset, but it's overlaid with your building in the financial industry, right, for all intents and purposes. And so there's this undercurrent of the Wall Street way, if you will. And in the book, as you're writing it, like, I'm assuming

you saw that clash over and over and over again. And it wasn't just kind of Adam White going into Cantor and getting, you know, berated. But were there other situations where you kind of saw that come to a head as Coinbase was being built? Oh, yeah, many times. I mean, you know, they, you know, move fast and break things ethos of the valley, you know, that's well and good, but it doesn't work in most industries. And, you know, we're talking about the country's banking system you can't play that way um and you know that affected you know sort of the cultural clashes with regulators but also from an infrastructure point of view you know i'm you know above my pay grade here but uh you know the tools they used to build it you know it's like

um uh you know what's the famous database thing you know mongo db and tools like that that are the kind of go-to building blocks for spinning up an app in silicon valley just are not strong enough to you know withstand like you know billions of financial transactions so you know the the tech stack like in 2017 for coinbase almost came crumbling down because they built it on silicon valley architecture and you know again you know pomp you and you know probably your crowd knows this stuff better than me but the the technological infrastructure you need to build something like jp morgan has got to be really solid and capable of massive throughput and uh You know, Coinbase got burned in late 2017 because their infrastructure almost fell down.

And so that's, you know, that's not so much a cultural thing, but it kind of is. The approach is to how you build. Silicon Valley, you build fast, you stand up, you pivot, you experiment. But, you know, when you're talking about, you know, Wall Street, you got to build, you know, very deliberately and make it to last. For sure. And I guess it's not only just Silicon Valley versus Wall Street, right? I know another kind of theme of crypto is it's much more global than most industries, right? I've got kind of this mental framework where a lot of companies, especially technology-wise, they were built in the United States previously. They would penetrate the U.S. market, and then there was almost like a board meeting.

It was like, okay, you know, this year is our global expansion, right? And then it would kind of go out globally. Now these companies are being built on, one, not even being based in New York or San Francisco, but also on top of that, they're global on day one, right? they don't kind of have this geographic region by geographic region kind of, you know, rollout plan, if you will. And so kind of how do you think that plays into Coinbase being based in San Francisco, but the industry being much more decentralized to some degree? Yeah, that's a really great question. Because, you know, you're right, typically, you know, you build here, and then you go market by market. But when you've got, you know, people like CZ, who stood up Binance in

a few months. And, you know, he, you know, he runs circles around Coinbase. And that's not entirely Coinbase's fault. But, you know, so much of the crypto industry's fate is determined by regulation. And, you know, in the US, you know, it's been pretty heavy handed. And so Coinbase had to make a choice to win the US or win the world. But it also made them complacent, because I think, you know, there is a bit of an American arrogance. Talk to some sources in the book about even when Coinbase went to China and Asia, you know, they were, you know, talking to people who built in Asia, they thought like Brian and Fred were extremely arrogant. They're like, look, you want to, you know, you want to compete, come, you know, come, come, come try win in, you know,

China and Japan, you know, before you tell us what to do. So that's, I think, really interesting. And then the, but the reality now is, you know, Binance, you know, they've done amazing things, but, you know, if you're hopscotching from Malta to Hong Kong to wherever they are now, Last I heard, CZ was planning to go to International Waters and run the whole thing from a yacht. I think it's cool. But if you're going to operate in the U.S., as much as crypto folks like being cowboys, you can't blow off the Treasury Department. You can't blow off the IRS. So that could hurt America from a competitive point of view in the long term.

But that's the reality that startups and crypto companies face. You got to play the game. Do you think that that makes an argument that the regulators or the regulation should change or there should be some kind of maybe even not like a full change, but like a sandbox where innovation can be tried or something done from a regulation standpoint that allows for the U.S. to not fall behind from an innovation standpoint? Or do you feel like it's just, hey, they're so true to kind of that way, that's never going to change and U.S. companies are just going to have to figure out how to compete with their hands kind of tied behind their back in some regard? Yeah, I mean, I don't know. I think, you know, you and probably a lot of your audience are closer to those questions than me. But as a reporter watching this, I certainly do feel that American crypto companies are being hampered. It's improving a bit. I mean, I think the regimes, you know, they're trying to set up a sandbox regime in Wyoming, which sounds great. brian brooks coinbase's former lawyer you know becoming you know the you know controller of the currency that's promising but also i think people underestimate the the lobbying clout of you know of the banking industry in dc you know if they want to shut something down they will so you know

