A top Coinbase exec explains the master plan to turn the $1.6 billion cryptocurrency exchange into the next Google
- Business Insider checked in with Dan Romero, VP and general manager at Coinbase, to find out what its like trying to grow and scale one of the hottest startups in tech.
- Coinbase, a cryptocurrency exchange, saw $1 billion in revenue last year as bitcoin surged in popularity and nearly hit $20,000 in value.
- Now Romero is tasked with building an organization and product that is suited to handle wild consumer demand. That includes implementing technologies like SegWit, a sometimes-controversial technology that aims to improve bitcoin.
- Romero downplayed rumors that Coinbase is seeking a CFO ahead of a prospective IPO, saying instead that he’s focused on building a company that could do for cryptocurrency what Google did for search.
Coinbase is one of the hottest startups in tech — and with good reason. The cryptocurrency exchange hit $1 billion in annual revenue as this year’s bitcoin mania sent the popular digital coin surging up to almost $20,000, before it came back down.
With a reported 10 million customers served on the platform, Coinbase is far and away the most popular exchange in the US. And investors have noticed, giving the six-year-old startup $100 million in capital at a $1.6 billion valuation in a funding round last August.
But popularity comes at a price, and Coinbase has stumbled through the difficult of scaling from a niche product to a real, sustainable business. It was under these circumstances that Dan Romero, a four-year veteran of Coinbase, took on the role of general manager and vice president of the company in January.
Romero, who previously ran the startup’s business development, is now in charge of growing and scaling both the engineering and product side of Coinbase, as well as its internal operations. Or, in Romero’s own words — “the overall customer experience, that’s what I wake up every day and focus on,” he tells Business Insider.
In conversation with Business Insider, Romero downplayed a recent Recode report that the company was hiring a CFO to go public — but didn’t deny it, either. In a bigger-picture sense, Romero says that Coinbase is trying to build a company that could do for cryptocurrency what Google did for search.
Below, find our conversation with Romero, touching on everything from upstart cryptocurrency exchange rivals like Robinhood, to the sometimes-controversial SegWit technology that could improve bitcoin, to the future of Coinbase itself.
This interview has been edited and condensed for clarity.
With competition growing, Romero says Coinbase is focusing on the mission
Becky Peterson: The competition seems to be growing, with a lot of companies launching cryptocurrency exchanges. How do you define yourself and see the positioning of Coinbase in the long-term compared to other companies in the space?
Dan Romero: We are a first mover in the space in terms of building a consumer friendly brand. We are enabling individuals to be able to get into the ecosystem and be able to experiment with digital currency.
We’ve had a lot of challenges around with scaling. We’ve had a lot of customers come on to the platform in the last year and we’re doing everything in our power to make sure we’re giving them a great customer experience. It’s not where it needs to be today. I think hopefully soon we’ll have made significant improvements there.
But I think if we shift to long-term, Coinbase is going to be 100% focused on cryptocurrency. Our mission is to build an open financial system for the world. We’re not interested in equities or options trading or any of the other kind of traditional financial system products.
We’re focused on digital currency. Where we will be successful is if customers fundamentally think of us as “the crypto company.” That is our focus. So with other folks coming into the market, it’s validation that cryptocurrency is more mainstream. But we fundamentally don’t view cryptocurrency as a feature. It’s our business.
If you look at a couple of the more recent entrants into the market, they don’t allow you to send and receive digital currency, or they make you jump through significant hoops to do that. And I think that is antithetical to the idea of cryptocurrency to begin with.
It’s fundamentally something to be used, and you can move it around just like you can more your own files around. So the fact that a service would come in and let you speculate on price but not actually use currencies — in some ways that’s actually concerning to me.
Peterson: What do you mean? The fact that Coinbase offers payment features and things like that?
Romero: Yeah, but I think a great example, there is a competitor that’s rolling out today, where if you go to their help section, they don’t allow you to send digital currencies to them, and in order to access withdrawals you have to go through multiple hoops and it may take you a week to do that.
