The following is a conversation with Brian Armstrong, co-founder and CEO of Coinbase, the largest cryptocurrency exchange platform with 98 million users in 100 countries, listing Bitcoin, Ethereum, Cardano, and over 100 popular cryptocurrencies. I recorded this conversation with Brian before this week's SEC probe into whether some of the crypto listings are securities and thus need to be regulated as such. As always with conversations that involve cryptocurrency, I try to make it timeless so that the price soaring high or crashing down low doesn't distract from the fundamental technological, economic, social, and philosophical ideas underlying this new form of money, energy, and information. Our world runs on money, the exchange and store of value. And cryptocurrency seeks to build the next chapter of how money works and what it can do. Coinbase and Brian are trying to do this by working together with regulators and governments, which is a long and difficult road. Bureaucracies resist change for better and for worse. The latest SEC probe is a good representation of this. It is a serious attempt to limit fraud, but one that also runs the risk of limiting innovation and limiting financial freedom of individuals. This is a complicated mess, and I applaud everyone involved for trying to work through it. I hope in the end, the interest of the individual wins. Decentralization, after all, is a hedge against the corrupting nature of centralized power. And now, a quick few second mention of each sponsor. Check them out in the description. It's the best way to support this podcast. We got Audible for audiobooks, Skiff for email, Buy Optimizers for health, Fundrise for investing, and Athletic Greens for performance. Choose wisely, my friends. And now on to the full ad reads. As always, no ads in the middle because I hate those. I tried to make these interesting, but if you skip them, please still check out our sponsors. I enjoy their stuff. 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It's a platform that allows you to invest in private real estate. If you're looking to diversify your investment portfolio, this is a good choice. Boy, is 2022 a giant mess. From an economics perspective, I have no idea. You definitely don't want to take financial advice from me, but I think diversification is still a really powerful tool to have when you're doing investment. And in this age of cryptocurrency and all the different options that are out there, I think it's nice to have a tool to do easy, accessible investment into private real estate. Over 150,000 investors use it. So, go check out Fundrise. It takes just a few minutes to get started at fundrise.com/lex. This show is also brought to you by Athletic Greens and the AG1 drink, which is an all-in-one daily drink to support better health and peak performance. It replaced the multivitamin for me and went far beyond that with 75 vitamins and minerals. I wonder if they have an AG2 drink at some point. Why is it named AG1? Every time I look at that, I wonder, it's like when you do that prank on people and you release like four turtles and number them 1, 2, 3, and 5 in an apartment or house, and then everyone will be looking for the number four turtle. So here I am looking at AG1 and looking for AG2. But AG1 is enough for me. It's my strong grounding nutritionally in all the crazy stuff I do in terms of the stuff I eat, in terms of the mental workload and the physical workload, all that kind of stuff. I can count on the fact that my nutrition at least is in the right place in terms of the vitamins and minerals I have in my body. I also take fish oil. And now you can get one month supply of fish oil when you sign up at athleticgreens.com/lex. This is the Lex Fridman podcast. To support it, please check out our sponsors in the description. And now, dear friends, here's Brian Armstrong.
Let's start with the fact that you're a programmer. What was the first program you've ever written or the first one that you remember?
The first memory I have of programming was probably in middle school and I remember it was recess and they had this time period where you could read books and the other kids were reading comic books and stuff, and for some reason I had gotten into this idea I wanted to get into computers and I was playing with computers at home and so I got this book I think from the library and it was called like How to Learn Java in 30 Days. So I was reading this book at recess and I didn't understand anything and I remember I went home and I tried to get this thing working and you know, if you've ever written a Java program, the first lines are like public static void main string args or whatever, and it's just so foreign and it's so difficult to get started, and so I was kind of frustrated. I was like, I don't understand anything that's happening in this book. So the first thing I wrote was probably just a hello world app in Java. But I felt like I was so confused about what was actually happening that I later learned a bit of PHP and PHP was more fun for me because it was like, oh, just print out what you want, it didn't have all this complexity around it. So then I got more into PHP, started building some simple websites, I think learned some HTML. So I think that was my introduction to programming, at least the very beginning part.
Yeah. You know, Java has a lot of, out of all the hello worlds you can possibly write, Java is the one where I think it's the longest.
Which is quite interesting because Java is often, at least for a long time, was used as the primary programming language to teach people how to program, or at least about object-oriented programming. I think most universities have now switched in high school switched to Python. I'm not sure if that's the case.
Probably better. It's easier to learn. It lowers the, it makes it less scary. There's less of a hurdle.
And certainly none of them use PHP. I love PHP and I feel like it's a dirty secret I have to keep private to myself, like it's somebody I'm seeing on the side or something like that, because it's just not a respected programming language because I think there's so many ways you can write poor code with PHP.
Which is why it's not respected.
Yeah. It's a scripting language more so, although of course Facebook built a huge stack on top of it and valuable company. But I still love Ruby to this day. Ruby is probably my favorite language. Python's great too, but I just love the idea behind Ruby that it's like let's make it easier for the human, harder for the computer and make it a joy to be expressive and all these things. So I was never the best computer scientist, but I was a good hacker. I could rapidly prototype products using languages like Ruby. Do a lot of computer science programs still use like Lisp and Scheme and things like that?
No. No, they do for that's like if you're hardcore. If you're legit, you're going to do some of the functional languages.
I think there's a few others that popped up, but Lisp is a distant memory for a lot of people. That's like somebody has to go to the library, dust off the book.
But Scheme a little bit. I think if you're starting, I mean there's courses about languages themselves like programming languages.
Lisp might be one of those, you know, how there's languages that nobody uses anymore, like ancient languages.
You might have to go to school in that same way for programming languages.
Back in the day we used to use parentheses. I of course still use Emacs as the editor for most things that I do. And Emacs is, you know, a lot of the customization you can do is in Lisp.
And that's the language probably when I first really fell in love with programming is Lisp, because for a long time throughout the earlier history of artificial intelligence, Lisp was the primary language, but it still had a life in the '90s and the 2000s where some people would use it.
Such a beautiful functional language, but it just somehow didn't pick up. That said, I should say, push back on PHP. I feel like it's still true that most of the web runs on PHP. Most of the back end is still PHP.
So if you look at, it's like the stuff that people don't talk about. It's like what runs most systems in the world? What runs most backend? What runs most frontend? JavaScript, HTML.
JavaScript. I think the Stack Exchange surveys show Java, JavaScript is the most popular language in the world, I think.
Oh, yeah. In terms of programmers and numbers of, I wonder.
By survey of number of programmers on Stack Overflow.