but fortunately as much as you know i know because i know i've got a piece in the book about brian armstrong going to dc because they tried to get him on the lobbying circuit he hated it you know he's like you know he told somebody i think that democrat senator's an ass and i can't stand any of this because Silicon Valley guys, they want to build, they don't want to do that. But, you know, the industry has got to grow up and that's just kind of how American capitalism works for better or worse. So, you know, I think as the industry gets more entrenched, their lobbying in Washington shops will get better. I mean, that's what Google and Facebook did. Once upon a time, they refused to go to Washington. Now they're there again for better or worse. You know,

that's just how the American games played. Yeah. So Coinbase was obviously Bitcoin only for a long time, right? And then started to add other assets. Anything that was memorable as people kind of talked about the strategy evolving from Bitcoin only to other assets. And now they're even doing things around staking and custody and kind of moving outside of just help you buy Bitcoin, which sounds like that was the original mission. Kind of any takeaways there? Yeah. I mean, Coinbase was caught flat footed. I mean, that's part of the reason they got so beat by Binance for a while. And, you know, it's the reason people like Olaf and Fred Ursham, you know, left the company, they want to spread their wings. And there was a period

in 2015, 16, where this Bitcoin got so bitter between the block size debate, you know, remember people wanted to expand it to two megabytes and all that. And so much of the energy was consumed in politics and backstabbing and fighting that. Meanwhile, all that was going on in Bitcoin world. And then what Vitalik was building, you know, it was, it seemed suddenly very positive. It seemed full of potential. So Fred wrote a sort of a famous blog post saying, hey, this is the future. And he left to pursue it. And Coinbase just dragged their feet, adding Ethereum, adding anything. Part of that's for regulatory reasons, to be fair, but part of it was inertia. They got complacent. And then it happened again when Binance started

adding every token under the sun. There was a talk in Coinbase, people were advocating, look, let's split the company in two. We'll have an international holding company that can go playing you know in all those markets do the crazy stuff in an american company which you probably should have done um but then part of it was cultural i mean olaf was saying you know they had such a good 2017 they're like oh what should we do to maximize our tax advantage rather than building you know they lost touch with the pulse of the crypto community you know people were like hey let's add dogecoin which would have been easy lift and they're like well we don't know about the you know roi on that and you know so but that's when they brought balaji in and he you know

Balaji Srinivasan is pretty famous for a variety of reasons in crypto world. And he really injected some energy and was just like, you know, hellbent on adding tokens. And that's, I think, how they managed to get their ass in gear again. Yeah. So maybe talk a little bit more. Balaji came in through the Earn.com acquisition and became the CTO. I recently had him on for an episode and we spent almost zero time talking about Coinbase and spent most of the time talking about all of the crazy powerful ideas he has. But in terms of that acquisition, if I remember correctly, that was the first big acquisition that they did where it was, you know, kind of a nine-figure sum attached to it reportedly. Was that specifically for kind of a change in strategy or what was kind of the driving force behind rather than building everything internally to go out and buy a company like that?

Balaji's a hard figure to report on. I've only met him a couple times. he's incredibly polarizing and divisive however what everyone agrees with is he's a genius he's one of the sort of smartest people in crypto and in general so the account of you know getting earned.com you know some people related to me that it was a dog of a company and since andreessen horowitz had a big stake in that and coinbase was a way to solve that problem and a lot of people whispered in my ear that the official price you know the nine figures whatever it was, wasn't actually true, but it was to satisfy Balaji's ego. You know, I don't take

a position on that. That's what a lot of people were whispering in my ear. However, Balaji did do the job in really kind of changing up the culture at Coinbase, you know, and the downside was it resulted in a civil war. I mean, he pushed Adam White out. He pushed a lot of people out. You know, someone called him Coinbase's first brilliant asshole. Other people said he would win Survivor. You know, I don't take a position on any of this. I don't know Balaji well enough. I do think he's got formidable intelligence, that's for sure. And then ultimately, it became a showdown in Coinbase between Asif Herji, their, you know, COO and president for a while, who was making the company more corporate. And so, you know, which had to be done. Asif did a lot of good things. He

