Coinbase’s backstory and future with ‘Kings of Crypto’ author Jeff John Roberts

No industry better epitomizes elite tech opinion as blockchain. Ignored for years in its infancy, the industry received intense interest from investors, engineers and the public five years ago, generating some of the most deeply devout evangelists that have emanated from startups since the advent of the World Wide Web and the dot-com boom. Then, it all burned down, but a few companies made it through the flames, among them Coinbase.

Coinbase today is still valued at a 2018 price of $8 billion, and is expected to go public in the coming months. Despite major controversies around its mission-focused policy and diversity, the company continues to lead the pack of consumer-oriented blockchain and crypto companies.

That makes its origin story and rise all the more enticing. Jeff John Roberts, a staff writer at Fortune, has put together precisely that narrative in his new book “Kings of Crypto”, published by Harvard Business School Press. It’s the story of Coinbase, Brian Armstrong and the dream of a crypto economy. Given all the recent discussions and controversies swirling the company and Bitcoin’s recent record-beating price increase, provides a deeper, more analytical perspective on a complicated subject.

I sat down with Roberts last month to talk more about the company, the crypto industry at large and what’s next as we head into 2021.

This interview has been edited and condensed for clarity.

I think the most interesting story right now is that there is this tension because Wall Street and Silicon Valley don’t like each other.

TechCrunch: How did you get into this project and decide to write the book?

Jeff John Roberts: There’s a lot of crypto books out there, some of them not very good, but I think there’s kind of a first-generation series of books on the subject. Nate Popper’s “Digital Gold” is very good, and then the Wall Street Journal guys with “Age of Cryptocurrency is a really good explainer, so I was looking for a new way to tell the story. Focusing on a company is just sort of a narrative mechanism, since companies can be a good way to tell the story of a broader industry.

I used Coinbase as a vehicle because a lot of the early stuff in crypto is hard to understand. I think it’s still true, but crypto can’t decide if it wants to be a subculture or sort of a mainstream technology and a lot of the early writings on it celebrated the quirky angles. So I tried to tell it as more of a general interest, “Hatching Twitter”-style business story and fortunately there’s a lot of gossip and things in there to recount.

How did you get interested in crypto originally?

My own interest came about when I was at GigaOm. Back in 2013, there was a meeting in New York City in Union Square, an event called Satoshi Square every Monday at the little corner of the park. I went down to check it out, and what it emerged to be was a bunch of crypto anarchists selling bitcoin. Some of the other people there though were Wall Street traders in $5,000 suits, which left an indelible image for me. It was really funny watching that collision of cultures, with the mix of greed and counterculture.

So it was during Bitcoin’s first splash into something close to the mainstream that I covered, and then that kind of dried up and went away, as it does, and then it came roaring back in 2015, 2016 and I covered the bubble. And now there’s again been an uptick in interest. So my timing for the book wasn’t good in the sense of the pandemic (I got cheated out of my canapé launch parties) but my timing was good in that a lot of the prices are soaring today.

You’ve seen a lot in the crypto industry over the years, what’s the most interesting storyline today?

I think the most interesting story right now is that there is this tension because Wall Street and Silicon Valley don’t like each other, but for crypto, they need each other, and it’s been interesting watching them kind of dance and find a way to kind of bridge the two worlds.

Bitcoin is forever promising it’s going to change our financial world, but realistically it hasn’t, but I think in the coming decade, blockchain really is going to start doing some needed stuff and so that kind of convergence of Wall Street and the Valley [is inevitable].

Then there are also the big corporates coming in. Obviously Facebook with Libra, but Square and PayPal and I’m sure that Apple’s going to get in this game soon because they’re good at privacy, they’ve got all the wallets and they presumably pay a shit ton in transaction fees, so I think that’s the coming story and what’s interesting to me. And then Coinbase sort of sits right kind of at the center of all that, so they’re a good vehicle to tell that story.

You chose Coinbase as one of the focus companies for the book. Why them?

I mean, there’s a lot of recent cultural stuff we can talk about, but it was interesting to me because going back to what we talked about earlier: Do you want to be a rebel in a subculture or do you want to actually make a difference?

I think Coinbase was the first and the best at the latter, and Brian Armstrong, who even among many Valley CEOs is a weird dude, he saw early the need to make this mainstream. That tension goes on to this day in the crypto world — and also within Coinbase — between the purest sort of libertarian vision of holding your own wallet versus the practicality. I think Coinbase is very astute in seeing that’s where things are going and building it out that way, building sort of the crypto version of online banking.

So I think that they’re always telling you, “We’re the white knight of crypto” and so on, and then of course Andreessen Horowitz and Fred Wilson had a big role in shepherding it that way, but it was the right call and they’ve largely executed, which I think is really interesting.

What was it like building Coinbase early on? Were there some fun stories from that time?

I think the early days were fun to watch given their mantra of running through brick walls. One of my favorite anecdotes was with Apple. I guess they were in the App Store briefly but then Apple had a rule you couldn’t have a crypto wallet so Fred Ehrsam (one of the co-founders of the company) came up with this clever idea where they basically geofenced the app to exclude Cupertino, and this actually worked for months where they actually set up their app so people could buy and trade, and as far as Apple knew, it didn’t do that.