Oh, yeah. But that's also the cutting edge, right? Those are the people that are just excitedly writing code. I wonder if there's people that are just maintaining gigantic code bases.
Yeah. I think the amount of Java out there just running industrial systems has got to be enormous. And then of course in the banking industry, finance, it's like even older stuff, COBOL and whatnot.
But I've been actually looking for somebody to interview who represents COBOL and for like who's the figure still there that holds the flag. I did, you know, with Java, founder of Java, creator of Java, creator of Python, creator of C++, but nobody wants to hold the flag for COBOL, even though some of the most important systems in the world still run on those.
Like power systems and infrastructure systems, which is fascinating, and ATMs and stuff like that. A lot of stuff that we rely on that just works. And the reason we don't change it because it works well is written in languages that people don't use anymore.
Yeah, that'd be a cool series of interviews. Get the stuff that's like tech that was invented 40, 50 years ago but still is being used widely. I mean Emacs is an example of that.
Let me ask the big question of what are cryptocurrency exchanges and what's Coinbase? How does it work? Before I'll ask even bigger questions, but it's just a nice kind of pallet cleansing question of what is Coinbase?
Coinbase is a cryptocurrency exchange, brokerage, custodian. Basically, we're the primary financial account for people in the crypto economy, how they buy crypto, how they store it, how they use it increasingly in different ways. We can talk about that. So, yeah, we want to be the way that a billion people hopefully access the open financial system globally. How does it work? What's cryptocurrency? You know, there's Bitcoin, there's Ethereum. What does it mean to be an exchange? What does it mean to store? What does it mean to transact? How does what does Coinbase actually do? Okay, so basically in any given market, there's some people want to buy, some people who want to sell, and there's you keep an order book of all those prices. And then if someone's willing to buy for more than the lowest price someone's willing to sell, then you get a trade to execute. That's kind of how an exchange works underneath. And a brokerage is kind of simpler than that even. You don't have to look at the whole order book and everything. But you just go in there and you say I want to buy $100 of Bitcoin or whatever cryptocurrency. You get a quote and if you like it you can hit accept. And the core things that we do to make all that just work, make it seamless, it sounds simple on the surface, is we have to do payment integrations in a variety of places around the world to make it easier for people to get fiat currency into this ecosystem. We have to work on cyber security a lot. There's lots of hackers out there trying to break into our systems and steal crypto or to put stolen credit cards and bank accounts and things like that into these systems. We have to integrate with the blockchains themselves, which are periodically getting updated and having various airdrops and all kinds of things. So we're integrated with lots of different blockchains and then we have to store the crypto that people buy securely as well. Crypto is kind of like storing, you store the private keys essentially, and we've invented a lot of cool technology about how to do that securely that helps me sleep at night as one of the largest crypto custodians out there. So those are some of the pieces that had to come together to get that early simple buy-sell experience to work. And yeah, I mean Coinbase actually has a lot of different products now. So we have an institutional product. We have Coinbase Commerce which is like merchant payments, like Stripe for crypto. We've got a self-custodial wallet which we can talk about. There's all kinds of cool applications people are building with web3 and they can access it through that. We just launched an NFT product. I can go on down the list. We're sort of like a portfolio of crypto products now. We're big enough where we can do multiple things, but the core thing we got started with and still the majority of our revenue today is people just want to come in and buy and sell some crypto and we help them do that, make it simple and easy to use.
And I'll ask you about wallet, NFTs, about what is it called the Stripe type?
Coinbase Commerce, yeah. I'll ask you about all that. But order books and exchange, what's the difference between that and stocks for example, which also have order books?
I mean stocks trade through order books too. So do commodities. It's all similar type of situation.
So when I want to buy one Bitcoin and I see on Coinbase the price of that Bitcoin is say $40,000 and I press buy, what happens?
Okay, so you've gotten it a lot like you know when you press the button on your keyboard, an electrical signal goes up the wire on your keyboard. No, we won't. That's also important the timing, right? Because isn't that price fixed?
Yeah, that's true. It's giving you a quote, right? That's, there's a whole concept of slippage and like by the time the quote is executed, if the price has moved too much, we may reject it and there's various things like that. But how do I mean what's the simple version I can give you?
So we'll basically check the order book, give you a quote. It's good for some period of time or for some amount of slippage, and then what's happening is we're initiating a debit to your payment method, whether that's a credit card or a bank account or you're storing dollars or euros or something on our platform. There's various payment methods. So we're basically debiting that and then we're crediting you the crypto and we're taking a fee for it too.
That's fundamentally what's happening underneath. And then there's some interesting slippage. How do you calculate how much slippage is allowed? Like how do you know these things? Because order books are fascinatingly, the dynamics of that is pretty interesting.
Yeah. So there's a lot of people like traders who get super into this and high frequency traders and arbitrage and all kinds of interesting topics. Flash Boys was an interesting book on this whole thing. You want access to the information the fastest. Sometimes even putting your thing in the data center right next to the thing. We don't allow that colo stuff because we want it to be more democratized. But basically you give a, let's say we wanted to just keep it math simple. We want to charge a 1% fee. So if you're buying $100 of Bitcoin, we'll charge you $101. We've presented you the amount of Bitcoin you're going to get for the $100. Now let's say 10 seconds later you hit accept. We go to fill the order. So it's going to be some error bound around that 1% fee. And if we think we're actually losing money on the trade, I think we'll often reject it. So some part of the fee, the slippage is incorporated into that averaged over a large number of people.
I mean, just that little detail probably requires a lot of experimentation.
Yeah. And it's kind of like a giant bug bounty out there because if you get it wrong, there's people who are going to arbitrage that. And we've had people sort of pentest our systems in really creative ways where they'll just fire programmatically with APIs, they'll fire off a million different quotes and look for one of them that's out of bounds and then actually take that money right there. And we get people doing all kinds of crazy stuff.
So how do you protect against that? How do you protect? We'll talk about cyber security in interesting ways, but there's a lot of clever people trying to do clever things to earn an edge of some kind in the system.
How do you stay one step ahead? There's no silver bullet, it's a bunch of lead bullets. So it's like, you know, one thing we do is we just have good test suites. So you're testing every piece of code that goes out. That's just common good best practice, but it's particularly important in financial services. Another thing we do is we hire third party firms to try to audit this stuff and break in. Another one we do is we have a bug bounty program. So we basically pay white hat hackers to find this stuff before the black hats do. And we've paid out lots of good bug bounties. So try all the above and occasionally you don't get it right and you lose some money and then you fix it and you keep going.
Let's talk about cyber security a little bit more. You mentioned using stolen bank accounts.
So that's another interesting one. How do you protect against that?
