All posts in “coinbase”

Coinbase acquires Distributed Systems to build “Login with Coinbase”

Coinbase wants to be Facebook Connect for crypto. The blockchain giant plans to develop a “login with Coinbase” identity platform for decentralized app developers to make it much easier for users to sign up and connect their crypto wallets. To fuel that platform, today Coinbase announced it has acquired Distributed Systems, a startup founded last year that was building identity standard for dApps called the Clear Protocol.

The five-person Distributed Systems team and its technology will join Coinbase. Three of the team members will work with Coinbase’s Toshi decentralized mobile browser team, while CEO Nikhil Srinivasan and one other co-founder are forming the new decentralized identity team that will work on the “Login with Coinbase” product. They’ll be building it atop the “know your customer” anti-money laundering data Coinbase has on its 20 million customers. Srinivasan tells me the goal is to figure out “How can we allow that really rich identity data to enable a new class of applications?”

Distributed Systems had raised a $1.7 million seed round last year led by Floodgate and was considering raising a $4 million to $8 million round this summer. But Srinivasan says “No one really understood what we’re building”, and it wanted a partner with KYC data. It began talking to Coinbase Ventures about an investment, but after they saw Distributed Systems’ progress and vision, “they quickly tried to move to find a way to acquire us.”

Distributed Systems began to hold acquisition talks, and the CEO tells me it was deciding between going to “Facebook, or Robinhood, or Binance or Coinbase”. Coinbase “were able to convince us they were making big bets, weaving identity across their products.” The financial terms of the deal weren’t disclosed.

Coinbase’s plan to roll out the “Login with Coinbase” platform is an SDK that others apps could integrate, says Srinivasan. That mimics the way Facebook colonized the web with its SDK and login buttons that splashed its brand in front of tons of new and existing users. This made turned Facebook into a fundamental identity utility beyond its social network.

Developers eager to improve conversions on their sign up flow could turn to Coinbase instead of requiring users to set up whole new accounts and deal with crypto-specific headaches of complicated keys and procedures for connecting their wallet to make payments. One prominent dApp developer told me yesterday that forcing users to set up the MetaMask browser extension for identity was the part of their signup flow where they’re losing the most people.

Coinbase CEO Brian Armstrong confirmed this morning that it’s working on an identity SDK. When Coinbase investor Garry Tan of Initialized Capital wrote that “The main issue preventing dApp adoption is lack of native SDK so you can just download a mobile app and a clean fiat to crypto in one clean UX. Still have to download a browser plugin and transfer Eth to Metamask for now Too much friction”, Armstrong replied “On it :)”

In effect, Coinbase and Distributed Systems could build a safer version of identity than we get offline. As soon as you give your social security number to someone or it gets stolen, it can be used anywhere without your consent and that leads to identity theft. Coinbase wants to build a vision of identity where you can connect to decentralized apps while retaining control. “Decentralized identity will let you prove that you own an identity, or that you have a relationship with the Social Security Administration, without making a copy of that identity” writes Coinbase’s PM for identity. “If you stretch your imagination a little further, you can imagine this applying to your photos, social media posts, and maybe one day your passport too.”

Considering Decentralized Systems and Coinbase are following the Facebook playbook, they may soon have competition from the social network. It’s spun up its own blockchain team and an identity and single sign-on platform for dApps is one of the products I think Facebook is most likely to build. But given Coinbase’s strong reputation in the blockchain industry and its massive head start in terms of registered crypto users, today’s acquisition well positions it to be how we connect our offline identity with the rising decentralized economy.

Coinbase lets you convert your tokens into gift cards

It’s still quite hard to buy physical goods using bitcoins or ethers. Coinbase plans to (partially) solve that issue with a new partnership with WeGift. Coinbase customers in Europe and Australia can now convert their tokens on their Coinbase account into digital gift cards for popular stores.

For instance, you’ll be able to buy gift cards for Uber, Tesco, Google Play, Marks and Spencer and more. The feature is now live in the U.K., Spain, France, Italy, Netherlands and Australia.

While WeGift promises gift cards for dozens of merchants, most of them are restricted to customers based in the U.K. If you live in another country, you’ll only get a handful of options. For instance, in France you can only buy gift cards for Décathlon, Bloom & Wild, Global Hotel Card and Ticketmaster. Coinbase says that it will adding be more retailers in the coming months.

