It wouldn't, according to accounting principles. It would be accounted for as deposits received, with a balancing liability for when the customer makes a purchase or withdrawal.
They would only record revenue when they charge a transaction fee, or any other charge/income that can't be used by/returned to the customer at their discretion. Revenue is only revenue if it doesn't incur a matching liability.
I agree that that's how it should work, but I wouldn't be surprised if Coinbase wasn't completely orthodox in their accounting. Replies below indicate that they may indeed be counting customer deposits as "revenue".
Per sources connected to their Finance Dept, that $1 billion in revenue does include amounts that would not normally be included in revenue under generally accepted accounting principles (GAAP).
More like 7%, and yes, YC will typically "sit" and not do anything. In fact, given that Coinbase has raised recently, YC's share is probably higher than 7% through the YC Continuity fund.
Who knows what will happen once an IPO happens, but no YC company has reached that point yet. We'll find out soon with Dropbox.
They have almost certainly been diluted. They don't do their pro-rata generally on each funding round and my bet is that the YC Continuity Fund was only allowed to do their pro-rata. When the Dropbox S-1 drops we will see what kind of ownership they end up with over time.
included in this is, if bitcoin doesn't fall to zero (as people wouldn't use coinbase if bitcoin was worthless). in a way I guess, it's kind of like owning some bitcoins, because if bitcoin tanks, coinbase will be worthless
One can be short-term bearish, long-term bullish, on cryptocurrency. I am. Tether is a disaster looming on the horizon for every cryptocurrency investor and business, but it, too, will pass. Mt. Gox was very bad for crypto for a while...and, then it didn't matter anymore.
If I were a betting man, I'd wager we'll see Tether play out similarly: Big spike in price (which we've already seen), massive drop to something reasonable based on actual demand and participation by real people with real money (currently ongoing, though surprisingly drawn out...the Tether trick seems to be working better than I would have believed, if it were pitched as a film plot), and then long slow climb back to a new all-time high (two years, perhaps).
Then again, at some point, something that works better is going to replace Bitcoin. Maybe the terrifying Tether crash will be the straw that breaks BTCs back. But, Coinbase/GDAX will be well-placed to profit from whatever that next thing is, as long as they're vigilant for new opportunities and careful as hell about security. Coinbase can only lose by making mistakes at this point. They profit whether BTC is going up or down, as they take (very high) fees regardless.
What's the most worrying news you've heard of, regarding Tether? It seems sketchy as hell, but I haven't seen anything which would cause me to call it a looming systemic disaster, yet.
There's an incredible amount of smoke for a situation where there is no fire.
They have no banks, as far as anyone can tell. Every bank that they publicly had a relationship with has cut ties months ago. They haven't accepted new accounts from individuals since then, but the USDT market cap has exploded since then; they've been printing $100 million every day or so for the past few days even as BTC has been dropping.
If the money is coming from anywhere, it would have to be institutional investors...so, what institutional investor sends $100 million a day to a sketchy as heck looking little company with no audits, no accountants, no banks, and to buy an instrument that, according to the terms of service, cannot be redeemed for dollars. That really doesn't add up.
For me to believe $100 million a day is pouring into Tethers while BTC is overall either stagnating or on a downward trend (much more than when it was doing well and on its way to an ATH of 19+k), I'd need to see some evidence. They've promised audits, right on the front page of the website, for years...never delivered one.
I'd believe they're laundering money on this scale (which is mostly bad for them, when they get caught, though the market will be hit hard when their wash trades stop). And, I'd believe they're printing money on a fractional reserve model. This one would be even worse for the BTC market, because Tether has been buying roughly half of miner output for months now...that would mean half of the upward pressure has potentially been fictitious. How can that not be disastrous?
But, I simply can't believe they have 1:1 backing for over $2 billion. It just looks completely outlandish, given all the shady stuff surrounding the company and its founders. Extraordinary claims require extraordinary evidence, and so far, they've failed to provide any evidence, much less extraordinary evidence.