Okay. So fraud prevention is a big topic. So one of the things people do, but one of the things they do is use machine learning. So you look at, to protect against it. So what you want to do is kind of build up a labeled data set of all the different people who have turned out to be fraudulent and good actors and hopefully collect as much data as you can and then you might feed hundreds or thousands of these factors into your machine learning model and it'll come back with a risk score. So an example of the kinds of factors people create or put in there. Obviously I don't want to disclose too many of them because it's a cat-and-mouse game, but just kind of relatively well-known stuff might be device fingerprints. So like what kind of device are you on and what fonts do you have installed? A lot of people who are farming lots of these accounts, they're using emulators and virtual machines and stuff. They're not like an average person on that device. And then you'll see sometimes, one of my favorite metrics we tracked for this was called improbable travel velocity. So we would track people's IPs, and you might see someone who was one day in Austin, Texas, and then an hour later they were in London or something. It's like, well, that's very improbable. I mean, sometimes people are using VPNs, so you got to be careful with that because there's legitimate people who use VPNs too. If it's not possible for them to have gotten on a plane and gotten there that quickly, then that's usually they're spoofing a device or IP. Sometimes those are interesting factors. But if you feed enough of these in, you will, oh, another fun one is like real users will type their credit card one number at a time. Scammers have a list of them and they'll just paste in a whole number. So you can look at the number of milliseconds between keystrokes. There's all kinds of stuff people have come up with.
And even for travel velocity, you could probably incorporate VPNs too because that's probably a travel velocity for VPN switching too. That's humanlike. Like if you're using legitimately VPN for something else.
I feel embarrassed that I don't know this, probably should. But the I'm not a robot captcha thing.
Yeah. So that probably works in the same way. Like how do you move your mouse maybe? Or the dynamics of the clicking?
But how does that even work that well then? And why can't it be faked? I need to look into this because it's such a trivial captcha. It feels like should be very crackable. And yet a lot of high security places use that.
Yeah, it's really interesting. It's another cat and mouse game. So I think they've, yeah, but it's using a lot of similar signals like mouse movements, keystrokes, and then obviously all the stuff that comes over the wire with your browser. So like what operating system, what fonts, what headers are being sent over. And there's actually an old website I can't remember what it's called. It was called like Panopticlick or Panopticon or something, but it basically was a proof of concept site that they would just show you all the data that was kind of getting sent over with your request and say that there's only one person in the world who has this exact set of data. It's you. And so it's almost like a clever workaround to track somebody, to identify a unique person even if there wasn't a cookie involved or something. This is a fascinating world where you can't see anybody. You're in the dark and yet you have a lot of signal and you have to figure out who's a real person, who's not, who's a robot, who's not.
Let me step back. We're going to jump around all over the place. Let me step back.
That's why I like your interviews. You get into technical topics.
So, just let's use Bitcoin as a measure of time. You started Coinbase when Bitcoin was $10.
Yeah. And you just mentioned an incredible system with security, with transactions, everything is thought through. There's a lot going on, but what was version one back in those early days, the first prototype of Coinbase? What did that look like?
Yeah. Like what did it take to write it, to think through it and make it work enough to at least make you believe that it's going to work?
Well, I definitely didn't know if it was going to work. I mean, it was kind of I felt like I was just following my gut. So I was working at Airbnb. I was a software engineer there, project manager. I was working on some fraud prevention stuff, for instance. And I read the Bitcoin white paper in kind of December of 2010. I started going to some Bitcoin meetups in the Bay Area. Met lots of interesting people there, like crazy people, anarchists, really brilliant people, all the above. And so I started nights and weekends trying to hack together a prototype. And my initial thought was, well, SMTP is a protocol that runs email and git is a protocol for version control, but people made like Gmail and GitHub. Most people don't want to run their own email server or even their own git server, they just want to use a hosted thing that will do all the security and backups for them. So the thought in my head at that time was Bitcoin is this new protocol. There's probably going to be somebody who makes a hosted service that does all the security and backups for you and makes Bitcoin as a protocol easy to use. So maybe I should make a hosted Bitcoin wallet or something. That was my idea, to make Gmail for Bitcoin. And a bunch of people told me that was a bad idea. Most of my smart friends who I told about it, they were like, well, first of all, I don't really get what you're doing at all. Like Bitcoin sounds like a scam or something you've gotten involved in. But then other people who understood what Bitcoin was told me they thought it was a dumb idea because they're like, dude, if you store all this Bitcoin, you're just going to get hacked. Like nobody, why would you do that? And so I kind of had this thought like, you know what, I'm not going to go all in and store everyone's Bitcoin. That would be too much right now. I have a job. I have a day job. But let me just make a prototype and I'll tell people this is like a beta thing. Like don't put any real money in it and just see if there's interest and if I feel like I'm on to something, maybe I'll go do this as a company because I really wanted to be an entrepreneur at that time. I was 29. I was almost turning 30 and I always wanted to start a company but I wasn't yet. I was an employee at a company that was great. So anyway, I had this prototype I was hacking together nights and weekends. I actually wrote a whole Bitcoin node in Ruby, which turned out to be a maybe a weird decision in hindsight because Ruby wasn't the most performant language. We've subsequently had to rebuild that many times. But yeah, I had this hosted Bitcoin wallet and I didn't have any users for it, by the way. I applied to Y Combinator because I was like maybe if somebody there writes me a check, this will make it feel like a real company. And I was trying to find a co-founder at that time unsuccessfully. So I was basically just wandering in the desert. I had a lot of self-doubt about this because I was like, I don't know, all my friends think this is kind of dumb and maybe Bitcoin is just going to get shut down and this will all be some stupid thing. So there was definitely a feeling of just wandering lost in the desert. Lots of self-doubt. Paul Graham and the Y Combinator group kind of wrote me the first check after I went and interviewed and stuff and they wrote me a check for like $150k and that was the first time somebody who I really looked up to kind of said this is worth pursuing. Like maybe you're on to something, maybe you're not, but let's at least try it. And so that's kind of what gave me the confidence to quit my job and try it. And I'll wrap the story here by saying that we, I found the right co-founder after Y Combinator. We still didn't have any customers. I basically launched the hosted Bitcoin wallet. There were people signing up. I just posted on Reddit and places like that and maybe like a hundred people would sign up and then nobody would come back. And so I was like, I just, in my comment they often tell you like talk to your customers and improve your product. Talk to your customers and improve your product. That's all you're supposed to be doing. Try to find product market fit. So I emailed like five of the users that had signed up. And I was like, hey, I worked on this app. I saw you signed up. Can I get on the phone with you? I get on the phone with like five of these folks. And I was like, you know why didn't you come back? And the guy was like, well the app was okay for a beta, but I don't have any Bitcoin so I didn't really know what to do with it. And I remember this light bulb kind of went off in my head. I was like, well, if I put a buy Bitcoin button in there, would you have used it? And he was like, yeah, maybe. So then I had this, we went about the process, my co-founder at that time, we got basically had to get a bank partnership, payment rails, an exchange, basic exchange functionality, all that stuff I was mentioning earlier in place. And the minute we launched that feature where you could just click buy, put in your bank account or credit card, buy Bitcoin, it showed up in your account. From that day forward, the number of users started to go up like this. And so we finally had found product market fit after two years of wandering in the desert.