sort of made it into a mature company. But at the same time, the rank and file in Coinbase didn't like him because he wasn't a real crypto guy and they all worshiped Balaji because Balaji could code he knew tokens he knew the scene he was of it so you know and ultimately yeah it came to a head where there's you know kind of a big body count and then Coinbase lost a lot of people and I think it forced Brian Armstrong to come in and lead because you know Brian does not like conflict but sometimes if your lieutenants are in a shooting war you got to step in and do something him. The final straw was, I guess, Asif asked Brian to report to him on product. Brian owns the majority of the company and is the CEO, and that was a bridge too far. And so that's when

he got pushed out. And then Balaji, on his one-year vesting period, he peaced out and that was that. Yeah. Asif obviously used to run TD Ameritrade, right? So kind of came from a much more kind of Wall Street type background. And I guess part of this is not even just Coinbase, But most companies, as they go through what I'll just call growing pains, right, there's positives, negatives, and you're trying to build something that's worth billions and billions of dollars, right? So obviously, it's going to be hard to do. Would you say that most people kind of understand that it was important to have that period where Belashi came in and had an impact? It was important to have the period where Asif came in and had an impact. And like those moments, although maybe painful at the time, have kind of built Coinbase and the culture it has into today?

Or do you feel like there's kind of certain points in the history of Coinbase where those that are left point back and say, hey, we wish we could have skipped over certain periods or we wouldn't have made certain decisions in the past that we actually ended up making? No, I think that's a good way to look at the bigger picture. I mean, I think people in a startup going through something like that think they're the only one that's happened to. But even if you step back and he's like, look, you know, the reality in the valley is a company gets that big that quickly, the executive team is going to turn over two or three times. You know, so you're going to have moments like this. And then you've had the hidden hand of Andreessen the whole way to, you know, I mean, I think Chris Dixon and Fred Wilson of, you know, Union Square Ventures and Barry Shulman, you know, you got these real smart, you know, veterans who've been kind of, you know, the hidden hand shaping the path. So, you know, I think while it makes good newspaper copy and, you know, salacious book gossip, I don't know if it's that different from what goes on at, you know, any tech, successful tech company that scales quickly. Yeah. Elaborate a little bit more on the venture capitalists, right? You just rattled off three names that are at firms that have now become very well known, not only one for just investing in general, but obviously for crypto specifically. How do you think about their impact on Coinbase, right? I'm assuming Coinbase couldn't become Coinbase without them, but how involved are they or were

they? Any kind of insight there as to their involvement? Yeah, I mean, I think they've had a huge hand in guiding it. Mark Andreessen, Chris Dixon, Fred Wilson, they're kind of the rabbis behind the scenes. That doesn't take, I don't mean to diminish credit to Brian and Fred who busted their ass to build the company, but it's kind of symbiotic in the sense that you know, for the crypto industry, Coinbase is too big to fail. I mean, if Coinbase collapsed, I think, you know, it would set crypto back a decade. So I think, you know, that's why maybe it's got more attention from the VCs than other firms. You know, I'm not saying, you know, Coinbase is the best or the only firm. Kraken does good things. Binance has been amazing. You know,

you know, even Gemini, there's a lot of good crypto players out there. But, you know, they, if you want to put the face of crypto out there, it's Coinbase. And, you know, if Coinbase went south, I think the ripple effects would be disastrous for the industry. Yeah. And when you say go south, is that from a business model standpoint? Is that more of like a custody security hack type standpoint? Maybe it's both. Like, how do you think about the downside case or the risk that's associated with a company like Coinbase being as big as it is? Well, I mean, I think they're, you know, probably safe by now. I mean, in the final chapter of my book, I talk about a clandestine meeting between Brian Armstrong and JP Morgan's CEO, Jamie Dimon. And