Peterson: Are you talking about Robinhood?
Romero: Yeah, I think they’re launching today.
Coinbase may be hiring a new CFO to take the company public
Peterson: Back to the business side of things — this week Recode reported that Coinbase is looking for a new chief financial officer to help take the company public. Is that true?
Romero: We are hiring a bunch of different executives at the company. It’s part of the scaling effort. We have a CFO right now. We may or may not be looking for a CFO. But I think the broader story here is that we’re trying to scale the company because we’re looking to build a lasting company in the space.
Peterson: In the case that Coinbase does go public, how do you convince investors that this company has a future?
Romero: I think our view is that this is similar to the beginning of the internet. So we’re trying to build a Google-like company for the cryptocurrency space. Things like SegWit are a good example, where we need to ensure that we have the latest and greatest in terms of cryptocurrency. That’s how we’re going to be the cryptocurrency company, that if we do go public at some point in the future, we’ll have that narrative.
So we will be focused on that as a business, rather than a feature. We think a lot of the developer interest we’ve seen grow in 2017 is validation of the fact that this is something that will have staying power, rather than a flash in the pan.
Peterson: When it comes to new technology like SegWit — how do you perceive the role of Bitcoin Core and the open source foundations behind the cryptocurrencies on your platform? Do you think those foundations will lead innovation on crypto or do you see Coinbase doing R&D?
Romero: We are actually trying to increase the amount of contributions we’re making at the core protocol level. We have a significant amount of talent that we’re trying to hire for, for engineers that would only be working on protocols. So no direct benefit to Coinbase, they would be doing open source development on protocols like bitcoin and ethereum.
We have an engineer right now who’s working on the Lightning Network. We view this as both beneficial to Coinbase in the long-term because it makes digital currencies more scalable and more accessible for more people. But at the same time, it’s us giving back. Because we’re obviously a business that benefits from the open source protocols that exist.
I think you’ll see us continue to hire more people whose sole responsibility will be to work with core developers in multiple digital currency protocols and try to help accomplish roadmaps that those communities have set out.
The company will double headcount to around 500 people this year
Tina Bhatnagar joined Coinbase in January to grow the company’s support team.Tina Bhatnagar
Peterson: Do you have a headcount or hiring numbers for 2018?
Romero: We’re effectively doubling the numbers in terms of headcount, from roughly 250 to 500. We wish we could hire faster but it’s very hard to hire in San Francisco, New York and London.
Peterson: Do you have to do a lot of training or are you mostly hiring people who have experience in crypto?
Romero: It’s pretty hard to find people with experience in crypto specifically. We’ve found that a lot of engineers at more traditional software companies are getting pretty interested in cryptocurrency and that those folks are coming into Coinbase and learning on the job.
If you’re a senior software engineer and you’ve worked with distributed system or just hard computer science type problems, this is stuff that you can pick up pretty quickly once its your full-time job.
Peterson: Is it the same when it comes to hiring executives? You just hired Tina Bhatnagar, who was previously at Twitter.
Romero: Cryptocurrency hasn’t been around for a long enough period of time, so to hire an executive who can scale a support operation, who also has cryptocurrency experience — I’m not sure that they exist.
Tina’s a great example. She was dealing with an order of magnitude larger scale support organization, and having her skill set come in — maybe she’s earlier on the digital currency learning curve, but that’s a sweet spot for us. She’s quickly picking it up on the job, and is clearly a talent person.
But the nice thing is that she’s seen the movie before, in terms of scaling a support organization, so she’s able to hit the ground running.
In the last month and a half she’s done more in some ways than we were able to do before. So it’s really great to bring in experienced folks on a variety of different functions.
Peterson: Are there any more updates on the roadmap, in terms of major technical changes likeSegWit?