So you weren't even thinking about the buy on-ramps. You would think it would be just the wallet, a place to store Bitcoin that you've already gotten.
Okay. This is, I mean, because that's such a pain to do, to have to work with others to convert dollars or any fiat currency into Bitcoin.
Yeah. So did you, I mean, were you overwhelmed by the immensity of the task here or were you just sort of not allowing yourself to think too deeply through this whole thing and just letting the optimism take over here?
You know, I was really looking forward to doing something crazy and a big challenge and I wanted to, I love kind of crisis moments like that where I'm very determined, especially when I get very set on something and I'm just like, you know what? I'm going to figure out a way to make this thing work no matter what. And so I reveled in that. I had read all these books about startups and like every startup has these major setbacks and just like nothing works and so that was a sign that you're doing something right.
I had no idea if I was doing anything right at all, but I was kind of loving the experience of it in a weird way. It felt stressful at the time, like nothing was working, but I just felt like I was on the right path somehow and so I just kept going. I don't know.
What was the darkest moment that you've gone through in your mind during that time? What were some of the tougher moments? You said self-doubt.
Where did you go? Where did you go in your mind?
Is there a moment where you're just laying there, this is hopeless?
Well, there's a couple moments I'm remembering. I mean, so for whatever reason, I had this big chip on my shoulder at that time. And I was like, I really want to do something important in the world. Like I could have a good life and work for some good companies and write some software. And for some reason I never wanted that for myself. That probably would have been healthier, honestly, as an expected value outcome. That's probably a better thing in life. But I was like, man, I really want to do something important and have a bigger impact. And I was willing to sacrifice a lot for that. I was like sleep and not going out with friends and stuff. I remember one of the just for like years working on this stuff. I remember one of the darker moments was we probably had like maybe five employees at that time and I remember like a bunch of bad things happened all at once. First of all, you have to remember at this time we were all very sleep deprived, which kind of exacerbates everything. If you look at the Exxon Valdez spill and all these natural disasters, sleep deprivation is often involved. So because the reason why we were so sleep deprived is not just because we were working so much, but the site would go offline in the middle of the night and we'd get paged. I was on pager duty. So I'd get woken up sometimes two or three times a night, have to try to fix something, go back to sleep. So in that environment, you can get discouraged. So one bad thing that happened was we had a bug on the website and there was thousands of people on Reddit and Twitter who were all pissed at Coinbase because the balances were showing wrong and they were just like, [expletive] this company. It's over. I hate these guys. And so that was I'd never had this feeling of a thousand people mad at me at the same time. I'm a pretty chill guy. Most of the time people don't get mad at me. So that was one. Another one was that.
Can we pause on that? That's so interesting. So you were saying like here's a dream. I'm trying to create something and now forever the reputation of this dream is ruined. It will never be recoverable. It's over. That kind of feeling.
Yeah. Well, I didn't, you're right. I didn't know at that time. I was like, is this the end? Like we're so tiny now. Everybody hates us. So is it over?
Nobody told me this before starting a company that a bunch of people will hate you for this, which is a very counterintuitive thing because you know most companies I think are doing good things in the world, at least you're trying, right? And so even if someone's trying but they're failing, I'm generally rooting for them, at least you're trying. But that's not the case at all, and most founders I've known have gone through this too, where they're very surprised at the amount of hate that they get. And I think it's actually a muscle you can build, your tolerance to it. Because you know, you go talk to somebody who's, for you it feels terrible because you're at the center of this storm, but if you go talk to your family or some other person, they're like, dude, I didn't even hear about that. They're just busy in their own life, and so they have no idea that you had all this negative press or whatever it was.
Can I once again linger on that?
There's an interesting person I'd like to bring up just as an example. Bill Gates.
So he gets a very large amount of hate on the internet.
And there's something about him, this is me talking, not you, that he seems out of touch about that hate. I believe at least in my understanding that with the resources he has, he's trying and is actually doing a lot of good. And yet there's a gigantic amount of hate, conspiracy theories and stuff like that, right? And it feels like that's the case because he's somehow out of touch with people. So I wonder how you stay in touch with the voice of the people without being destroyed by the outrage. Is there any wisdom you have to that?
I don't know about wisdom, but I've thought about this too because you want to always be open to feedback, especially from people who have your best interest at heart, right? And if you can become isolated from it and just surrounded by yes people, and I mean, who knows, maybe Xi and Putin and people like that are in situations, I have no idea. But if you listen to too much of it and you just try to please everyone, you'll never get anything done. And most of the best leaders are people who they can act when they believe that they're doing something net positive for the world and humanity, and they actually don't really care if they piss off some portion of the people. Almost anything you're going to do of significance in the world today is going to piss off 5% of people. Maybe 49% of people or whatever, maybe 60%, I don't know. So you never want to become so surrounded by people who just work for you and will say yes and then you think, well, I'm a genius, that's how you become a dictator or whatever. But you also can't care so much about what people think because then you'll never do anything that's truly authentic to yourself. One other thought on that, by the way, I think it's a really good question. So I have thought about this a lot like why, you know, people generally kind of hate on Zuck and they hate on Bill Gates and they hate on, they don't really hate on Elon. Actually, Elon has a lot of haters too, but it's a different thing.
This is measured. I was looking at some surveys. So I think Zuck is the most loved and hated, right? Zuckerberg is the most both loved and hated.
He's the most hated. And then I think it's Bill Gates and Elon is down there. I think it's like 40% for Zuck, people asked, and then Elon is in the double digits but low double digits. And so it's interesting, you just look at this and ask yourself why, right? So I ask myself this sometimes too because I don't claim to know any of these people well, but I've met them briefly and my impression is that they're actually all smart people trying to do good things in the world. So there's not too much difference there despite public perception. So why is it that some are really hated and some aren't? I mean it's a complicated question. Obviously Zuck and his Facebook got blamed for the whole election thing and all that didn't help. Social media has gotten a lot of pressure just from like, hey, why aren't you solving all of society's tough problems? It's like, well, they're just one company. But one thing I've noticed is that a lot of these people, they have like Asperger's, right?
