Surging into the 21st century, digital currencies are no longer hype, but reality.

Digital currencies are the new it thing in the world. Having existed for quite a while, payments and transactions with cryptocurrencies are quite widespread.

Digital currencies, such as Bitcoin, are attainable either through mining or exchange. Since mining is costly and tricky, it is much easier to buy virtual currency second-hand, through an exchange platform.

This new kind of virtual payment method gave birth to Coinbase. This company enables people to create bitcoin wallets and start selling or buying digital currencies by connecting their bank account to the online platform. It’s the outcome of Brian Armstrong and Fred Ehrsam’s brainstorming.

The two young men saw an opportunity for connecting regular people to the fast-growing sphere of digital currencies.

If you want to know something more about Coinbase and how it came to be, continue reading the story of Brian and Fred, the masterminds behind Coinbase.

Setting the (coin)Base

Brian is born in San Jose, California to engineer parents. He earned a Bachelor’s degree in both computer sciences and economics while attending Rice University in Texas.

Working as a software engineer for Airbnb, Brian encountered some difficulties transferring funds to South American countries, which were hit by hyperinflation at the time.

His solution to the various problems that people were facing while transferring funds, was to create an open financial system that can be used all over the world. After long nights of coding, Brian started buying and storing crypto coins. Not long after, he met his future business partner on an online forum, Reddit, which they used to study cryptocurrencies.

Fred, born in Boston, Massachusetts, was a distinct computer science graduate from Duke University. He was a professional video game player before becoming a foreign exchange trader for an investment bank for Goldman Sachs, NY.

When Fred first heard about Bitcoin, he started to trade and study cryptocurrencies in his leisure time, which eventually led to him becoming Coinbase’s first President.

Building up the Foundations

In a small San Francisco apartment, Coinbase was officially launched in 2012, making it a pioneer in the crypto-based economy.

Throughout the years of its existence, the company has been described as the Gmail for Bitcoin (as well as 20 other cryptocurrencies at the moment)!

Coinbase started from a two-person company, working from a two-bedroom apartment that they shared with another company, to a company employing 1000+ in the first two years of its existence.

In 2013, Coinbase received a Series A investment of $5 million from Union Square Ventures. That same year came to another $25 million from well-known VCs Ribbit Capital and Andreesen Horowitz.

In 2015, Coinbase continued making strides as the preferred bitcoin exchange for companies ranging from Overstock, Expedia to Time Inc., and Dell. It also became the cryptocurrency processor for traditional payment companies such as Stripe and PayPal.

Coinbase’s demonstrated ability to push bitcoin into the mainstream played a role in it securing even more funding of $75 million from several banks, the New York Stock Exchange (NYSE), and venture capital firm Draper Fisher Jurvetson.

Coinbase received its first funding through one of the most famous seed accelerators, the Y Combinator startup accelerator. $150.000 was used for powering the company and creating a prototype application for trading with cryptocurrencies.

Two venture capital firms funded the company with $30 million in 2013. Using this capital, the firm grew its users base to one million in 2014.

All in all, Coinbase had a very good head start!

The Only Way Is Up!

Coinbase launched services for buying and selling bitcoins via bank transfers in 2012. After receiving hefty funding from venture capital firms in 2013, the company created its first vault system for safely storing bitcoins.

The company’s next step was to create an application, Coinbase Pro, that will enable users to store, buy, and trade various cryptocurrencies such as Bitcoin, Etherium, Bitcoin Cash, Etherium Classic; and Litecoin.

The Coinbase app became the most downloaded app on Apple’s App Store in December 2017!

Next came Coinbase Custody, cryptocurrency custody intended for institutions and bigger players, such as pension funds, asset managers, hedge funds, and so on.

Coinbase Toshi is a mobile app for browsing decentralized apps. To give access to apps built on top of the Etherium blockchain, and provide broader financial uses for the cryptocurrency assets.

Coinbase started working with VISA, to make debit cards that can make payments drawn from a Coinbase account that holds cryptocurrencies.

Coinbase also launched Coinbase Ventures, a venture fund with the goal of backing companies related to blockchain and crypto to improve the chances of a successful future.

Financial Evolution

The nature of digital currencies allowed Coinbase to prosper financially, fast, and steady.

But how does this platform earn money?

Since it’s in exchange, it earns money through the spread which can be as high as 2% for retail investors, but much larger for institutions placing large orders through Coinbase Pro.

The problem with this source of income, however, is that if the price of bitcoin crumbles, as it did in 2018, trading volume decreases, and therefore income falls.

So Coinbase has had to pivot into new sources of revenue.

More advanced traders, such as crypto hedge funds, buy and sell assets through GDAX (or Coinbase Pro) as it’s now known, which determines the mid-market price. Coinbase then allows retail investors to buy and sell at that price charging a small fee on top of around 1.5% - 4%.

According to Reuters, the company's global sales in 2018 were "about $520 million."

As of 2020, Coinbase filed with the US regulators to go public in 2021, a move that will provide more credibility and legitimacy. In February that same year, the business applied to the Securities and Exchange Commission for a direct listing to become public.

In April 2021, before the direct listing, Coinbase recorded a nine-fold rise in first-quarter revenue to $1.8 billion, up from $190.6 million the prior year!

Prior to the IPO, Nasdaq established a reference price of $250.00 per share, valuing the firm at $47 billion. Coinbase ended at $328.28 per share at the end of its first day of trading. Mission successful!

The Big Player of Today

With over $500 million in funding and serving over 30 million customers, Coinbase is one of the biggest cryptocurrency companies in the world.

There are 2100+ people working for Coinbase. It is a remote-first company, with no formal headquarters, a decision the company made during the COVID-19 pandemic.

Coinbase has 13 board members, with co-founder Fred among them, and 62 current employee profiles, and Brian as the CEO and co-founder.

The operating income of Coinbase is $408 million, out of which $322 million is in its net income. With a $1.14 billion revenue, the company reported that they own company assets worth almost $6 billion.

Before making it big in the digital currency sphere, Coinbase had to face fierce competition coming from companies like Bakkt, Circle, and Bitso, among others.

If digital currencies are something you want to explore and learn about, it is safe to say that you will come across Coinbase’s services along the journey. It is a pioneer in the cryptocurrency world, hence the expression - Gmail for Bitcoin!