The first real cryptocurrency stock, Coinbase's Silicon Valley for 8 years
Source: Rhythm Blockbeats
On February 25, Coinbase, the largest cryptocurrency trading platform in the United States, filed its S-1 registration documents with the Securities and Exchange Commission (SEC) to go public under the ticker symbol COIN. Wall Street giants such as Goldman Sachs, Citigroup and JPMorgan are advising on the IPO.
It's a veritable first cryptocurrency share in what has been a rare IPO year.
From Snowflake being added to Buffett's "roster" last year to new listings like Wish, Airbnb, and DoorDash, to tech unicorns like cloud security firm LaceWork and media company News Break, as well as more than a dozen companies that have announced IPOs or "backdoor listings" through SPAC. While many miners have traded on Nasdaq before, Coinbase is more directly related to cryptocurrency trading, especially as bitcoin has become a global asset.
In the disclosure of more than two hundred pages in the file, in addition to $1.277 billion in 2020, the total revenue, net income of $322 million, and currently hold 10.62 billion dollars in cash and cash equivalents, total assets of $58.55 billion bright eye, such as data, there are many worth pondering details, such as Coinbase will reveal in this our true identity, the etheric lane 2.0 development and release schedule as commercial risk and so on.
The announcement not only settles the dust on Coinbase's long-rumored IPO, but it also lifts the veil of mystery surrounding the eight-year-old unicorn company with a trove of data and details.
It has 43 million users in 8 years and will turn from loss to profit in 2020. It has invested in hundreds of companies.
If you look at the numbers alone, Coinbase's revenue figures don't match those of competitors like Binan and Huobi, but they're good compared to many public Internet companies that haven't turned a profit for years.
In terms of trading volume, Coinbase, like all platforms, is subject to price fluctuations in crypto assets such as bitcoin. For all of 2020, Coinbase saw approximately $193 billion in cryptocurrency trading volume, up 141.7% from 2019. In addition, Coinbase continues to grow its users steadily, with 43 million verified users on the platform as of December 31, 2020, up 34.4% from the end of 2019.
Source: S-1 filed by Coinbase
Coinbase turned a profit from 2019 to 2020. According to the filing, Coinbase reported total revenue of $1.277 billion in 2020, up 128 percent from 2019, with a net profit of $322 million, after a net loss of about $30.4 million for all of 2019. Specifically, Coinbase's operating costs accounted for 68% in 2020, up from 109% in the previous year, showing significant optimization effects. Marketing and marketing costs are relatively stable at 4-5% of total revenue.
Source: S-1 filed by Coinbase
Specifically, Coinbase's revenue comes from transaction fees, which make up 85.8% of its total revenue, and subscription and service revenue, which makes up 3.5% of its total revenue.
As the leading cryptocurrency trading platform, Coinbase ended 2020 with $10.62 billion in cash and cash equivalents, total assets of $58.55 billion, total liabilities of $43.29 billion, and total shareholder equity of $9.64 billion.
The influence of Coinbase is not limited to its own business. The accumulated industry resources and the crypto ecosystem built by Coinbase have always been the focus of practitioners. According to the S-1, Coinbase Ventures has invested in Compound Labs, StarCard, Inc. and Amber Global, among others, in recent years.
Currently, Coinbase's largest shareholder is co-founder and CEO Brian Armstrong, with a 21.7 percent stake, according to the filing. Also on the list are well-known A16Z Affiliated entities, Union Square Ventures (USV) Affiliated entities that have invested in Twitter, Tumblr, and other well-known VCs such as Ribbit Capital, Tiger Capital, and Paradigm.
Source: S-1 filed by Coinbase
Looking back at Coinbase, it's almost like the history of cryptocurrencies in Silicon Valley.
"Google created Gmail for Bitcoin"
Founded by former Airbnb software engineer Brian Armstrong and Goldman Sachs trader Fred Ehrsam as a crypto trading platform, Coinbase's original vision was "to build a global, open financial system that promotes innovation and freedom."
Armstrong showed a flair for entrepreneurship from an early age. After peddling candy on playgrounds in elementary school and trying to resell used computers, Armstrong started an education company in 2006 after receiving a master's degree from Rice University.