A little bit. And sometimes, you know, people with Asperger's don't really emote in the same way. And so I think it's almost a form of like bias against their cognitive type or something, which is like that person doesn't emote, right? I don't trust their intentions. And the other thing I've thought about too is that sometimes I think some leaders, you know, like maybe Zach or Bill Gates, they can come across as like a little bit PR rehearsed. Like they're basically giving the PR approved answers as where Elon just says whatever he thinks like to a fault. So even if people hate what he says, they're like at least I believe it's authentic.
So I've always thought about that too for myself. I'm like how do I because you can mess it up on both sides, right? Like if you just come out and you're like saying whatever's stream of consciousness, you'll often end up like pissing off people on your team or like tripping over some like regulation that you, you know, there's all kinds of things about running a public company. You know, you can't say certain stuff, but if you're too PR approved and your answer is like nobody trusts you what you're saying. And so anyway, this is something I think about a lot. I don't think I have the right answer, but I'm trying to find that balance.
And more and more with the internet, there's a premium on authenticity, just like you're saying. People really appreciate that. So for leaders, it's a challenge to be how do I make sure I'm authentic but also don't say stupid stuff.
Yeah. And so that's an interesting thing I've noticed that just having interacted with a bunch of leaders that you have to be careful how much you surround yourself with PR folks because the best, I would say let me just say a nice thing about marketing and PR folks. The best marketing folks are extremely good.
So they understand exactly what great marketing is and great PR, it's authenticity. It's showing, revealing the beauty as opposed to PR and marketing out of fear. Oh, don't say that. Don't say this, don't say that. Because then you start living in this kind of that pushes you towards a bubble where you can't express your beautiful quirks and weirdness and all that kind of stuff. And also the beautiful things about what you're doing. I find like especially with tech things like even like Coinbase, the way to reveal the beauty of it is not only by showing all the things you could do with it, but showing that there's great engineering going on underneath. So, letting the nerds shine, too. It doesn't have to be like these kind of commercials where it's like a happy family using Coinbase to send a transaction about flowers for mom or something like that. Like it could be also like gritty stuff and real stuff. So that's a general observation I made. You said you were talking about dark moments and that there's people on the internet that were pissed off that the site was down and you said there might be something else.
Yeah. So sleep deprived, like a bunch of people on the internet were pissed at me. The balances were messed up, like people were tweeting the company's over, just give the money back whatever. And then, oh yeah, somebody posted, so we had all this, we didn't, we had started to get all these customer support inquiries and like we only had like a few people at the company and so we were backed up maybe like 20,000 support requests so people couldn't get a hold of us. So somebody posted my cell phone number on Reddit and they were like, if you need to get a hold of the CEO whatever do because everyone's upset about where their money is. So I remember we're in the office it's like late at night. We've been working like 12 hours. We're all sleep deprived. I'm trying to hack and like get this bug fixed. And we all need like food at the office. And so my phone has been blowing up all day because someone posted my phone number on the internet and there's like a guy, there was a guy like trying to deliver food and I needed to answer my phone to like get the food from downstairs. So I was like, I got to just see if that's him. So I start answering the call and it's like, is this Brian? I'm like nope, wrong number, click. You know and I pick up the next call. It's like every right when I finish the call, another call is like coming in. So I was like, this is a reporter from Japan like asking about a security. Nope, wrong number, click. And I like finally I get the delivery guy downstairs bring the food up. We're all like, you know, surviving to like fix this bug. I remember there was just basically a point that night where I was like, I need to just, I basically just curled up on a ball on the floor and I just like cried for a little bit. I think I let myself just kind of wallow in self-pity. Kind of took a nap for about 5 minutes and I was like, let's solve this. And I like, you know, stopped being like a little whatever and like got back up.
Sleep deprivation combined with just the stress and the pressure of the site going down and everybody wants you the site to be up. Just the pressure from people and the number of users is growing and growing and growing. So that pressure was just mentally tough.
What was your source of strength during that time? Like somebody that patted you on the back and said, 'We got this.'
Yeah. Well, it definitely helped to have a co-founder. So, you know, there's like that old saying about it's better to be in a great relationship than to be single, but it's better to be single than be in a bad relationship. So, co-founders actually blow up a lot of companies, too. But when you find the right co-founder, which I was lucky to find with Fred Ehrsam, that was very important. There was definitely moments where, you know, I was like kind of at the wits end or whatever and he was like, 'Dude, let's rally,' and he basically carried the team, you know, a couple times like in really key moments.
What advice would you give to startup founders about this particular stage about surviving it to the five and through the five employee stage where you...
Yeah. Well, if you're pre-product market fit, the best advice that I have from that period is action produces information. So, just keep doing stuff, you know. I remember like...
Paul Graham line's a good line.
Yeah. Paul Graham had this great line like that. I think that's his line. And he was like startups are like sharks. If they stop swimming, they die. You know, so even if you're like not sure what to do, like just do anything because when you do it, it'll produce some information like people liked it, they didn't. This was very true for me. There was times where I just did something instead of debating it endlessly and like just try it, you know, like all right, so we shipped it and like there was a couple times where like the minute I shipped it, I was like I know we built this wrong, but now I have an idea of what to do next. And it wasn't, I only would have had that idea if we had actually gone through the exercise of going to build it. It's like my other favorite analogy for this is that you're like at the base of a mountain that's shrouded in fog and you're looking up at the mountain and you're trying to think like, okay, how do I get up there? But you can only see like three or four steps ahead because the fog is so thick. So you have to just take steps into the unknown. And when you take three steps, another three steps will be revealed ahead of you. And sometimes you'll end up on some local maximum. You'll have to retrace your steps or whatever, but or come up to a cliff, you know. But most people in life don't take the steps into the fog into the unknown because it's scary or they're like I don't know what if I fail or like I don't know how that's going to work or I might run out of money or I won't be able to get a job after or I don't know whatever reason. But that is like one of the things that separates I think entrepreneurial people with that kind of inclination is that they have some sort of a comfort with this risk tolerance but it's actually not really risky if you think about it. It's not like, you know, in at least in most places like you know, if you go do a startup and it fails, like you're going to be even more valuable to your next employer, right? Or you can go raise a seed round, pay yourself a salary, try it for like 2 years or 3 years. If it doesn't work, go get another job. It's not like you weren't paying yourself a salary during that time. So, I think people overestimate the risk of doing a startup and they just never start because it seems crazy and all your friends think it's silly. Like that's sort of the default nature of every big startup idea.