In some cases, WeGift offers you the fiat equivalent of your cryptocurrencies as well as a tiny bonus. For instance, you get £102 in Uber gift cards if you spend the equivalent of £100 in bitcoins.

In the U.S., Coinbase also partnered with Shift for a traditional Visa card. But many European cryptocurrency companies who provided Visa cards had to go back to the drawing board because Visa stopped working Wave Crest Holding — Wave Crest Holding was the card issuer for all European cryptocurrency cards.

Gift cards aren’t as convenient as receiving money on your bank account or a debit card. But they’re a great way to avoid telling your bank that you made money by speculating on cryptocurrencies. Many banks directly report data on their users to local tax authorities. But don’t forget that Coinbase can track all your withdrawal events and notify tax authorities too.

Disclosure: I own small amounts of various cryptocurrencies.

0x lets any app be the Craigslist of cryptocurrency

Centralized crypto exchanges like Coinbase are easy but expensive because they introduce a middleman. Not-for-profit project 0x allows any developer to quickly build their own decentralized cryptocurrency exchange and decide their own fees. It acts like Craigslist, connecting traders without ever holding the tokens itself. And instead of having to bootstrap their way to enough users trading tokens on their app alone so that there’s liquidity, 0x offers cross-platform liquidity between users on the different projects it powers.

The problem is the user experience of decentralized apps is often crappy compared to the consumer apps we’re used to across the rest of tech. From sign-in to recovering accounts to conducting transactions, it’s a lot more complicated than Facebook Login, PayPal, or Shopify. Bitcoin and Ethereum prices remain well below half their peaks because it’s difficult to do much with cryptocurrency right now. Until the decentralized infrastructure improves, the dreams of how blockchains can improve the world remain distant.

0x is trying to fix that by ensuring developers all don’t have to reinvent the exchange wheel.

It began as a for-profit exchange before the team recognized the massive usability gap. So instead it became a decentralized exchange protocol, and raised $24 million in an ICO for its ZRX token. That’s how relayers — the apps who use it to build exchanges for ERC20 tokens atop the Ethereum blockchain — can charge fees. It also gives those who collect the most a say in the governance of the protocol.

Some of the top projects on 0x like Augur and Dydx are going strong. Last week Coinbase announced it was exploring whether it might list ZRX and several other currencies for trade on its exchange, helping perk the price up after declines since the new year.

0x’s ZRX token price, via CoinMarketCap

Now 0x is putting some of its $24 million to work. It just hired former Facebook designer Chris Kalani to help it improve the usability of its APIs and the products built on top of them. His skills helped Facebook embrace mobile around its 2012 IPO. He then built Wake, raising $3.8 million for the design prototype sharing tool that let teams get instant feedback on their works-in-progress. Kalani sold Wake to design platform InVision in April, and after a few months assisting the transition, he’s joined 0x.

“There are very few designers involved the [blockchain] space” Kalani tells me. “There’s not a lot of people who had worked on anything at a large-scale or from the consumer perspective. We’re focused on making crypto more approachable.”

Sustaining A Crypto Not-For-Profit

After talking to four leaders in different parts of the blockchain industry, the consensus was that 0x was an elegant protocol for spawning decentralized exchanges. But the question kept coming up about whether the project will be sustainable. The company doesn’t have to earn enormous amounts of revenue, but concerns about its longevity could scare away developers. One, who asked to remain anonymous, described 0x saying “the best analogy is trying to monetize Linux.”

0x is open source, so it could be forked so developers can sidestep ZRX. 0x hopes that the shared liquidity feature will keep developers in line. It only works with the unforked version, and is now being used by 0x-powered projects including Radar Relay, ERC dEX, Shark Relay, Bamboo Relay, and LedgerDex.

While some centralized exchanges have suffered security troubles and hacks, those with stronger records like Coinbase continue to thrive while banking off high fees. That in turn lets them offer better liquidity and invest more in the user experience, widening the gap versus decentralized apps. “People trust Coinbase with large amounts of capital but they wouldn’t trust themselves” Kalani admits. But he thinks it’s early in the game, and as users become more knowledgable and comfortable with holding their own tokens for use on decentralized exchanges, 0x and ZRX will thrive.

There’s also competition within the decentralized exchange space from Kyber’s liquidity network, and AirSwap’s peer-to-peer exchange marketplace. But for any of these to thrive, the mainstream crypto owner will have to get better educated. That could fall to 0x.