Someone sitting on a $2+ billion dollar fund that's growing $100 million every day can afford to hire a reputable accounting firm to look at the books and talk to the institutions holding the money.
2+ billion dollar in imaginary money, with more coming every week, with no real audit? I don't know, with wash trading and bots, it could be accounting for > 80-90% of current marketcap.
Why would it drop below 1.6B? Coinbase makes money in both bull and bear markets via fees. If they booked 1B+ in fees last year their cash on hand alone should justify their current valuation, if not conservatively justify a higher one
If they had bought BTC with the seed round (600k total, not sure how much of that round YC did though) it would be worth $560M. It has gone up roughly 1000x since then.
But would it have gone up that high without the help of Coinbase? Or did Coinbase help spike the popularity of bitcoin so that there investment in Bitcoin would only be up 500x?
They should have enough money to scale up their servers to be able to handle peek usage... not sure why they don't do it... maybe they like it that way (they can claim that their servers are down when they want to stop trading?)
Regulatory requirements are the hard part. The governments (of many different countries) are by no means required to license you to do what they do - it's not just a storefront, it's tons of financial regulation, they're even fdic insured for cash deposits. It’s a legal challenge
If we don't start seeing real world DAP adoption and growth in legit crypto-payments soon - this all comes crashing down. My gut tells me the market will wait 4-8 months at best.
Loading and unloading Lightning channels creates separate transactions. Depending on how often an open channel is used, Lightning can increase the transaction load.
Good one? It works, made a purchase this weekend ($4 stickers), channel cost $2 to create with a segwit tx.
From then I can send/receive transactions for 1 satoshi.
Bitcoin won't be the crypto
payment method. It'll
be the Crypto gold that keeps the market together. Another small and light coin will
be the payment method and possibly replace bitcoin after a while.
Yes, and as much as I like the currency, the perpetual "they'll do it out of the goodness of their hearts" answer to "who will run a node with no incentive" isn't very convincing.
IOTA is not made to be a currency to shop online or buy coffee, it's an IoT currency. Stop trying to shill what you've bought. It's also deeply flawed, centralized and its wallet is not user friendly.
We are seeing it. I pay for a ton of stuff on Newegg using BTC, and Bitpay is being adopted at a ton of places, particularly those that serve Wordpress-powered shops due to a simple plugin.
Bitpay's switch to the payment protocol interface sucks, but it's workable enough and hackable if you know how to run a script. For everyone else, it's easier to use, so that's good in the long run.
If you're expecting to go to Target or Walmart and see adoption before you declare it good, I don't know what to say. But cryptocurrency purchasing is rising on the Internet, and if the Lightning Network does half as much as they want to, then it's in really good shape.
Because no one knows when the market will stop being volatile or irrational. "Markets can remain irrational longer than you can remain solvent" - Keynes
What we need is the ability for people to do 1:1 forward or options trades on their existing private shares. So if you have 10,000 RSUs or options in Coinbase, you can instead write an options contract and sell that to investors that will only exercise on IPO. The trick is making these contracts tradeable on a secondary market but I don't see how Coinbase or whoever else could regulate that, as long as there is a solid legal contract underlying it.
I like how Coinbase, trading a largely unregulated 'security', has the moral indignity of telling its own investors that they better not be trading the assets they purchased.
The fact that people cant buy or sell shares of private companies is ridiculous in general, but particularly in this case.
If you don't like the terms of the shareholders agreement, then you don't have to buy the (private equity) shares. But if you buy the shares and sign the agreement, I don't see why the directors should honour illegitimate share transfers you attempt to make in the future.
All contracts have consideration. If the consideration for the agreement that all my assets are Apple's is $1 billion USD, then sure I would happily comply, rather than risk voiding my contract.
More seriously: people should comply with the agreements that they sign. Don't sign an agreement that says all of your assets are actually Apple's if you're not happy with it. Read all of the fine print and don't be surprised later.
Don't buy stock in a privacy company if you're not happy with the constraints on it. One of the common key differences between private and public companies is that you can't sell or transfer stock in private companies without their approval. You know that when buying it initially, or when agreeing to receive it as compensation.
