Coinbase's four-phase secret master plan: eventually building an open financial system application for 1 billion people

(Translator's note: The authors of this article are Brian Armstrong and Fred Ehrsam, two co-founders of the digital currency company Coinbase)

Fred and I are passionate about creating an open financial system for the world. By open, we mean one that is not controlled by any one country or company (like the Internet).

We believe this is a way to bring more economic freedom, innovation, efficiency, and equal opportunity.

In this post, we will outline where we think the cryptocurrency industry is today and how the world will have an open financial system. We believe there will be four main phases (compared to the internet).

The Evolution of Two Open Networks (Internet and Cryptocurrency)

Let’s take a closer look at each stage and the role Coinbase will play in them.

Phase 1: Development Protocol (1 million people)

In this phase, new protocols (Bitcoin, Ethereum, etc.) are created and people start improving them. Open source communities develop around each protocol, and in some cases, these protocols are sponsored by companies. The protocol race has begun, and it remains to be seen which protocol can scale and attract application developers.

Coinbase has worked closely with various open source communities and has made contributions to some extent, but at this stage we do not play a significant role.

Phase 2: Establishing a digital currency exchange (10 million people)

Investing or speculating is a guiding mechanism for payment networks, and creating a secure and easy-to-use exchange service provides a convenient bridge for people to trade digital currencies.

During this phase, we established the Coinbase wallet for consumers and the GDAX exchange for institutions and professional investors. This is currently the core business of Coinbase, and we will use the revenue from this phase to invest in the next phase of the plan while continuing to expand these businesses to more countries.

Phase 3: Building a user interface for digital currency applications (100 million people)

When consumers start using cryptocurrency applications (also known as distributed applications, or dapps), they want a simple user interface.

The Internet is HTML and web browsers built on TCP/IP. In the case of digital currency, we believe it will happen in, for example, Ethereum scripts and yet-to-be-developed web browser equivalents, where the underlying layer can have a user-controlled wallet. The main feature of this application will be that it greatly reduces the difficulty of developing digital currency applications and the barriers for ordinary people to use it.

Coinbase will participate in this phase by building or investing in relevant teams.

Phase 4: Building an open financial system application (1 billion people)

The existing financial system needs to be rebuilt as an open network where people around the world can access this new user interface. Some example applications we think need to be created include:

1. Loans (mortgages, small business loans, micro loans, etc.)

2. Venture capital (seed investment, traditional VC, venture debt, etc.)

3. Investments (stocks, index funds, savings accounts, etc.)

4. Identity and reputation (ID cards, identity authentication, credit scores, etc.)

5. Remittance (cross-border remittance)

6. Merchant processing (point of sale, web orders)

Coinbase will participate in this phase by acquiring, building, or investing in various companies. We will also build developer tools and work with regulators to draft regulatory solutions suitable for this industry.

in conclusion

We are currently most likely near the end of the second stage, although there will be some overlap between each stage, and digital currency is still in its early stages of development.

Long story short…

1. New protocols have been created that allow for an open financial system.

2. We will make it easier for people to invest in digital currency to bootstrap this network.

3. We will use the money we earn from Phase II to build a user interface that is suitable for the mass market.

4. We will use the money we earn to build or invest in an open financial system (lending, investing, spending, etc.)

Coinbase co-founders Brian and Fred.