I love this so much is, of course, Dimon is, you know, Bitcoin's most famous antagonist. You know, he's called it, you know, every name in the book, a fraud and insulted it. And then meanwhile, he's taking the secret meeting with Brian Armstrong, you know, in the, you know, in JP Morgan's Manhattan headquarters. So, you know, I think that sort of shows that, you know, Coinbase is here to stay. In terms of moments that could have sunk them, you know, a fatal hack, you know, the industry barely survived Mt. Gox, something that befell Coinbase, because you got to remember most American crypto owners, that's what they know crypto as. I mean, I think people come on your show, the people who are running the funds and building it, they're all like, you know,

that's child's play. But for most Americans, or, you know, most a lot of other consumers in the that's their touchstone you know so if there's a disastrous hack at coinbase it would sink them could still happen i guess but um i do recount my book an early hacking incident you know coinbase like say it's never been hacked that's not true uh in the early stage um when there's just five of them one of their vendors got in and uh got into the hot wallet and quickly stole 250 000 um and after that they uh coinbase issued only um uh custom chromebooks to anyone working with them and tighten their security and then also um forgive me i can't remember the guy's name uh starts with a you know he's a very famous figure in crypto who's uh you know antopolis anthopolis

something like that andreas antopolis yep thank you yep they hired him to go and test their cold storage and to do a complete audit of to make sure every bitcoin they had was indeed there you know because remember what happened with mount gox uh you know carpolis was sitting there he he thought he had it. And then when I looked, it wasn't there. So Anthopolis verified it was there. So I think getting by that, I think getting through the IRS audit. And, you know, so I think that's, and then your other existential point was when Silicon Valley Bank gave them the boot, which is very bad, because Fed Ersim ill advisedly put up a PowerPoint explaining how Bitcoin, you know, was could skirt sanctions. He wasn't advising it. And, you know, he's kind of right,

you know, because it's decentralized, but you don't go around, you know, making presentations like that. And Silicon Valley Bank finally had enough and booted them. And that's a big deal. You know, they, you know, I know it really pissed off Chris Dixon and stuff. And at least they gave him a six month grace period to find another banker. But if that, that could have sunk them too. But I think at this point, you know, Coinbase is, they might lose market share, you know, they might, someone else might come along, but I think they've really kind of become the face of the industry yeah and so you mentioned uh uh brian and jamie diamond meeting uh we recently saw in the news that jp morgan is now banking both coinbase and gemini is that part that meeting

kind of leading to that or was there other conversation that you're aware of uh as part of i love the word clandestine that you use yeah it's funny because you know i learned it happened and there everyone's like you know i was trying to get uh you know uh jp morgan to confirm and they were sort of skittish about it and stuff. Yeah, I think because Brian did an East Coast tour, met with Lloyd Blankfein and Golden Sacks and Jamie Dimon. And I think it was both sort of a, you know, he's, you know, being an evangelical for crypto, but also I think he wants to learn from these guys who, whatever you think of the traditional finance industry, I mean, Blankfein and Dimon are formidable financial executives. And I think it was a little bit, you know, to come sit

at their feet and learn what they have to say. You know, and no doubt that probably was the first step to lay the groundwork for what was reported last week of JP Morgan taking on Coinbase as a banking customer. Yeah, that's awesome. So let's look forward. Obviously, Coinbase today, and I probably should caveat this entire conversation, we have some exposure to Coinbase financially. We're not direct investors in the company, but basically we've invested in somebody who's invested in the company. But where do they go from here? It's an eight plus billion dollar company based on public reports, but do they continue to stay private forever? Do they have aspirations to go public? Do they tokenize the company's equity? I think one time Brian said

something about that would be like the most Coinbase thing to do. What's the conversation around the company from that standpoint? Insiders told me the plan was to go public this year, but like everything else in the pandemic, life is on hold. But unlike so many know, they're unicorns. I mean, they are, you know, profitable most quarters, so they can. And I think you put your finger on it. The question is not, you know, if or when, it's how. And I talked to Fred Ursham recently and, you know, asked him this, like, what's it going to look like? Are you going to do a blockchain token? And he said, yeah, it'd be pretty boring if we just did a conventional NASDAQ IPO. And I think there's so many people, because they are, you

know, a lot of people hate Coinbase, but, you know, they're the industry leader. They're the the standard bearer for the industry. So I think it'd be very brutally disappointing if they just did something boring. So I think it's just how quickly they can get the regulatory ducks in a row. And what I hear in the company is they want to do some hybrid listing of, they'll float some shares like normal, but also put a bunch of those on a token and do this sort of an ICO meets IPO. And I can't wait to see the details. And that's what they hope to do. But who knows? I mean, maybe their investors will get impatient and just push them out the door. But I think the crypto world's really hoping for a, you know, a Coinbase token.