There are legitimate reasons why private companies don't want their stock to be transferred willy-nilly. For one, it makes the cap table larger and more complex, which complicates further funding or purchase agreements. Two, if the cap table grows too large, then the company may become subject to onerous SEC regulations that are more appropriate for public companies (but without receiving the corresponding benefits). Three, since shareholders are entitled to certain information about the company, private companies limit ownership so that they're not obligated to share this information with people they do not trust. There are probably more reasons.
> More seriously: people should comply with the agreements that they sign. Don't sign an agreement that says all of your assets are actually Apple's if you're not happy with it. Read all of the fine print and don't be surprised later.
You have read every single word of all the TOS you ever signed? I find that very hard to believe.
> Don't buy stock in a privacy company if you're not happy with the constraints on it. One of the common key differences between private and public companies is that you can't sell or transfer stock in private companies without their approval. You know that when buying it initially, or when agreeing to receive it as compensation.
If we talk about the letter of the law, then you don't need to sell the stock, you can sell futures of it at your own compliance. The company can't prevent you from doing that by letter of the law. But the SEC can. The contract is only enforcible in practical terms because as an employee or investor you are disallowed from making any legal claim about the stocks you are entitled to.
Also, the argument that it is 'legal' is entirely a different thing. I never mentioned legality, I said ridiculous. Its not a moral, economic or practical argument to say that something is 'legal'. Saying something is legal is one of the lowest forms of defense for an action. Its saying that the only purpose of it is that they cant put you to jail for doing it.
> There are legitimate reasons why private companies don't want their stock to be transferred willy-nilly. For one, it makes the cap table larger and more complex, which complicates further funding or purchase agreements. Two, if the cap table grows too large, then the company may become subject to onerous SEC regulations that are more appropriate for public companies (but without receiving the corresponding benefits). Three, since shareholders are entitled to certain information about the company, private companies limit ownership so that they're not obligated to share this information with people they do not trust. There are probably more reasons.
Very nice, but there is a much more important reason why companies want to not be able to sell off shares: they benefit economically directly because of it. Because the owners get the shares back when people dont buy them, and they have information asymmetry with the employees. AS an employee you have a lot less information.
If employees could sell their stocks willy nilly, every employee that leaves a startup and doesnt want to buy stock to keep would sell them in the open market, which would dilute the value of companies big time while making employees richer.
Why would you sign it if you didn't intend to "happily comply"? Do you often walk into contract negotiations with little intention of holding up your end of the deal?
I have never read any terms of service ever, nor I am a lawyer to understand the ramifications of it. Do you have a lawyer on retainer to read all the TOS you ever signed?
Your hypothetical deal with Apple will get thrown out of court for two reasons:
- It's lop-sided, as in they get something for nothing, comparatively speaking. Courts don't see such contracts to be valid.
- It's understood that users mostly don't read ToS, and instead rely on their general understanding of what ToS may contain, plus or minus some deviation. Anything that's way outside reasonable deviations fails the "meeting of the minds" test, and is also held invalid.
The shareholder agreement is a different matter. The investor most certainly is expected to read the agreement, and they do. And both parties are exchanging plausibly valuable things - stock for money.
I'm not a lawyer, this is not a legal advice. Seek professional advice before taking any action based on what you read.
Do you have a lawyer on retainer to read all the TOS you ever signed?
A click-through TOS? No, duh; you knew that when you asked it. But a shareholder's agreement that I put pen to paper for my signature, which is the topic at hand? Umm, the answer to that one would be "yes".
Bitcoin is (most likely) not a security. It's a commodity. Securities are typically assets that derive their value from a contractual claim (such as ownership rights to a company), which is not the case with Bitcoin. When you own Bitcoin, you just possess Bitcoin, not any kind of contract claim on some other asset. Bitcoin is more like gold and other commodities in this regard.
Some crypto offerings (ICOs) might be securities depending on what's promised when purchased. If the creator of a coin advertises their ICO as an investment opportunity, where the buyers can expect to see gains from their investment, due to the labor of others, especially when there's no established market for the coin, then that ICO may be a security.