It's just basic fear. It's the same kind of fear that if you see, if you're a guy, see a cute girl at a bar, it's the fear associated with coming up to her, you like her, asking her. It's like what's the actual risk exactly?
She'll say, 'No thanks, I'm not interested.'
No thanks. I guess the risk is like that's going to be mentally difficult to deal with rejection. So, just like it's mentally difficult to deal with failure, if you had a bunch of ideas and you were excited about them and you implement them and you realize they're not good, that could be difficult to keep pushing through that. But that I suppose that's life. You're supposed to, you know, persevere through the failures.
And then the risk is low. So that's, and then the whole time through the fog up the mountain, you're looking for product market fit.
Yeah. That's right. So you know you have it when the usage of your product keeps growing without any marketing dollars or anything like that. It's just like more people keep coming back every week or month. So you're basically watching your stats. Nothing is working. You see these little wiggles of false hope in your metrics and you basically just keep talking to customers, improving the product. Talk to customers, improve the product. Talk to customers, improve the product, you know, and try not to run out of money. So be really scrappy. And then if you're lucky, you hit some kind of threshold where like, okay, the thing is good enough now or we hit on some use case and then it'll organically start to grow a bit and then you have a whole different set of problems once you hit product market fit which is how do we scale this thing? How do we hire people? How do we, you know, hire an executive team or raise more money? And like so the problems totally changed but...
Well you were there through the whole thing. So that's the other question that's fascinating.
Again, back to the girl at the bar. How do you hire people? It's like, how do you find good friends? How do you find good relationships? And in this specific case, how do you hire good people? Engineers, executive, all of it.
One thing is I've done a lot of reps on hiring at this point. So, Coinbase has about 5,000 people. Probably the first 500 people or something maybe in that range. You know I interviewed every single one of those. But you have to remember there's probably like I don't know on average maybe 10 people that we went through in the process for every one we hired or something. So it was like by the time that we had 500 employees I had done like 5,000 interviews or something. I was like very burned out on interviews. I had been doing, some days I did like seven interviews in a day or maybe you know you've been, you would do lots of interviews. Maybe you wouldn't get burned out, but different kind of interviews.
Very different. Very different. Yeah.
Very different because you're...
So, first of all, most of your interviews lead to rejection.
Which is also exhausting.
Yeah. And there's a whole part of the interview which is about candidate experience, right? Sometimes you know it's not the right person, but you want to make sure they have a good experience. Like if you're just exhausted and you're on your sixth interview and you're like, 'Well, thanks for coming in,' you wrap and you just, and then like you're going to create a detractor. Someone who's out there like, 'That company or Brian was rude to me or whatever.' So I had to honestly I had to work on that a little bit in the early days. I was doing so many interviews like I needed to make sure that when people came in I was like, you know, made them feel comfortable. Ask them a couple of like warm-up questions just like oh how was it getting in the office? Like did you find it okay? And like what have you been up to this week? And not just like a factory assembly line like boom boom boom like run. So I... Yeah. But also there's a moment because I've interviewed a bunch of people for like teams and stuff.
There's also a moment when you early on know it's not going to be a good fit. And you still have to land that plane and all that kind of stuff and that could get really, really, really exhausting. So yeah. Anyway, sorry. So yeah. So basically we've tried so many things over the years to make interviews more efficient because it's a huge time sink for the team. So you know we basically will usually get them down to like 25 minutes. I've seen if you're trying to hire like a big team, let's say, of people who are like contractors or something, not necessarily full-time employees. I've seen people actually do 10-minute interviews. You can even interview like a thousand people almost like in a week or something. I'm not sure if that quite works out, but maybe a little less than that. But you can basically get six done in an hour if you're just, I need to get a team of 30 contractors for whatever purpose. But if you're talking about full-time employees, I usually do like 25 minute, you know, you're often times like one thing we've done is we'll put like a Google form online and it's like put some basic hurdles in there like you know ask them to put in an answer which you can check in a spreadsheet if it was correct or not and like there was some funny examples in the early days of Coinbase where we put in like brain teasers and stuff but we don't do that anymore. We do like normal interviews, we do references. The kinds of things I ask in interviews, you know, it's usually like I like to think about what do we need this person to accomplish in this role, right? And get really specific about that. It's like usually something pretty hard. And then I'll ask them a question. It's like, tell me about a time you did X or tell me about the hardest kind of problem you had to solve in Y and what did you do specifically to overcome it? Right. So, I'm asking to see if they can actually do the stuff we need to get done, but then I'm also kind of asking culture questions if I'm interviewing for that. And so, I'm trying to see like are they concise communicators? Can they just give me a clear answer and stop talking? Some people like ramble on for like 5, 10 minutes if you ask the first question. Some people are, you know, they're interrupters, like church of interruptions. So, like they won't stop talking until you interrupt them, which for me, I'm always patient and I wait. So, yeah, that's weird. I'm looking to see for humility too. Like you know I'll ask people tell me about a time something went really wrong like you had conflict with someone on a team or and what I'm kind of looking for is were they part of the solution or are they still holding on to like blame and criticism about that and be like well I told them they shouldn't do that way but they didn't listen to me. You know these are all like bad signs. So I'm looking for yeah can they get the job done? Will they work together on a team? Can they communicate effectively? Do they fit into our cultural values? and you know those kind of things.
Yeah. I mean there's because I've even for help with this podcast here but also at MIT and so on. I've done a bunch of hiring and I was always looking for you said brain teasers all kinds of simple questions that can reveal a lot of information and it's always been challenging. I used to, I still ask this question but do you think it's better to work hard or work smart? And you know, I had this idea that I've, that I think I've matured about, which is I kind of believe that people who say work smart on that question don't actually work smart. So the right textbook answer is it's better to work smart. But the reality is it's people that haven't actually ever done anything that say work smart. They're like they haven't really struggled because my general belief at the time was in order to discover what it means to work smart, to be efficient, you have to work your ass off. So you have to really fail a lot and failure feels like hard work. And so I was always suspicious of people that would say work smart. I would want to interrogate that question. But then I also, you know, have learned that there is people that are just exceptionally efficient. They really do know what it means to work smart even at a young age. And so like you can't just disqualify based on that. You have to dig in deeper. But some of the most interesting people I've ever worked with would say work hard unapologetically. And they're usually the ones that know how to be efficient, which is just an interesting thing like that. And I've always searched for questions of that nature to see can I get a person to reveal something profound about them in as brief of a question as possible? And then of course there's basic attention to detail and brain teasers and stuff like that depending on the role programming and so on to see can they solve a tricky puzzle and do so like one that doesn't require a lot of effort but requires a certain nonlinear way of thinking. Is there some, I mean maybe you don't want to reveal but is there some questions that you sometimes find yourself leaning on? So, you said like how did you solve a hard problem in your past and have them talk through it?