Yeah. And it's interesting too, because I wonder if there's a day where we see a Coinbase equity token trading on Coinbase, right? Which kind of leads to the question of they historically have listed assets that are not securities. And I think that's, you know, as you mentioned, kind of part of that underwriting process and really kind of trying to stand the right side of the regulators. Does the company eventually end up listing kind of commodities, currencies, and securities all in this digital format, all in one location? Or how do you think that kind of plays out based on the conversations you've had? Yeah, that's prescient. I mean, I think you're looking into the future and that's what the future is going to be. I think we're going

to see Nike and Apple stock and other equities traded as tokens because it just makes so much sense. It's so much more efficient, it's more secure. Who will be doing that? I don't know, possibly Coinbase, but we could also see, you know, the big broker, we could see Intercontinental Exchange trying to buy Gemini or Coinbase. And, you know, they see a period where we have, you know, hybrid share listings for a while. But I think no doubt, you know, I, you know, I don't know what your guess is, I'd say maybe within 10 years, we'll see that. Yeah, look, I personally, my personal opinion is that we will see stocks, bonds, currencies and commodities all digitized, right? Kind of the technology layer will be the same. And it just generally makes sense. We're

kind of seeing this, right? If you take some of the companies we see that are focused on like millennial investing and things like that, they're trying to put various asset classes together on the same platform. That's a little bit different, but still directionally getting towards where you could buy Bitcoin, buy a stock or buy something else on one location. It just seems that's the way the future is going to play out, but I don't know, right? Yeah, I mean, technology is inevitable. You know, remember we had the internet and we realized things were gonna go digital,

you know, and logically it should happen next year. In some industries, it took them 20 years. And, you know, but I just can't see going backwards. This stuff just makes so much sense. But who's gonna do it? I don't know. Will Coinbase morph into become the, you know, New York Stock Exchange of the future?

Will they get acquired? You know, and then also the other people big in this game is, you know, Facebook with their Libra token. You know, I think it's notable that Apple and Amazon we're going to start tokenizing stuff too you know there's and you know government central banks it's it's kind of a jump ball out there but i think you're absolutely right all this is going to happen but who's going to pull it off first i don't know yeah in um i think it was 2017 maybe i tweeted and i said look you know within the next 24 months we're going to get um large companies

start to issue these tokens uh and my guess was actually uh tesla and amazon tesla having like some sort of energy credit for the grid, right? So you actually have some incentive mechanism that's used there. And then Amazon, just from the idea that a gift card is basically a token, right? I mean, yeah, it's a different technology form factor. And so you can easily see kind of this happening.

But I do think that it's happened slower than people have thought, right? It was kind of like in 17, everything looked like it was gonna happen, you know, within 24 months. Now it's probably pushed out a little ways. Well, I mean, someone's gotta build the interface. The problem with it, I don't wanna insult,

crypto community but i think they're so in love with their own technology their own culture there's been a lag in building you know i mean even with d5 stuff i try to cover it and i mean this i theoretically it's so cool but i mean you want me to get it you know browser add-on and metamask and all the rest of it and i mean give me a break this stuff has got to be you know an app it's got to be as easy to use as any other app on my phone and that's where i think the big corporates could have a role i think amazon you know tesla yes given their unique corporate culture could do that but you know i mean we need those user interfaces and it's just it seems a lot of crypto sometimes is insiders impressing each other with who can build the most you know kind of

out there technically sophisticated products and we've got to remember you know most people the stuff is just too hard you got to build it so it's accessible the ui is so crucial and you know i think you know you got to build a plumbing first and that's what's going on but you know who's going to crack the code and make this mainstream accessible i don't know could be coinbase could could be Tesla, could be Amazon, could be Apple, could be Facebook, or some startup out there who's going to solve this all. But I can't wait to see how it turns out. Yeah. I mean, look, Coinbase, Gemini, I think part of what's made those companies so successful, right, is they basically made it look very similar to other brokerage type products, right? And so if you're used to kind of

buying financial assets on a platform, you now can do it here and they make it look and feel very user-friendly. But then you also have things like Cash App, right, that are just, you know, stupid simple um and they're kind of pulling other people in i wonder what other trends i'm kind of going with coinbase uh to finish up and you've covered you know crypto for a while now and obviously seen everything from the early days to now what are the other trends that are interesting to you you mentioned d5 but are there other things that just kind of stick out to you or that you're paying attention to um it's just as an aside you mentioned uh cash out square i was talking to a VC recently who just described it as a beast and Dorsey's interest in crypto and