One alternative path for the not-for-profit would be selling developer services and consulting to those building on top of it. Or it could always do another ICO. But for now, there are a lot of projects out there that don’t want to foot the upfront cost to build their own secure and compliant exchange from scratch. Kalani concludes, “The way Stripe allowed developers and businesses to build on top of it, and not have to worry about regulatory issues and all the infrastructure necessary to take payments, I think 0x is going to do something similar with exchanges for crypto.”

Coinbase says its problem days are over. Better Business Bureau disagrees.

They’ve changed. They promise. 

To hear the San Francisco-based cryptocurrency exchange Coinbase tell it, they’ve turned over a new leaf. Sure, SEC documents revealed scores of customer complaints against them — ranging from allegations of fraud to negligence — but those were in the (very recent) past. These days, insists the company in a series of blog posts and statements to Mashable, Coinbase is a different animal.

But over the course of 2018 its customers have deluged the Better Business Bureau with complaints. Maybe they missed the memo?

The precursor to the Better Business Bureau was founded in 1912 by a Boston ad executive. The organization’s early form was the so-called National Vigilance Committee; their goal was to curb misleading advertising. Today, you may know the Better Business Bureau as the organization that rates businesses across the US and acts as a public clearing house for consumer complaints. It’s often the last recourse for people who feel they’ve been screwed over by a company but don’t have the resources to pursue legal action.

When it comes to Coinbase, the Bureau has received quite a few of those complaints — enough to give them an “F” rating based on “the total number of positive, neutral, and negative reviews posted.”

These complaints are recent. In contrast to the documents Mashable obtained following a FOIA of the SEC, the tales of poor customer service and frozen funds are not from the time of “unprecedented growth” as described by a May 18, 2018, blog post written by VP of operations and technology Tina Bhatnagar.  

“In 2017, the cryptocurrency space experienced a profound uptick in mainstream awareness and growth,” she wrote at the time. “As part of that, consumer demand for our services increased by 40x and we experienced transaction volumes in November and December of that year that grew by 295%.”

Coinbase wouldn’t make the same mistake twice, she assured us. And yet.

Ouch.

Ouch.

Image: screenshot/better business bureau

Of the 1,155 Coinbase customer complaints available on the BBB site, there are a substantial amount from this year. 

“My account disabled to log in on Nov 19th,” reads one complaint from April. “I filed a case report to CoinBase but it is never resolved up to now. I have money in my CoinBase account and have been waiting for 5 weeks to refreeze it. I cannot withdraw the money and trade Cryptocurrency.”

That complaint was far from unique. 

“I wired $14000 (USD) to coinbase over a month and a half ago to purchase Bitcoin and the money hasn’t been processed into my account or returned,” reads another one from April. “I’ve opened up a ticket within coinbase 2 weeks after wiring the money but they have not given me any idea why the funds have not posted to my account.” 

How about a few more, all from May of this year, for good measure: 

Sent wire transfer 4 months back and haven’t received it in my **** account. Have called the **** support number numerous times and am still waiting for them to email me back with an update.

Coinbase froze my account. I can not access my funds to settle pymnt. I have asked coin base to unfreeze my account so i can make payments from my accouny.

I have been attempting to withdraw my funds from Coinbase since January 3rd, 2018. I have been back and forth with the technical team since then but they abruptly stop replying. I recently have talked to the support team on the phone twice but they mention I can’t escalate or speak to anyone else…regarding this issue. My money is stuck in limbo in their system and I have received no solution or answers.

in December 2017 I placed an order of $2000 dollar on coinbase, they however double charged me for another $2000 dollar which they refuse to refund me for. It’s been over 3 months and their support still wont acknowledge this. I’ve tried to get the money back via my bank but they say coinbase is…claiming the transaction was authorized (of course they would say that), and so I’m stuck with $2000 missing.

Again, these are not claims made late-2017 while Coinbase was experiencing a surge in new customers and activity. Rather, these are from a time when the value of bitcoin is down — along with interest in cryptocurrency in general.

A quick look at Google Trends puts this downturn into perspective. 

Way, way down.

Way, way down.

Image: screenshot/google trends

According to Forbes, Coinbase generated $1 billion in revenue last year. Some of that, if the company is to be believed, was put toward beefing up its support staff following what can only be described as a tumultuous 2017.

It clearly has a few more hires to make. But hey, Coinbase will get there eventually. It promises.

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