That's the deal when you invest in a private company. If you don't like it, don't invest in a private company and only invest in publicly traded companies.
Being the way it is doesn't make it not ridiculous. It is absolutely ridiculous that you cant sell a share of a company, something you own, of a company that buys and sells things they don't own.
It's contractual. Abiding by contracts you sign is not ridiculous. These are very wealthy investors and this is part of the game they play. Stop acting like some little person is getting screwed.
Shareholders in a Delaware corporation are legally allowed to sell their private shares. The general exemption for this is Regulation D. Most restrictions are of companies’ construction.
Disclaimer: I am not a lawyer. This is not legal nor any other kind of advice.
I was just about to ask that question: what is the basis for the prohibition on selling shares? How are those prohibitions enforced? If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do.
If an employee sells their shares in violation of a company contract, what happens? Can the company repossess the shares? Or are the shares structured so that they can be made worthless?
Can employees construct a security based on their shares and then sell that instead? Nominally the employee retains the shares, and sells a contract based on them to someone else - an asset-backed security. The contract is an option that allows the contract-owner to request the shares-owner sell their shares in the event of liquidity, and the contract owner will receive the gains. Alternatively, the share-owner simply holds onto the shares until they are transferrable (eg IPO). In exchange for this the shares-owner is paid an up front fee.
Presumably this kind of arrangement could also be prohibited in some way by the company, but if someone is willing to violate that agreement, it would be difficult to discover that the agreement exists.
> what is the basis for the prohibition on selling shares? How are those prohibitions enforced? If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do.
The organizing documents will have language that specifies the right to injunctive relief. That clause can be used by the court as a basis to order you not to complete a contemplated sale. (Obviously, only works if they catch you before it happens.)
> If an employee sells their shares in violation of a company contract, what happens? Can the company repossess the shares? Or are the shares structured so that they can be made worthless?
The organizing document will specify that shares must be registered and all transfers must be done by filing appropriate paperwork with the company. The company will refuse to process transfers that don't comply with the rules, and refuse to recognize as shareholders anyone who claims to own shares but doesn't have them registered in their name.
> Can employees construct a security based on their shares and then sell that instead? ... an asset-backed security.
Agreements that prohibit transfers often also prohibit pledging the shares as collateral, which means it couldn't be used to secure a derivative contract (making it asset-backed). But it's difficult to prohibit every possible derivative contract, so if someone really wanted to sell some transfer-restricted stock, I believe it's somewhat doable via this route. If you're interested in learning more about it, look at what SharesPost is up to, from what I understand, they buy exposure to private companies in the form of unsecured derivatives contracts.
> If the basis is contract law, then you can't necessarily prevent people from undertaking the prohibited action, can you? Just collect damages if they do
The record of a private company’s shareholders are maintained by the company. If you try to buy shares in a prohibited transfer, the company won’t recognise the change of ownership. Forcing recognition would require the transacting parties to sue the company; this is frowned upon.
That said, yes, companies who block transfers tend to spawn clever financial engineerings. Because of associated legal and banking costs, these structures only make sense for larger trades.
Disclaimer: I am not a lawyer. This is not legal nor any other kind of advice.
Why do you say that cryptocurrency was originally about having a more liquid currency? I've heard many states goals of cryptocurrency, and have never seen that goal featured prominently.
Tip for people buying on Coinbase: you can avoid their fee entirely by using GDAX. Deposit the money into your USD wallet first (no cost), then transfer the money to GDAX (no cost), and place a limit order (no cost). You may need to babysit your limit order for a couple minutes but this trick saves you $15 for every $1000 you buy.
I think there is little reason not to do this unless 1) you value your time very highly or 2) you can't be bothered. I honestly think most of Coinbase's revenue comes from people in the latter group.
I've had a Coinbase account for years, and am verified. For some reason, I need extra verification for GDAX. When I try to do this, it always fails, with no explanation given except to try again later. So as much as I like Coinbase, and would like to use GDAX, it seems they haven't been able to handle the scaling load. It's frustrating.