the infrastructure they're building. It's subtle, but I mean, they've got a giant banking network, you know, so they, they're ones to watch. That would be really neat if they push the crypto ball forward. I could see them doing that for sure. You know, otherwise I think the thing to watch right now is what comes out of the crisis we've seen with the, you know, attempts to deliver funds, you know, to businesses, you know, and within the last crisis in 2008, 2009, you know, we saw legislation that enabled the whole fintech industry to take off the PayPals and things like that. So I'm watching to see if the lawmakers are smart enough to do something to facilitate how things are going to change. You know, I think the way we pay is changing, you know, like, I'm

Canadian, I'm surprised that the US still doesn't, you know, have contactless payments, you know, Canada's had that for years. Everywhere else, Asia's miles ahead. It might take this health crisis to get people to stop swiping credit cards. I'm curious a lot of the innovations in the rest of the world is going to come into America. I'm always surprised about how cultural payment is. People pay very differently in Northern Europe and in Asia and Canada and America. Obviously, crypto is going to have a role to play in that as well. I'm watching Facebook look into it closely, because I think that notion of, I know a lot of people hate it because it's centralized, it's not real crypto. That's true. But I think the more people get

familiar with this, with tokens, with fungible wallets, let's just get everyone on the platform and then educate them about having their own hardware wallet and stuff. So sorry, that's kind of a stream of consciousness answer, but that's some of the things I'm looking at. And finally, central banks too. I think, are we going to see, is China going to pull this off? can you do it without turning to a surveillance mechanism? I think that's going to be a big story in the next couple of years. So the only thing I'm going to correct you on is Jack, if you listen to this is scoffing because he would say he's into Bitcoin, not crypto. But other than that, I definitely agree that they specifically have this unique place in the market where they've got the

connectivity to kind of the legacy system. And then when you've got the leader of the company who is so kind of hell-bent on Bitcoin and kind of its future prospects that you just don't see that anywhere else, right? Yeah, what if you strapped it to Twitter? Why not build in a payment network? And as someone in the media drives me crazy that Apple and Google with Chrome and Safari don't build in a crypto token so that you come across one of my articles, there's a paywall.

What if there's a little button you could just say, yeah, pay a buck and use crypto tokens to do that? I mean, the technology, you know, it's just, it's so obviously, you know, that it would be useful to deploy it this way. You know, it's just someone's got to step up and lead. Maybe it's Jack, maybe it's Zuckerberg, you know, maybe it's Brian Armstrong, but, you know, it's going to happen. I don't know how soon, but it's going to happen. Yeah, and then I guess what are the areas, everything you mentioned on the trend side is very kind of positive looking. What are the areas where you say, other than the user experience, these are the big obstacles that crypto has to overcome in the next kind of five to 10 years?

I think they've got to build something someone needs. I mean, as a reporter, I mean, you know, these pitches I get like these, you know, I don't mean to, you know, pick on some companies, but like DFINITY raised $100 million for a world computer that's going to change everything, you know, it's like, okay, where is it? And I think it's just a structural model of traditional startup. You've got to build, you've got to get customers, you've got to get revenue, you've got to scrape to get to your Series A and your Series B. The crypto model is flawed because it's like, okay, here's $100 million, go build it. And guess what? A lot of these people, it's a lot more fun to go and fly around the world and go to conferences and do stuff like that than to grind because there's not enough pressure to build the stuff. So I think the incentive model within crypto is very flawed. But, you know, we'll see what happens. So I think that's going to be a threat to it. And I think there's, you know, just, you know, people have got to start speaking plain English. You know, Polkadot and DFINITY and all this is really interesting theoretically. And I'm in the world, so I kind of appreciate it.