That's one. You know, we started with brain teasers periodically at Coinbase and we got away from that relatively quickly and I think one, it's a tough one because I actually think it does show how somebody kind of performs under pressure, but I don't think it's a super reliable indicator because there's some people who are really good in what the typical work situation, but that's not a typical work situation where somebody puts you on the spot like in a live interview and sometimes people get nervous and they can't think clearly and like they don't have their computer in front of them or whatever they normally use. So yeah, I'm a little skeptical now of the brain teaser thing. There is a whole question about like a lot of universities are getting rid of, you know, entrance exams. So if you're hiring right out of universities, sometimes it's becoming a less reliable indicator of like are they in that university? And I've heard some companies, we haven't done this yet, but I've heard some companies are actually creating their own like for college grads like their own basically exams like standardized testing almost to get people in the door because the degree almost like doesn't mean what it used to, which is a whole topic. But...
Yeah, that's fascinating because it's fascinating both for them because it's not just about you trying to hire a great team. It's also to help them find the right place to work at.
Yeah. It's like a two-way street.
All right. So, once you found the product market fit, how did Coinbase become what it is today? So, let me ask an engineering question actually sort of from the Ruby wallet days. What are some of the interesting challenges there? Or are they not engineering? Just the things that had to be solved. What were they? Engineering, regulation, financial, hiring, lawyers, what was it?
So post product market fit, yeah, a lot of it scaling and you got to build out an actual company. So I remember I was still writing a lot of code there for a while and we had like maybe 25 people or something and I remember one of our investors came by one day and he was like Brian how much of your time are you spending writing code? I was like maybe 50% or something. He was like how much time are you spending hiring people? I was like probably 20%. He was like I think you need to flip those numbers. Like this company is not going to scale. You're the CEO. You don't need to be writing code every day. You're going to have to transition that stuff. Like even if people can't, all that stuff's locked in your head. So maybe they're not going to do it as well as you for the first 6 months or something, but like if you don't start to transition it, you're never going to build a real company. It's just going to be you're going to be the bottleneck. So, you know, like a lot of founders, that took me a while to like really internalize that lesson. I'd always heard people say that and, you know, but I still was holding on too much to decision-making and I probably still am, by the way. Like even to this day at Coinbase, we continually have to push down decision-making or like even with 5,000 people like who are the owners of each of these things. And so the temptation is people to push it up and you become a bottleneck. And anyway, so yeah, you basically need to make sure you have enough money where you don't die if there's some kind of a downturn or hit break even and profitability. We were in a position where we were periodically profitable during up periods, but then crypto would go down and we were unprofitable. And so we had to kind of manage our own psychology and the balance sheet to make sure we didn't like die in the downturn, which a lot of crypto companies did. We had to basically professionalize a whole bunch of services that had been just very quickly thrown together by like 20-year-olds, right? Whether that was cyber security, it's like, okay, how do you go get like a really senior experienced cyber security person, but not someone who's so senior that they can't get their hands dirty and they can come into a company with 25, 50 people? How do you get a finance person to come in and do that? Our finances were a mess. Like we didn't even really know how much money we had at certain times and stuff. I mean, this was, it's embarrassing to say, but it was true. Like, I remember there was a point where we had raised I think like our series C or something like that and I think we had our bank accounts. I just put like $25 million like in a different bank account that none of the stuff was touched to the actual operation of the business because I was like, you know, our operations were so messy and we needed to hire a new finance person. And I was like, I'd heard horror stories of actually startups where they thought they had X amount of money and then it turned out they had way less and then the whole thing was insolvent in like 3 weeks.
So you wanted to have some padding to at least like all right I can at least count on this to save us if we go like super negative.
Right. I mean it was like a cheap hack but that was like the only thing I could come up with and you know until we could hire like a real CFO and finance team who like okay now we got our arms around how much cash we have. It sounds silly but we had such high volume of money coming in and out. Anyway,
What was the ordering of hiring by the way? Like how many engineers was it early on? You said CFO was not, you didn't even have a CFO for a bit.
Like what was the landscape of hiring as you building up this company? Was it engineering focused?
Well, let's see. I mean, so the first person we hired was just like we need to solve customer support. So, we brought someone in to do that because we were all staying up till midnight every night trying to do customer support and then we got more engineers and then I think maybe the sixth hire or something like that was a recruiter because that turned out to be you need to hire the person who can hire more people.
That turned out to be a great force multiplier and then man you're going down the list you eventually you want to hire some more senior people. We needed legal and compliance. We needed that really badly because we, you know, there was all kinds of questions about what the legality of it was.
Was it hard to find legal people that work with crypto? Like serious adults because it's such a cutting edge new world.
Yeah. I mean, there was nobody who had like more than, nobody had three years of experience with it because it had only been around a few years. So yeah, we were finding people from adjacent fields. There's a certain personality type of people who are willing to join early companies because they have no structure. You can't really commit to them about you're gonna have this team or this boss or whatever. Like everything's in chaos and flux. So it takes, yeah, hiring is one of the hardest things in the early stage for sure. You got to find people crazy enough to join you on this journey.
So one of the interesting things about Coinbase and you've written, we've talked, we'll talk about it a bit. You're very focused on the mission.
I think that simplifies things. That makes hiring easier. That makes working at Coinbase easier. That makes...
I mean, it's similar sort of Elon has the same thing. It's pretty clear. It's pretty clear what we're here to do.
Yeah. So, I suppose what's the mission of Coinbase?
Well, it's to increase economic freedom in the world.
And what is economic freedom?