The GDAX verification only worked for me on my phone. It required the browser to be able to access a camera.
It blows my mind that the behind-the-scenes exchange for Coinbase would be designed mobile-first/mobile-exclusive like that. I understand the mobile-first push in a lot of places, but somehow I kinda thought this was a niche that it wouldn't be as good of a fit for. (I can't wait until sites for downloading desktop software are mobile-first.) Works on desktop since I'm verified at least.
In order for your limit order to actually get filled if you do this, someone has to place a taker order that matches against yours and pay the GDAX fee on that. Coinbase still take their cut no matter what, all you're doing is making sure it comes out of the other side of the trade. If there aren't any less patient people willing to pay the trading fee, your order will just hang around until either someone does or you lose patience and pay it yourself.
Also, there's a risk that the price will move away from where you placed your order and it'll never fill, in which case you'd have to cancel it and re-submit the order at a worse price.
but if you look at coinbase and gdax's fee schedule, coinbase is as expensive, if not more than gdax. (0.25%-1% spread vs 0%-0.25% fee depending on whether you're taker/maker). unless you're in a period of insane volatility, the spreads are small enough that placing a limit order for highest bid + 0.01 or lowest ask - 0.01 would get you a trade within seconds.
Yup. Anyone mining on Nicehash has that loophole too now. Transfer BTC to Coinbase off-chain for free, then do the GDAX loop. Aren't market orders free, though? Don't need to babysit a limit order if you do and you get the spot price. Last time I checked it was, anyway.
You can get USD out of GDAX for free too using this. Well,
"free." You pay the bid/ask spread for the liquidity, which is usually very small, especially on BTC.
As for other strategies, use LTC to get into your account cheaply if Segwit isn't online, then sell the LTCBTC pair and repeat the above.
I couldn't find any documentation on the fees, and when I logged into GDAX and opened up a market order I saw no fees attached. Is that true? Is there a link? Can't seem to find anything on market order fees.
Here are some sources. GDAX charges 0.3% fees for BTC/USD market orders and 0.25% fees for ETH/USD market orders [0]. They charge slightly less if you trade large volumes (millions of $) which most users will not hit. GDAX's pricing structure incentives users to place stop/limit orders which help provide liquidity.
For purchases through coinbase, in the US they charge 1.49% in fees for cash/bank account purchases [1]. They have different pricing fees for other countries.
I do this for manual buys when I'm doing large purchases/sells. However something I am willing to pay this .25-1% fee on is monthly automated purchases of cryptos for speculative holding.
The spread is usually a penny at any given time, though. Have you even watched the order books? You also have the option of exiting with a limit order rather than a market order to save yourself a fee.
Do you have anything i can read that would lead me to think along your same lines? I dont currently think coinbase is any worse and is potentially slightly better than many of the other online exchanges. Wanna make sure I get out of my own bubble though and would be interested in the reasoning behind your dislike.
Coinbase is infamous for delaying customer transactions, including crypto-to-fiat conversions. They've shut down access to accounts without warning or explanation. There are several dozen reports of them withdrawing money from bank accounts without crediting the account holder for the corresponding amount of cryptocurrencies.
Since they make around 1% per transaction, $1billion transacted (I assume this means revenue) is 10 million net... what am I missing here because that's not impressive at all.
I don't think $1B is the transaction amount.
In the last 24 hours, trade volume on GDAX(Coinbase's exchange) for Bitcoin alone was $247 million.[1]
Their trade fees are around 0.25%[2] so in the last 24hr they made over $60M in Bitcoin trading alone.
I Am not sure if all of transaction volume is subject to fees. Market makers get a discount, or can even do it for free, and part of their larger customers might be other exchanges which would get similar discounts.
$1B in revenue sounds reasonable, seeing as there are higher volume days than just yesterday, and those trading revenues don't include revenue from fees on (non-GDAX) Coinbase buy transactions.
Congrats on hitting that milestone, Brian, keep it up!