Coinbase IPO: 5 Things You Should Know About the US Cryptocurrency Exchange

Here’s what you need to know about the popular trading platform prior to the public offering.

What is Coinbase?

The Silicon Valley crypto exchange was co-founded in 2012 by Brian Armstrong, 38, who heads the platform’s CEO. Fred Ehrsam, a director of Coinbase, also helped set up the company.

There are two types of Coinbase stock. Armstrong owns 11% of the Class A shares and 22% of the Class B shares, while Ehrsam owns 11.4% of the Class A and 9% of the Class B.

According to Forbes, Armstrong’s net worth is currently $ 6.5 billion based on his ownership in the company, which is likely to increase if direct listing is successful.

Coinbase bills itself as a bet on the burgeoning crypto economy, which starts with the # 1 crypto asset bitcoin but goes much further, Armstrong and the company argue.

Bitcoin prices BTCUSD,
-2.49%
have attracted attention as it climbed to repeat records, most recently hitting a recent peak of over $ 58,000 over the weekend, before starting to give up some gains in recent trading.

Last week, bitcoin reached a market value of $ 1 trillion and although the asset created by a person or persons known as Satoshi Nakamoto represents about 70% of the total crypto market, a number of other popular crypto assets are still traded on Coinbase, including ether ETHUSD,
-1.53%
on the Ethereum blockchain, Bitcoin Cash BCHUSD,
-4.38%
and Litecoin LTCUSD,
-6.79%
to name a few.

Who else owns Coinbase?

Venture capital firm Andreessen Horowitz is the largest owner of Coinbase, with approximately 25% of Class A shares and 14% of Class B. And Marc Andreessen, head of the venture capital outfit, sits on Coinbase’s board.

Coinbase has ambitions that align with those of Robinhood Markets

“Coinbase is a company with an ambitious vision: to create more economic freedom for every person and every business,” Armstrong wrote in a letter that was added to the company’s public filings with the SEC.

Biggest risk factor

Undoubtedly, the biggest risk factor with Coinbase is that it is a bet on an unproven asset class established a little over a decade ago. Coinbase is trying to make it clear that its fate is tied to the outlook for Bitcoin and ethereum and the thousands of other alternative coins that have emerged.

But a decline in interest and strict regulations in the US and elsewhere could block the exchange platform.

Here is now Coinbase explains it:

There is no guarantee that a backed crypto asset will maintain its value or that there will be meaningful levels of trading activity. In the event that the price of crypto assets or the demand for crypto asset trading falls, our operations, results of operations and financial condition would be negatively impacted. Most of our net income comes from transactions in Bitcoin and Ethereum. If the demand for these crypto assets decreases and is not replaced by a new demand for crypto assets, our operations, results of operations and financial condition could be adversely affected, ”Coinbase writes in its S-1 file.

How big is Coinbase?

According to the data site CoinMarketCap.com, the crypto exchange platform ranks third among the largest digital exchanges in the world. That ranking puts it behind Binance, based in Seattle and Huobi Global, a Seychelles-based cryptocurrency exchange that was founded in China.

In the US, Coinbase is by far the most well-known crypto platform, but there are competitors, including Gemini, run by Tyler and Cameron Winklevoss, who famously used their Facebook Inc. FB,
-3.64%
arrangements to invest in bitcoins.

Kraken is another popular crypto platform and direct competitor in the US.

Odds & Ends

The company offered a number of tributes to the founder or founders of bitcoin and the era of the digital currency in its public filing.

For example, it mentioned the genesis block associated with Satoshi Nakamoto on “1A1zP1eP5QGefi2DMPTfTL5SLmv7DivfNa”, whose whitepaper in 2008 set bitcoin in motion. (In addition, a “Satoshi” is the smallest unit of bitcoin – 0.00000001 BTC).

The company does not have a physical address for its California headquarters, citing the COVID-19 pandemic, which has forced a number of companies to have most, if not all, of their employees work remotely. For that reason, Coinbase calls itself ‘a remote company’.

However, the lack of an address for some has been seen as in line with the decentralized nature of blockchain and bitcoins.

The company also provided a helpful introduction to cryptocurrency terms, including defining terms such as “hodl”, which have become popular in cryptocurrency circles. Hodl was accidentally coined in a 2013 Reddit and signifies a long-term holder of an investment.

Read: Don’t Fight The FUD: HODL On This List Of Bitcoin Terms You Need In Your Vocabulary

Armstrong crypto charity

In 2018, Armstrong started GiveCrypto.org, which makes direct money transfers to people living in poverty.

“People who have invested in cryptocurrencies early on have amassed an enormous amount of wealth in a relatively short time. Yet the reputation of the crypto community has been dominated by images of ‘bros in Lambos’, whose antics are getting a lot of attention, ”Armstrong wrote in a separate blog post on Medium in 2018.

Armstrong has reportedly donated at least $ 1 million to GiveCrypto.