Money is a strange thing, often taken for granted. Human history has used all sorts of items for trade, and for millennia, these items always had value of their own. In ancient civilizations, tradesmen bartered, offering the products of their craft for the products of another man’s craft. The blacksmith traded armor for produce, swords for furniture, and tools for meat. This system eventually led to a more flexible system of trade: money. Coins were made of precious metals, usually having their worth based simply on the worth of the materials used. Later, governments instituted money that had no particular value of it’s own, but rather was backed by a treasury, which owned gold allotted to every worthless piece of money. “Money” became a promissory note from the government, and when the “gold standard” was left behind, money became arbitrary, worth only what people would be willing to give in exchange for it. This gave way to new methods of trading money, such as digital banking, and online money transfers. Now, an entire new currency has emerged that is entirely digital: bitcoin.
Bitcoin has grown in popularity and in value, leading to new opportunities for entrepreneurs. Brian Armstrong, co-founder of Coinbase, is taking advantage of this new opportunity with a familiar business concept applied to an untapped platform. Coinbase aims to be the “Paypal for bitcoin,” making it simple for technological laymen to buy, sell, and send gifts using bitcoin. Coinbase acts as a virtual bitcoin wallets for users, providing security as well as simplicity. To retailers, however, Coinbase is a payments processor, with the option to instantly sell the bitcoin for USD, giving companies the confidence to use bitcoin in the face of high volatility. Merchants are given multiple benefits, including low fees (1% via Coinbase vs. ~2% via credit card companies) and higher flexibility for the customer. Armstrong’s business deals with objections well, with a promises of zero chargebacks and fraud, as well as easy refunds, even when the company has sold the bitcoins. Because of this, they have secured clients such as Overstock.com, Dell, Google, and even their predecessor Paypal.
Like many other great technopreneurs, Brian Armstrong worked for another successful young start-up, airbnb, prior to starting his own tech company. After working as a software developer there, he left to start Coinbase. Coinbase is known to be the most well-funded bitcoin exchange, and shapes up to be the leader of the fast-growing, dynamic market that is digital currency.
I had never heard of bitcoin before reading this blog post. Coinbase seems to have a lot of incentives for people to use their service. I think it was a smart investment for Brian Armstrong to get involved in the digital currency market as the online connections of our worlds seem to be ever increasing.
The increasing use of digital currency provides a strong base for the company and its future success. I use paypal frequently and im sure a business similar to paypal but for bitcoins would be also very successful.
This is an awesome innovation because it proves something that people are sometimes unwilling to believe, that the free market can do it too, and in some cases, it can do it better. Bitcoin is hard to tax because it is not real money under the government, but it acts as a currency anyway. This leads to the question of whether the dollar could be effectively privatized, which is a very interesting question.