Yeah. So, economic freedom is this term kind of like GDP that economists use. And it's basically a measure of different countries around the world. It looks at things like are there property rights enforced? Is there free trade? Is the currency stable? Can you start companies that you want to start? And can you join the ones you want to join? And you know, is there corruption and bribery prevalent or is it relatively free of that? And so there's several different organizations that basically score countries by economic freedom. And the really cool thing about economic freedom is that basically it positively correlates with things that we all want in society like not only higher growth of the economy but also things like higher self-reported happiness of citizens, better treatment of the environment, better income for the poorest 10% of people. And it negatively correlates with things we don't want in society like corruption and bribery and war even and things like that. And so it's this pretty crazy provocative idea which is that if you give people good property rights and rule of law and allow them to trade it basically encourages them to do more good stuff and the whole society benefits. Like one of the things you know you may have noticed this growing up in various places you did or you know I spent a year living in Buenos Aires, Argentina that went through hyperinflation and there's a certain like pessimism that can creep into countries when they don't have economic freedom, which it's basically like everyone has this bit of this vibe which is like don't stick your head up, you know, don't try too hard because it could all be gone tomorrow. Like the things that really are valuable in life are just family and friends and the past was better than the future will be. And so you don't really, people don't try as many, they don't try hard because you're not really sure you can actually keep the upside of your labor if you try hard. So you just don't try as hard. Whereas in America historically, or high economic freedom countries, you know, people basically like they just try more stuff because they're like, if I do good for other people, I'll get to keep part of it for myself and I can improve my lot in life and for my children, my community, whatever. So I realized when I read the Bitcoin white paper a long time ago that at least I had a hunch at the time. I was like this might be a really powerful piece of technology that can inject good financial infrastructure into all these countries around the world that don't have it. Basically good economic freedom principles in like property rights and things like that into these countries all over the world with just as long as you had a smartphone. And now crypto got invented, we could everybody could have economic freedom. And crypto is kind of really well suited for economic freedom because if you want property rights, it's basically like crypto is, if you can remember a 12-word phrase or you know have an app on your phone, you can store as much wealth as you want and it can't be taken away from you. You can even, you know there's like refugees who need to flee and they want to take their wealth with them and they can't do it often in the traditional financial system and so crypto lets them do that right. Crypto is inherently global. So it allows free trade and cross-border payments. It makes it easy to accept payments from people globally. You know it provides a stable currency to everyone not only with Bitcoin which is kind of like this new reserve currency but also with stablecoins right which are new inventions there. So yeah I basically feel like crypto is this secret hiding in plain sight that can create economic freedom for people all over the world and a more fair and free and global economy.
Well, so the limit, and by the way, I didn't know about Argentina. Why'd you end up in Argentina?
Okay, so I was basically, you know, I was living in Houston, Texas after college where I went to school and I had never studied abroad. I kind of like, I don't know, I felt like I needed some adventure or something in my life and I was like I was running this other startup that I was trying at the time, a tutoring company, and I could work from anywhere. So, my plan was, you know what? I'm just going to go do like a month in every city around South America just like almost like to force myself out of my comfort zone because I had never traveled by myself to a foreign country or whatever and where I didn't really speak the language. And anyway, I landed in Buenos Aires thinking I'd go all around South America where I'd never been there, but I basically once I was set up in Buenos Aires with an apartment and a cell phone and stuff, then I was like, I don't want to do that all again next month. So I just stayed there for most of the time and took some day trips. But yeah, it was kind of a formative experience in that regard.
You got a chance sort of unexpectedly to experience the social effects of hyperinflation, which is interesting. But I also, I've never been. I really, really want to go. As a person who likes tango, a person who likes the Argentinian national team and soccer. And steak. All right. And all the other things that Argentina is known for. Okay. So economic freedom, one of the limits on economic freedom comes from government and government regulations and all those kinds of things throughout the world. So how does cryptocurrency help resist that? So can you sort of elaborate a little bit further? What are the things that limit economic freedom and how does crypto help ease that?
You know today the world like traditional financial system is basically every country of the world for the most part has their own currency and so there's a group of people or institutions in each of those countries that's controlling that economic policy or that money supply and you know it can be manipulated right so it's not like many of these currencies are not linked to the gold standard you know the US kind of famously came off that in the 1970s for instance but if you read Ray Dalio and all this like he talks about there's thousands of fiat currencies that have been in existence over time and basically all of them eventually get disconnected from backing of like hard commodities and then they get over inflated and printed and so in times of stress you know with Nixon I guess it was like in the US it was the Vietnam war or something like that it kind of drove government spending and so under times of stress they say hey it's a temporary measure we need to break the peg temporary was you know, famous words that he used and they go print. And so the bad thing about that, of course, is that it sort of erodes people's like wealth if they can only hold their assets in cash, which basically like poor people tend to do that. You know, if you're wealthy, you can hold stocks or like real estate and things like that but so it's really a tax on the poorest people in society, inflation. So anyway, crypto in a way is a little bit of like a return to the gold standard in this digital era, right? Bitcoin, there's guaranteed scarcity of it. It's deflationary. There's never going to be more than 21 million Bitcoin. And so that's a really important principle. I also think not just Bitcoin, but like cryptocurrency generally, it's really important in terms of this. You asked about regulation, right? So, think about like if you wanted to make a global borrowing and lending marketplace or a global exchange, you would have to go to all 200 countries in the world, sometimes like maybe 50 states in the US and get lending licenses or an operating exchange or whatever. And you know, they're not going to, that's just an incredible amount of work. And you can't even do business in many of these countries because like you know, you have to bribe somebody or it's corrupt or whatever. And so, but with DeFi, with decentralized finance, people have published, like Uniswap is a decentralized exchange, everybody in the world, no matter what country you're in, what jurisdiction can interface with that decentralized exchange because there's no central company operating it. It's a smart contract on the Ethereum blockchain, which is globally decentralized. So, there's no throat to choke. There's no one person or company you can go to to like, hey, shut this thing down. Even if everybody who's working on Uniswap today stopped, the Uniswap smart contract would continue to operate on the Ethereum blockchain. Similarly for like a borrowing lending marketplace, you know if somebody in India wants to borrow from somebody in the US or whatever like there's very difficult to do that in the traditional financial world but in a smart contract that's decentralized you can enable anybody to access it. So it's really kind of this great democratizing force that is creating a new financial system that is more fair and more free. Yeah and in some ways it's a clever way that's enabling people to do that in a novel way.
So is Uniswap in some sense a competitor to Coinbase? In which way is it and which way is it not? So because for people who don't know, Coinbase is centralized. So let me ask, doesn't that go against the spirit of crypto since crypto is decentralized? What are the pros and cons of being centralized as an exchange?
So I don't think Coinbase is fully centralized there. We have many different products and the way that I think about it is that our exchange or our brokerage is a centralized regulated financial service business and it's actually important for the crypto ecosystem to have that because you want to allow a lot of the fiat money in the world to flow into the crypto economy. So we're very proud of that and I think we've helped a lot of that money flow in. Now once people have money in crypto they can choose to hold it in a variety of ways and they can choose to hold it in a self-custodial wallet which is more decentralized. They can choose to use decentralized exchanges which we love and Uniswap is not really, I don't think of them as like a direct competitor to us. We basically have integrated Uniswap into a number of our products. We love DeFi, decentralized exchanges, the whole thing. So, Coinbase Wallet, which is a self-custodial wallet, is more decentralized and it allows people to hold their own crypto. They don't have to trust us.
Can you explain what a self-custodial wallet is? What is a wallet and what is a self-custodial wallet?