But, you know, they've got to make this stuff relatable to ordinary people. Yeah, I think it's a great point. where can where can people go find the book if if they want to read more about it well thanks for asking pomp yeah i mean you know it's uh just if you want to learn about coinbase and crypto i think it'll have you covered but also you know it's it's a great story i think there's a lot of gossip i tell it narrative style so you know it'll should fly by if you go to amazon audible and google kings of crypto you can get it uh they've got the exclusive rights for that for a few more months and you can pre-order from harvest harvard business review again to search kings of crypto

and uh you can order it up that way so um yeah you know i hope people do because it's it's a good story and there's a lot of gossip in there and about people you might know so that's awesome before i let you go i uh i was asking everyone two questions and then you get to ask me one to finish up uh what is the most important book you've ever read uh my goodness um can you ask me the second one and i'll get back to you on that second one's not much easier uh aliens believer or non-believer uh that's easy non-believer i love astronomy i love the stars no aliens out there no wait well you gotta explain that why no aliens you're one of you may be the fifth person ever to say no aliens we would have heard

from them okay yeah um uh let's see most important book i've read um and i'm probably supposed to say some business book but i i love fiction so uh probably crime and punishment it's just you know the best detective story it's the best piece of russian literature ever written and it's just exploring people's motives souls you know life death god atheism it's all in there so uh you know if you're stuck at home in the pandemic reprimand punishment so uh i have not read that but i did read bill browder's book um it is uh red um i'm gonna forget the name now uh um it is red I forget. But Bill Browder is the guy who, he's an American investor and he went to Russia and Red Notice is his name. And they issue a Red Notice for him. And it's this whole kind of

crime and drama book and ended up killing his lawyer and doing all this crazy stuff. And I've heard a bunch, but I've never read the fiction. And so I wonder how accurate the fiction and the nonfiction line up there. That sounds really good. I did think of a business book it's not the most important one i want to read but i listened to it recently a shoe dog by phil knight of nike great book you want to hear guys struggling to build a company and just the you know the footwear industry more interestingly you can possibly imagine so if you want a good business book pick up shoe dog it's an old one but a good one i always say that he made the right decision not calling it blue ribbon right so something about nike just sounds

better uh what what one question do you have for me to uh to wrap this up uh okay how about the future media it's it's it's grim out there who's going to save media the atlantic just laid a bunch of people off buzzfeed's laying people off you know how does how does the media business fix its business model so we uh you know so we can we can stay solvent yeah so i think there's uh two paths that are interesting i don't know necessarily if they're these are the magic bullets uh because i think that there's in the legacy media world you're going to see um some actually get stronger right while some fail and that's just the nature of kind of consolidation and things like that but the two new paths that are really interesting to me uh one is kind of

the sub stack model where you say look people are going to subscribe to other people they're not going to subscribe to the publication itself and so uh you'll see that kind of get continue to get built out i think you'll continue to see journalists leave and um kind of just say hey look i want to write what i want to write and it might be all kinds of weird stuff not fitting under one publication so you know support me um so we'll see how that plays out uh but then the other thing that I'm really interested in is kind of these very small, what I call internet first media companies, right? And so this is people who are doing this right now are people like Tim Pool, or if you look at somebody like David Pakman, or you see people like, what's his name? Ben Rubin,

right? And all of these people, what they basically have done is they've recreated what would be a traditional media company that has tens of, if not hundreds of employees. And it's like them and a staff of four or five right joe rogan's another example right now joe's doing video and audio but it wouldn't be hard to see somebody in joe rogan's position just say hey look we're gonna hire one person to you know create show notes and transcripts and put that online and when you start to see that you start to say like the media organizations are gonna have the same uh disruption happen that you've seen in every other sector through technology uh the big question is just can they see it coming right so like new york times is kind of

a notorious one that, you know, they've adopted some of this stuff and they're benefiting. Obviously, Fortune's got their subscription services and they're kind of getting behind some of this. And so I think that's really going to ultimately depend like who wins and who doesn't. It's just, you know, who's awake, right? And who's asleep at the wheel. You know, so it'll be interesting to watch, but I also don't think it's going to happen overnight, right? I think a lot of people think like tomorrow, all these media companies are going to fail. I'm like, yeah, maybe, but it's more likely that it's kind of a slow death than it is just, you know, everyone goes out of business all at once. Yeah, that's astute. I mean, yeah, technology

sort of determines so much and media likes to think it's exempt, but it's, it's going to shape our future. So, all right, well, Palm, thanks very much. Real pleasure to be on your show. Absolutely. Well, listen, Jeff, I really appreciate it. And we'll, we'll talk soon. We'll take care.