7 Secret Stories About Coinbase

On Wednesday, Coinbase landed on Nasdaq as expected under the watchful eyes of the public. In the past, Coinbase has always maintained a cautious attitude towards security and regulation, leaving a professional and conservative image.

In the past, Coinbase has maintained a cautious attitude towards security and regulation, leaving a professional and conservative image. However, this image is far from Coinbase’s early slogan of “running through brick walls”.

Unlike its image today, Coinbase’s early operations were full of excitement and risk-taking, such as “playing around” with Apple and being kicked out of the App market.

In the book "Kings of Crypto", the author interviewed many early Coinbase employees and discovered Coinbase's past that few people in the industry know about. Here are 7 of the interesting stories, please check them out~

Coinbase "played tricks" on Apple and was kicked out of the App Store

In 2013, many large companies considered Bitcoin too risky to be associated with, including Apple, which refused to approve apps related to cryptocurrency transactions.

In order to bypass this obstacle, the founders of Coinbase came up with an idea of ​​"crossing the barrier". They used a technology called "geo-fencing" to prevent users in certain regions from accessing the App's trading function, and this blocked area was limited to Apple's hometown: Cupertino, California.

This means that only users in Cupertino, California cannot trade Bitcoin on the Coinbase App, while users in other parts of the United States can still buy and sell freely.

At that time, the App reviewers at Apple headquarters found that this app did comply with policy regulations and did not support the Bitcoin trading function, so they launched the Coinbase App on the App Store.

A few months later, Apple discovered this trick and removed the Coinbase App from the App Store.

Early employees must be able to "do questions" in order to be hired

Just as Google once used mind-bending math problems in its interviews, the founders of Coinbase also required job applicants to answer math problems before being hired. The questions were often difficult, such as the following one, and the interviewees were asked to find the answer within a few minutes:

There are 100 students and 100 lockers. Student 1 starts at locker 1 and opens all lockers in order. Student 2 starts at locker 2 and closes lockers that are 1 locker apart. Student 3 starts at locker 3 and changes the state of every third locker (if it is open, close it, if it is closed, open it). Student 4 starts at locker 4 and changes the state of every fourth locker. And so on, until all 100 students have changed the state of their lockers in turn. How many lockers are open at the end?

Coinbase's first employee, Carlson Wei, answered this question perfectly. (If you know the answer, please leave a comment at the end of the article~)

Coinbase was hacked

Coinbase has a reputation for security, taking very tight measures to protect its massive cryptocurrency reserves. Some supporters boast that it has never been hacked, but this is not true.

In 2013, when the Coinbase team had only five people, a hacker broke into Coinbase's hot wallet. At first, the hacker only stole a few bitcoins, but later he became more and more greedy. When the hacker stole the coins for the third time, Charlie Lee, an early employee of Coinbase (now the founder of Litecoin), frantically changed the password to try to prevent further losses.

This hacker attack caused Coinbase to lose $250,000. Later, it was found that the hacker had hacked into an IT supplier of Coinbase to obtain the password. This type of theft is very common in the field of network security, and hackers regard external suppliers as the weak point of the company's network.

After the incident, Coinbase’s CEO ordered a comprehensive security review, requiring any company working with Coinbase to use Chromebook laptops provided by the company.

Coinbase's original office was a two-bedroom apartment

Coinbase only acquired a proper office in 2015. Before then, employees crammed into an apartment in San Francisco.

In order to hold important meetings, Coinbase had to borrow office space from other companies, including Lending Club, which is also where Coinbase held its Series A financing.

Not everyone was bullish on Coinbase’s Series A, with one tabloid website mocking, “VCs throw $5 million into Bitcoin mania.” Today, Coinbase is valued at around $100 billion, and that tabloid website is no longer around.

Coinbase almost lost its banking business

Every startup needs a bank to do business with, and for cutting-edge technology startups, they usually turn to Silicon Valley Bank (SVB) - it is often willing to accept high-risk startups that other banks will not accept. Therefore, Coinbase chose SVB.

But in 2014, a media outlet published an article titled "How Coinbase touts cryptocurrency as a tool to circumvent sanctions against Iran," pushing Coinbase into the vortex of geopolitics. SVB Bank decided to cut off Coinbase's business and gave Coinbase a six-month grace period to find another bank.

This was Coinbase’s darkest hour, and much of its business had to come to a screeching halt because operating a cryptocurrency service without a bank was like selling ice cream without a freezer.

Fortunately, Coinbase found another bank willing to cooperate at a critical moment.

Coinbase founder “laid out” co-founder

According to official information, Coinbase was co-founded by Brian Armstrong and Fred Ehrsam.

In fact, there was another co-founder at the beginning - a British programmer named Ben Reeves, who originally planned to join the famous American startup incubator Y Combinator with Brian with the idea of ​​Coinbase.

According to media reports, just a few days before entering Y Combinator, Brian locked Ben out of his Coinbase account and told him: "Joint venture is like a marriage... our cooperation is not very good."

In fact, the two parted ways because of a disagreement. On the issue of whether Bitcoin holders can retrieve lost keys, the two disagreed. Brian advocated that Coinbase should keep a backup copy of the key, and he was worried that Ben's "privacy first" thinking would hinder Coinbase's chances of success.

Now, both Brian and Ben are successful - Ben is the founder of Blockchain, which is now valued at billions of dollars.

Coinbase almost laid off 40% of its staff

From the end of 2013 to 2015, the price of Bitcoin plummeted 80%, and Coinbase's trading volume fell sharply.

Brian and Fred had been managing Coinbase’s finances to provide a two-year cash cushion in case things went bad, but the bear market wasn’t over yet, and in one meeting, they realized they wouldn’t survive unless they laid off 40% of their staff.

Brian and Fred had a long list of layoffs to be made, and they were just about to execute them. In late October 2015, things took a turn for the better, with the price of Bitcoin breaking through $300, and by December, it was approaching $500. The continued rise in prices meant higher commissions for Coinbase, and the widespread media attention also attracted many new customers for Coinbase.

Of course, Coinbase employees are better off now that the company has gone public, and many of them will become millionaires, and a few will become billionaires.