Romero: Nothing specific. At a high level, we’re focused on providing customers what they want and what customers continually tell us is that they want high reliability during peak times,. So we’re continuing to focus on the scaling of the core infrastructure. I think the other big area for customers is wanting to add new assets.
We’re going to be slow to do that. We’re going to carefully evaluate any new assets we add to the platform, first and foremost from a security angle to make sure we’re not adding assets that potentially have a security vulnerability.
We are never going to be the brand that adds every asset under the sun first. For us it’s about being the most trusted.
CoinBase is betting on SegWit, a technology to improve bitcoin
Peterson: Coinbase announced this week that it’s rolling out support for SegWit, a software upgrade for bitcoin. How did the update process go? I understand you were testing it for a while.
Romero: If you look at social media over the last couple of months you have a lot of feedback saying, “Why hasn’t Coinbase implemented SegWit? It took this team two days to update this product. Why can’t Coinbase, with all the money and engineers they have, do it in just as quick of a time?”
It’s a little underestimating the scale that we’re operating at.
We’re holding billions of dollars in customer digital currency. Any change we make to that core business structure has to be thoroughly tested both from the implementation, to make sure it’s working, standpoint, but also some serious security considerations.
We’re a very much a measure twice, cut once culture — and in some cases maybe it’s measure three times and cut once.
But the upgrade for SegWit was challenging for a couple of reasons. A primary reason is that we have our own proprietary implementation of bitcoin, in terms of the node software we run.
Because we operate at a pretty large scale, we need something that can run for all of the transactions and customers that we’re dealing with, but separately that also provides additional security benefits to us.
So when we have an upgrade like this, we have to actually take it and re-implement it ourselves in some capacity. So I think that is going to inevitably makes it a little slower to make changes. But when we do, you’ll know that we’ve been really thoughtful about doing that.
So I think at a hig- level, it’s something we’ve been tracking. And it took us a while to get done but we’re quite pleased that it’s finally ready to go and it’s going to be rolling out to customers in the next few days.
Peterson: Besides the impact this will have on the greater bitcoin network, how will SegWit affect Coinbase customers?
Romero: The fees aren’t determined by Coinbase as much as the network. It’s a marketplace. You can only have so many transactions in a given block and if there are a lot of transactions on the network at any given moment, then the fees will naturally increase.
So what SegWit does is it allows more transactions to be in the network at any given time. And given how big Coinbase is relative to the network, it means that we aren’t consuming any more of the network for customer transactions than we need to be. So we’re technically making our infrastructure as efficient as we can.
You’ll see on Reddit and Twitter, people will say, “Okay, SegWit, great. What about transaction batching?” That’s something I think we’re going to be considering as well. It’s all about prioritization, and for us bitcoin is an area that we’re continuing to invest in.
Peterson: What’s transaction batching?
Romero: It’s just another technique to efficiently process transactions. It’s not an upgrade so much as a best practice when you’re at scale.
SegWit is a first step in terms of improving the efficiency of our bitcoin infrastructure, and we view it as a benefit for our customers as well as the bitcoin network and community at large that we’re updated with the latest and greatest.
Romero says SegWit is about customers, not bitcoin politics
Peterson: Critics of Coinbase have suggested that the company was against SegWit at some point because you were in support of a different upgrade to bitcoin altogether.
Romero: That is unequivocally false. We always try to do right by our customers.
What it is, is that ultimately we hold a lot of bitcoin on behalf of customers. Those customers, in the case of a fork, want access to those coins, especially if the fork is going to have more of a legitimate developer community behind it.
We need to make sure that we’re keeping that bitcoin safe, and in the event that there are situations like forks where customers potentially have two different assets, we should let customers choose what to do with those assets.
There is a group of people in the world who think that Coinbase should have one very clear political stance, and I think that’s just not where we are at this point.
We’re a neutral platform that is focused on bringing digital currencies to the world more broadly, and not picking favorites or following a political path.
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