Lab Summaries - Brian Armstrong on Building and Overcoming Challenges in the Bear

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With the recent blowups of various centralised entities, the few that are still standing have a key role to play in the crypto space.

Coinbase is one good example. As a company that has been founded 10 years back, and a respected founder that has built across various cycles, it is insightful to hear their thoughts about the industry in its current form, their outlook on the market and future plans.

Here’s an a16z interview with Coinbase’s CEO Brian Armstrong, condensed into a 5 minute read for you:

Coinbase’s role as a leader in the space

Coinbase wants to let people know that there are many good and well-intentioned players in the space, and that FTX does not represent the entire crypto industry.

Brian believes that we cannot let 1 bad actor (FTX and Sam Bankman Fried) take down the industry, so he is actively doing his part to send the message across.

Ideals towards decentralisation as a centralised exchange

As a centralised exchange, there might seem to be some conflict between decentralisation and Coinbase’s business.

However, Brian believes that what the space needs is regulator clarity on centralised aspects of crypto, while the real solution is DeFi and self custodial wallets.

Coinbase will work on both centralised, regulated products, while building self custodial wallets, decentralised protocols and Web2.5 apps to onboard new users.

Centralised pieces can help users to get fiat into crypto. Once they have cryptocurrencies and tokens, they should work in the decentralised space.

The hope is that most revenue is driven by the Coinbase wallet, and most users are using Coinbase wallet rather than the exchange. This will show that Coinbase is on the right path towards a decentralised open financial system for the world.

Similarities and differences between this and previous bear markets

Overall user psychology is similar to previous bear markets, but the difference this time is that the broader macro economy also went down alongside crypto.

Another difference: In previous cycles, crypto’s existence was in question. This time round, Brian does not think it is this time round.

That being said, as a business he is taking similar means as previous bear markets: He makes sure to manage costs, cut burn, survive and thrive making out of the bear.

Great companies are built during bear markets - as it is the best time to build with no distraction, while maintaining the long-term optimism of the technology and business.

Challenges of building a company

Brian acknowledges that Coinbase overhired during the bull market. This caused many more lines of structure and caused the company to lose the startup touch.

But he also sees the bear market as an opportunity to get healthier as a company.

He believes in the power law of employees, where a small number of employees bring the most value disproportionately.

He aims to find these employees, while cutting other less valuable employees to manage costs. This might even result in a company that moves even faster.

What Coinbase is trying to build long term

While the ideal is for everyone to do self custody, it is understandable that self custody also has its risks. This includes hacks, scams, lost seed phrases etc.

Coinbase is trying to build and improve self custody UX and security. They are aiming to make it harder for users to lose funds, while seeing an opportunity for innovation in social recovery of wallets.

He does acknowledge that there needs to be a simple and easy to understand marketing and education in place for the users.

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