Coinbase is definitely a success story in how to appeal to the masses. There were always alternatives, but coinbase always came out on top despite the high fees and poor customer service.
I think Coinbase as a publicly traded company will be very interesting to follow. Not only is it a massively cyclical industry, but the supposed point of crypto is to reducing the reliance on, and grifting from, companies like Coinbase. It's very success should be inverse to the goals of crypto, and over time, one would think the relationship can only get more fragile.
> the supposed point of crypto is to reducing the reliance on, and grifting from, companies like Coinbase
That was the pitch of crypto. In practice, people are buying it as a bet that it will go up. I suspect most people are only buying it because the value is going up. If bitcoin actually worked like a currency and traded between $8k and $12 for the past 5 years, no one would care.
Global wealth is $400T. All crypto currency combined is worth about ~$2T at this point. So to store 0.5% of the world's wealth, we are using 0.6% of the world's energy.
Banks obviously don't use anywhere near this much energy. Bitcoin is estimated to use more energy than all other server farms put together.
So we are using 0.6% of the world's energy to store 0.5% of the world's wealth. And < 0.6% of the world's energy to store the other 99.5% of the world's wealth.
Doesn't seem like the ideal wealth storage technology.
I would include the energy needed to maintain trust in other currencies including efforts to prevent counterfeits, which I might argue includes some portion of a nation's militaristic might. Trust is an even more ambiguous, yet crucial aspect of maintaining a currency's value, tied up in the "order" or predictability of the society using the currency, which involves various legal systems and at the most basic level, relationships between its peoples.
It takes a relatively minuscule amount of energy to maintain a database of numbers associated with certain people and entities, but quite a significant amount to make it mean something.
I don't really understand this argument. If militaries are part of the embodied infrastructure of a country's banking system, this would imply that replacing the banking system with something decentralized (like cryptocurrency) would cause countries across the world to reduce their military footprint.
I find it much more likely that military resources would be diverted to somewhere upstream of mining in the value chain. For example, if we continue relying on carbon-intensive proof-of-work blockchains, why wouldn't armies simply be diverted to secure energy resources?
Yes, similar to countries going all over the world to find gold in years past. In that sense, fiat would require less military since you don’t need to go conquer anyone, just being able to project enough of a threat to stop counterfeiting is enough.
Either way, it’s very convoluted and tough to tease out line item costs, but I don’t think comparing electricity usage is a good proxy.
My point is that, if a country no longer derives its power and wealth from controlling the banking system through military might, rather than freely giving up that power, it's going to flex that military might in other ways to ensure that it maintains that power and wealth. If crypto merely displaces military resources (as I think it would) instead of replacing them (as you seem to be arguing), then it's not really fair to count the military as part of the banking system's energy/carbon footprint.
That's why we need centralized exchanges like coinbase to enable off chain transactions within their walled garden. Then we can have the worst of both worlds.
The energy spent on bitcoin’s proof of work is not tied to the volume of transactions though. At a technical/protocol level, the same amount of mining would be needed if there was $100 trillion being stored or $1 being stored.
Although higher prices make larger mining operations more enticing and profitable.
Here is where Bitcoin's wasteful algorithm comes in. The vast majority of the energy expenditure comes from bitcoin miners burning compute cycles to bid for the right to add the next round of transactions to the ledger, which happens every 10 minutes. The more energy that the miner spends on computing SHA1 hashes, the higher the chance that they'll find a lucky hash that entitles them to a monetary reward from the transaction fees, plus freshly minted bitcoins.
The idea behind this proof-of-work scheme is that creating an alternative blockchain history becomes prohibitively expensive, pushing the network to achive a distributed consensus. However, it's tremendously wasteful because the energy isn't actually being spent on "useful" work.
Even if it is greater than 0.6% (it's plausible) - dollar denominated wealth accounts for 25% or global wealth. Which is 52.5x the amount of wealth as all of crypto.
The US doesn't even use 20% of the world's energy. So you would need to think that 125% of the energy the US produces and consumes goes directly into fighting wars and "supporting the petro dollar" - which is absurd. Almost 50% of energy is spent on transportation and utilities alone...
In the most generous of worlds, Bitcoin is 10x less efficient than the current systems. It is probably closer to 1000x less efficient (or more).
Well the US has killed over a million people in Iraq, Afghanistan, and Syria in the current wars. How are you calculating the cost of that million lives to prop up the dollar?
This is one of the biggest selling points of crypto, it’s not tied to a government that may decide to commit mass murder for its sake.
This implies that the energy required to store wealth in centralized databases is easily calculable.
It also implies that the goal of storing wealth is optimizing for low energy usage, which seems less important than security/safety, ease of transfer, taxation, automation, and other factors.
I’m not making an argument for or against PoW. Just want to point out it’s possible >.6% of humans energy output may in fact go towards banking and payments.
This is a poorly reasoned comparison. The .6% figure was in reference to .5% of wealth; presumably much more energy would be required to store closer to 100% of wealth with crypto.
Given that we are nearing the irreversible destruction of our climate and that existing electronic systems offer all the benefits you mention, but with massively lower energy cost, your claim that energy “seems less important” is unsupported.