I think my favorite chapter in the book though is about Balaji Srinivasan. He’s a loudmouth and a really obnoxious individual but he’s also a genius. There was this phase where the Winklevoss’ thing and Binance were starting to eclipse Coinbase, so Coinbase brought Balaji in to really shake it up and add new assets, and he really is the crypto visionary. Then you have their COO, this guy Asiff Hirji who I think wanted to be CEO himself but there was this massive cultural war in there.

If you don’t have time to read the whole book, just read the one chapter on the cultural fight between the two camps, the kind of corporate crowd under Asiff, and Balaji who really appealed to the kind of primal crypto developers, a lot of whom are just real believers in it. It’s just such an ideology, it’s almost like a cult and it’s just been interesting watching Coinbase trying to bridge the gap between those two factions.

Do you think they’ve been successful in bridging that gap between their two cultures?

Yes. You look at their valuation, and the market is sort of theirs to lose. I am curious, though, whether a couple years down the road Square or PayPal might take a run at them. But they’re trying to add more standard banking features and their debit card was actually kind of clever because people have been trying this stuff for years, but it’s always been sort of stupid because who needs to draw from a bank account of bitcoin that’s volatile.

They could still blow it, but at this point, including their cultural baggage, I have a hard time seeing anyone sledging them.

While we’re talking about that, what’s been fascinating to me is crypto itself is a political technology, yet Armstrong has pushed the view that his company is apolitical and should be mission-oriented. I’m curious, how do you balance not just the crypto politics but just the whole political realm in general for Coinbase?

Crypto is an ideological project, so trying to pretend you’re not political is ridiculous.

I think a lot of the actual underlying causes of gender equality and Black Lives Matter are completely legitimate, and Coinbase itself has long struggled with this. One of my protagonists is a woman named Nathalie McGrath. She was their first female employee and she basically did a very good job of taking a bunch of like 23-year-old tech bros and sort of humanizing them. I think companies that can’t bring in women both as consumers and as employees are going to struggle, and she did a great job with that.

There’s an anecdote of the first staff retreat when they were still 10 or 12 people, Brian and his co-founder wanted to go hunting and kill and eat something, which, nothing wrong with that, but as a corporate retreat is kind of goofy. She really did a lot to make it more of a human place to work, but I think that Armstrong’s inability to really see outside of the silo of the Coinbase world, they’re going to have to work that out.

Do you think Armstrong has developed as a leader over the years? Will he get better in the future than what we have seen recently?

It’s an ongoing question. He’s handicapped by being a severe introvert and he’s not charismatic. Another sort of theme of the book is Fred Ehrsam. He wasn’t really a co-founder but I think it was Paul Graham at Y Combinator who kind of whispered in Fred’s ear to push out the original co-founder, a guy named Ben Reeves. They were supposed to go to Y Combinator together, and the Silicon Valley narrative is always there should be a team of two or three, as it’s too hard to do it on your own. Brian did it but then he found his partner or soulmate in Fred who really did have the charisma. He’s completely weird at this point too, but he’s a Goldman Sachs trader, a professional video game player and a master coder while also being kind of like an MBA, good-looking, charming guy.

I think what should happen is Brian should retreat more into a kind of Sergey Brin role. They need an Eric Schmidt to do the day-to-day stuff because Brian keeps falling on his face, but they’ve gotten this far and they keep spending money on expensive coaches for Brian to kind of act like a human being. He’s also got the same tendency as Musk and Jobs in the ferocious focus he has on his company. Whether he can learn the social skills is still, as we saw this summer, an open question.

How is Coinbase different from other companies?

That’s a good question because in one way, every startup’s different but as they get big, they increasingly start becoming the same.

Ironically for an apolitical company, it is one of the most ideological places because especially in the early days, you had to be a real believer. I’ve got some quotes in there of like Fred Ehrsam when morale was flattening at some point and he would just run around screaming, “If you don’t believe in this stuff, get the fuck out of here. We don’t need you.” So that sort of raw, ideological drive I think sort of sets it apart because the people who built the company are those real believers, and Brian Armstrong’s one of them.

I think what harnessed them together was everyone’s just real crypto believers without being criminals or lunatics. So I think that’s sort of the distinct part of its culture.

Along that line, do you think that Coinbase is taking over the regulators? The regulators are taking over Coinbase? Where’s the culture moving?

I’ve got a chapter in there where the older people at Coinbase took Brian out to try to meet senators and to try to play that game and he wanted nothing to do with it. He was like, “We need to reinvent the SEC” and shit like that. He’s gotten a little more savvy as they go.

But if you go to the kind of higher level of “money” for a second, it also raises a question of what the U.S.’s role is in the next era of money because people at Treasury aren’t stupid. They understand Bitcoin and the potential for it but there’s also the worry of falling behind China, and especially what China’s doing with their digital currency.

The U.S. dollar is the global means of exchange and the world’s reserve currency and from a national security and economic standpoint the dollar’s primacy is really one of the U.S.’s most important strategic assets. So I think there’s a conflict in Washington over whether to embrace the technology, which the rest of the world is clearly doing, but also to try to protect what they have.

What’s up next for Coinbase?

It’s all about the IPO. They’re holding off because they want to do a token-based public offering because Fred Ehrsam was telling me it’s their spiritual destiny. I think he actually phrased it that way, which is silly, but there’s going to be a lot of people disappointed if they just did a conventional IPO that fed the Wall Street bankers. So they’re trying to get a regulatory structure in place so they can do a token offering for at least part of their IPO and if that doesn’t come together, they’ll probably just do a direct listing.