Later, his bad experience with cross-border remittances gave him the opportunity to get into encryption. In 2010, Armstrong read a white paper on bitcoin online and bought more than 1,000 bitcoins at $9 apiece. Even though the price dropped to $2, he didn't leave the market. On weekends and late at night, Armstrong writes code to buy or store bitcoins.
In the summer of 2012, he built a wallet on his own and gave a Coinbase pitch at Y Combinator's Demo Day, where he introduced everyone to the growing popularity of Bitcoin and received investment promises.
Armstrong at Y Combinator's Demo Day. Source: Medium
On August 22 of that year, ArmStrong  Sent an email to Boost VC founder Adam Draper revealing that Coinbase had a $320,000 commitment and planned to end up with $1 million, and he wanted to get him involved.
Adam Draper comes from a family of venture capitalists. His grandfather was a deputy secretary of the Army and later became a pioneer of venture capital in the United States. In his reply, Adam Draper expressed a strong interest in Coinbase and asked for more information. The rest is known: Adam Draper became one of Coinbase's earliest investors.
In October of that year, Fred Ehrsam, a Goldman Sachs alumnus, got in touch with Armstrong via email after reading one of Armstrong's articles on Reddit. The two met and chatted so well that Ehrsam was invited to join, gaining the trust of traditional banking institutions.
Over the next few years, Coinbase gained more and more interest from big-name investors. The A16Z partners are thrilled to be involved in Coinbase: "It's like Google creating Gmail for Bitcoin."
Coinbase, which only later offered users a way to store more than Bitcoin, took an extremely "conservative" approach to security: 99 percent of the platform's assets were safely held in vaults, and its 41-person security team included Iraq war veterans who assess security risks and Ph.D.s in cryptography who defend against attacks.
Starting in 2016, early employees left, including Coinbase's first employee, Olaf Carlson-Wee, and by January 2017, even co-founder Ehrsam had left. Coinbase was in the middle of a legal battle with the Internal Revenue Service.
Coinbase Base Color: Compliance & NBSP;
Since its inception, Coinbase has consistently followed the path of compliance.
On March 18, 2013, the Financial Crimes Enforcement Agency (FinCEN) issued an "explanatory guidance" stating that institutions offering to manage or trade virtual currencies such as Bitcoin should be considered "money transfer institutions" subject to state licensing, federal registration, and bank secrecy laws.
Upon hearing the news, Ehrsam immediately called her lawyer, who told her that it was "a guideline, a small company and a hassle to follow." "It would take a lot of time and money to do." "His advice to me was to try to make a good case for why signing up wouldn't work for Coinbase and avoid signing up for a while," Ehrsam recalled.
That night, Armstrong and Ehrsam had a "Comeon-Jesus" in which they agreed that Coinbase wanted to be the way for a broader population to use cryptocurrencies, and that avoiding registration was wrong for Coinbase's brand.
The decision to register for compliance added millions of dollars to Coinbase's costs, but at the same time, it also gave it an attractive selling point. Fred Wilson, a partner at USV who has publicly expressed interest in bitcoin, asked the founders about regulation before leading the Coinbase investment in March 2013, and their "cooperative stance with regulation" earned them USV's endorsement.
It is also because of The relatively strict KYC and certification system that institutional trading volume of Coinbase is much higher than that of ordinary investors. According to The statistics of The Block, since 2018, The proportion of trading volume brought by ordinary investors of Coinbase has been on a continuous downward trend.
The 208-page filing encapsulates Coinbase's remarkable eight-year history and satiates curiosity about the secretive trading platform. It's an answer to Coinbase's legacy since its inception, and an indication of Coinbase's ambition to build a vast crypto ecosystem.
While Coinbase's revenue numbers aren't as impressive as those of integrated trading platforms like Binance and Huobi, its adherence to the "compliance" approach has given it the distinction of serving institutional clients far more than ordinary investors, and has made it the preferred broker of crypto placement for wealthy outlier public companies like Tesla.
Coinbase is arguably the first crypto company to go public without mining machine makers, and it will be interesting to see what Adam Draper, Boost VC founder and an early Coinbase investor, calls Wall Street's "epha" on the value of bitcoin.
Cryptocurrency trading platform FTX has launched Coinbase (CBSE) pre-IPO products, valued at nearly $100 billion at one point, even before Coinbase's IPO was confirmed. Once Coinbase shares open to trade, it will add another blue chip to the list of blockchain-related stocks for U.S. investors.
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