Sadly this is true other than "no one would care". Many would care, just mostly not in countries with stable fiat.
But the success of BNB which is basically just a corporate database on a blockchain shows there is a big part of the community that doesn't care about decentralization at all.
Except currencies have much bigger market caps, it wouldn't have worked as a currency in that range (outside of a very small economy). We are now in the initial phase where it's being used as a store of value, but sooner or later, it's going to reach roughly it's true value at which point, you would expect it to behave more like a currency rather than an asset with a huge upside.
Currencies don't have market caps, assets have market caps. The fact that people talk about crypto's "market cap" is as clear an indication that it's not and never will be a currency.
In the past, Bitcoin exchanges IMO felt shady. They frequently were run from foreign countries and got away with avoiding Know-Your-Customer banking laws.
Coinbase brought a true sense of legitimacy and trustworthiness to Bitcoin exchanging.
Yep. I always wanted to buy bitcoin way back in the day, it's just every time I almost joined an exchange (like Mt. Gox) they always made me feel really nervous and like I was going to lose my money (didn't help that several of them got hacked and did lose everyone's money).
Coinbase was the first company that made the whole process feel pretty safe and reliable.
> Coinbase brought a true sense of legitimacy and trustworthiness to Bitcoin exchanging.
I could be wrong but to me this makes every shill for crypto that says "it's anonymous!" a joke.
I had to provide a driver's license and do checking account verification to be approved on Coinbase. Does that not remove the anonymity or am I missing something?
It does remove any question of who you are for coinbase, but bitcoin was only ever pseudonymous transactions, not fully anonymous. We can all see how each wallet behaves.
Yeah - it's not anonymous, the shill people didn't understand the technology and are wrong.
Every transaction is part of the public ledger. If you ever want to get money in or out from fiat you need some point that is going to require ID.
You could try and avoid this doing in person and cash, but if make any mistake ever your entire history of transactions is known.
Some people have tried to do things to obscure this (coin mixing), some coins exist to do something clever to make it private, but BTC isn't and the other stuff doesn't really work.
Coinbase is great because the original exchanges like "Magic The Gathering Exchange" (Mt. Gox) were amateur hour, they were routinely hacked and lost everyone's money. Coinbase was the first real company that showed up and did what they were supposed to do. They also made things easy with good UI.
I think this is partly because in the Mt. Gox days it wasn't taken too seriously, (most) people were playing with it because they thought it was cool not because they expected it to grow in to a trillion dollar monster.
Bitcoin CAN be used anonymously if you never use an online exchange to convert fiat to Bitcoin or vice versa.
But yeah, otherwise I agree with you. Once you've bought your Bitcoin from Coinbase, your name is attached to a Bitcoin address. Law enforcement might not know where the coins go once you spend them, but they could subpoena you or otherwise make some sort of legal demand to know who you sent them to if they suspected you of buying illegal things.
You don't need to "register" a Bitcoin wallet anywhere.
If you download the desktop client, you have a wallet, and you don't need to log in or register anywhere. You can then create a Bitcoin address and have Bitcoin sent to it.
One factor of that appeal in the US is that you have to provide your SSN to the exchange you're using. There's a lot of intangibles that Coinbase brings that overcomes the activation energy required to punch in those numbers on a web form.
Just an anecdote but, much to my chagrin, I've had a largely dormant Coinbase account since 2013 and haven't received any notable spam or evidence that my contact info has been handled sloppily.
Recently I started the enrollment process for a couple other popular exchanges and almost immediately start getting some gnarly spam of topical relevance.
> much to my chagrin, I've had a largely dormant Coinbase account since 2013 and haven't received any notable spam or evidence that my contact info has been handled sloppily.
> Recently I started the enrollment process for a couple other popular exchanges and almost immediately start getting some gnarly spam of topical relevance.
> coinbase always came out on top despite the high fees
Commissions tend to come down as markets mature (with some exceptions like real estate) so I will be curious to see if this occurs in the crypto market as well. I suspect that appeal to the masses will not be a long-term durable advantage.
Early on coinbase made it very easy to buy, even if it meant taking losses. They allowed people to trade with funds that were not yet cleared. This was a long time ago. Some ppl could withdrawal the coins and then cancel the deposit by contacting the bank. that did not last long.
>the supposed point of crypto is to reducing the reliance on, and grifting from, companies like Coinbase.
Not necessarily, the point of crypto is to reduce reliance on fiat money, due to the high fees of crypto it makes sense to build centralized services on top backed by decentralized cryptocurrencies, these exchanges dont hold real power, as you can just switch exchanges (unlike credit card processors). Bitcoin is like the internet gold, but you dont buy stuff with gold.
> the supposed point of crypto is to reducing the reliance on, and grifting from, companies like Coinbase
Yes, that is still the case? Decentralized exchanges like Uniswap are dominating (over $1B volumes daily) and growing very rapidly. Crypto is and always has been about decentralization.
I think Coinbase as a publicly traded company will be very interesting to follow. Not only is it a massively cyclical industry, but the supposed point of crypto is to reducing the reliance on, and grifting from, companies like Coinbase. It's very success should be inverse to the goals of crypto, and over time, one would think the relationship can only get more fragile.