Armstrong answered several questions in the session, beginning with one regarding “community trust ratings” for altcoins. Armstrong said that crypto is much like the internet: as more options emerge, better mechanisms of finding the actual high-quality projects need to come along. He pointed out that Yahoo began by manually indexing the web, but later things like PageRank started. He likened the experience to shopping and the issues associated with customer reviews.
“The most important thing to understand about the cryptoeconomy is that we’re not simply righting the wrongs of finance 1.0. We’re creating an entirely new way to access financial services.” @brian_armstrong shares his vision for the future of cryptoeconomy from #consensus2019 pic.twitter.com/NOg3XbEt3V
— Coinbase (@coinbase) May 15, 2019
Margin Trading Eventually Coming to Coinbase Pro
Then a much more interesting discussion came up around margin trading. Armstrong said that as far as he knows, it’s one of the most requested features. He said a lot of exchanges are offering leveraged trading and doing well with it, “so there’s clearly a market demand for that.” When it comes to providing such a product to consumers, there are regulatory issues to consider. Coinbase is aiming to become a global exchange, which means it’s best products will have to meet the lowest common denominator of regulatory standards. He told viewers that it’s something they’re considering, but there’s no real movement on it yet.
“This is one of those products where you have to innovate not just on the technology, but also on the regulatory side.”
Coinbase Card Expanding to the U.S.
He had some revealing things to say about Coinbase’s fraud prevention program.
Answering a question about why there is a five-day hold on GBP-based accounts, Armstrong said:
“Unfortunately, there’s people out there who trade in stolen bank accounts and credentials, and they often come and try to use them. That’s why in actually making a fiat-to-crypto exchange, one of the hardest things to do is fraud prevention, in addition to the security and regulation. We put holds up there because we’re waiting to see if we get chargebacks from fraudulent accounts. The fraud rate is something we measure really carefully, because it ever gets out of hand, I mean, it can wipe our entire margin from the fee that we charge for these things.
“Fiat-to-crypto through these kinds of reversible payment methods is a really difficult and expensive business. It’s part of why I’m so excited about crypto, because if you’re in a world where people have crypto in the future, a lot of these problems go away. For instance, you can make an irreversible transaction where it makes sense, or you can do the payment in real time, where it arrives in a few seconds instead of two or three days.”
There Will Be a Token for Pretty Much Everything
According to Armstrong:
“A directory kind of works when there are less than 100 or less than 1,000 of something, but quickly the number of pages on the internet grew to be in the millions and then billions. So you needed search engines, and you need things like PageRank to try to surface the best results.”
He went on to say:
“Another analogy is Amazon.com, which has millions of products. There might be a product that has two out of five stars, and you can decide if you want to buy it or not, but the best products get surfaced to the top once there are millions of something. And we are moving to a world where there’s going to be probably five or six major cryptocurrencies that are doing a lot of the payment volume, but there’ll be millions of tokens out there. One for every company, or project, or community, or non-profit.
“So we’re very quickly going to end up in a world, and you can see the beginnings of this – Coinbase has asset pages, where you can go read a little bit of information about each different type of asset out there, but you can see a world very quickly where those need to have ratings and reviews, and some kind of equivalent like PageRank, where it looks at maybe hundreds of factors to try and surface best assets out there when you search for something. It’s not just companies. You’re going to see assets issued for specific funds where people want to raise money, all kinds of security tokens and stuff like that.”
Armstrong hinted that Coinbase may soon have improved price alerts for the assets that it lists, but they haven’t rolled that feature out yet because they don’t want it to be “annoying.”