Interviewer / Podcast Host (2:43)

You just found it on your own?

Brian Armstrong (2:45)

Yeah, I found it on this website called Hacker News, which some technologists read. And Paul Graham from Y Combinator had created this back in the day.

Interviewer / Podcast Host (2:53)

Does it still exist?

Brian Armstrong (2:54)

Yeah, yeah.

Interviewer / Podcast Host (2:55)

Do you still read it?

Brian Armstrong (2:56)

Yeah, I do. Cool. Yeah. And it was describing how the world could have something kind of like the Internet that's global and decentralized, but instead of for moving information around, it was for moving value around. And it immediately caught my attention. I said, that's a pretty interesting idea. I have no idea if it'll work. Maybe the government will block it, maybe there's some flaw that will be found in it. And, you know, but I couldn't stop thinking about it. And over the next six months, I reread the bitcoin white paper a few times. I started going to these early bitcoin meetups in San Francisco, which was. Which was a wild experience. The people who would show up to this were kind of like half the people were these brilliant computer science PhDs. The other half were kind of like completely crazy people, like anarchists, like people starting their own religions, you know, homeless people just wanting free beer. It was like a really interesting motley crew. And over this period of time, I started to tinker with prototypes and just think about like, is this real or not? And I started talking to a lot of my best friends about it and they told me it was a terrible idea, you know, so I can go on and on. But that was really the initial moment where I started to think about bitcoin as a protocol. And then what would be some product that might be built around this, that would make it trusted and easy to.

Interviewer / Podcast Host (4:07)

Did you have any friends who were on board? Like maybe not in terms of being partners, but just people that you could talk to, bounce ideas off of?

Brian Armstrong (4:15)

Yeah, there's actually a guy who I went to college with named Brandon Iles, and he was a software engineer at Google. And a lot of the people I reached out to said, brian, this sounds like a terrible idea. Like they had no interest. Brandon was interested in it. And so on the weekends, sometimes I'd go over to his house and we started to build a prototype that was like essentially a mobile app that would allow you to have a simple bitcoin wallet. And we actually put this out as an open source project. It wasn't like we weren't trying to make a company or anything. We were just kind of playing with this technology on the weekend. And I remember actually Wired magazine wrote a little article about it and we put it out. I was like, wow, that's cool. Nothing I've ever done before got written up in a magazine like that. And a couple people started submitting in the open source world. It's cool. People all over the world who you've never met can submit contributions to it. So somebody submitted a translation into Japanese for the app and I was like, oh, this is cool. People are kind of into it. I also realized the minute we put out the app that we had kind of built it in the wrong way because we were actually running like a full bitcoin node on the phone. What that means, basically is every time you open the app, it had to sync with the entire blockchain and download a ton of data and it would make your phone heat up and overheat and run the battery and everything. And I realized almost like the minute that we launched it, that there would need to be some sort of cloud service, you know, that would do all the data and the security and backups. It's kind of like, you know, for email, a lot of people use, like they don't run their own email server on their phone, they use Gmail or something in the cloud. Right. So there's an important lesson in that of like, just getting started with anything, even if it's the wrong thing, will sometimes like, let you figure out what the right thing is to do.

Interviewer / Podcast Host (5:54)

Yes. If that iteration didn't happen, the next iteration couldn't happen. Needed to make it and realize what was wrong.

Brian Armstrong (6:01)

Yeah.

Interviewer / Podcast Host (6:02)

And then what was the next step?

Brian Armstrong (6:05)

Well, I remember at this point I was thinking about, okay, do I want to start a company in this space? I, I remember thinking somebody's gonna start a company around this kind of building the Gmail for bitcoin or whatever analogy I had in my mind. But I remember thinking, you know, I don't know if I wanna be that person because, well, number one, I have, I have a day job. Number two, that's gonna be a lot of work, you know, that like a bunch of people are gonna try to hack into this thing and steal the, steal the crypto. I'm like, that's a really serious endeavor. Someone who's going to have to really do that. And so I didn't know exactly. I remember I tried, I think I tried to convince Brandon to like, do you want to start a company around this? And he was like, no, I work at Google, like leave me alone.

Interviewer / Podcast Host (6:42)

You know.

Brian Armstrong (6:43)

He actually later went on to start a crypto company which is now pretty successful. But essentially on nights and weekends I kept sort of iterating on the project and again I didn't, wasn't sure I wanted to quit my job and do this full time, but I couldn't help myself. Kind of nights and weekends I was like, what if I did this? And so I was just kind of writing code in evenings. And the thing that actually convinced me to quit my job and do it full time was that I applied to Y Combinator, which is the startup incubator. And Paul Graham, I had read a lot of his essays on the Internet and I really had a ton of respect. And this is like somebody who's like a hero of mine. He still is, right? And I applied to Y Combinator. The first time I applied, I didn't get in the second time I had the right mix of co founders or something. And they decided, okay, we're going to invite you to the BNY Combinator, we're going to give you 150 grand. And that's what convinced me to quit my job and really try it. And I remember it sounds kind of silly in hindsight, but the thing I was nervous about was calling my parents and telling them I quit my job to go do this crazy thing. And I remember my mother first question was like, well, do you have health insurance? And I remember told her, well, I don't know if it's gonna work, but this guy Paul Graham gave me $150,000 and he believes in me. And there was something really powerful about that. You know, a lot of people I've met actually over the years, they think back like what was the most impactful moment in their career. And it's when someone gave them an opportunity that they maybe was a little more than they deserved at that time. And it was like somebody I really trusted told me he believed in me. And I was like, okay, maybe, maybe I could do it. Until that time I had so much self doubt. I was like, I don't know if this would even work.

Interviewer / Podcast Host (8:18)

And was it the money or was it something else? Was it Paul Graham's?

Brian Armstrong (8:22)

I think the check was like symbolic of him believing in me. It was showing real skin in the game. And I mean he didn't say more than like a few words to me, maybe until much later, he, he told me all kinds of brilliant things. But at that time, I think, I think they just told me something like, this is high beta. Like, this is. This, this is a. It could be a really massive outcome or a zero, but it's worth trying, like, because the upside could be big.

Interviewer / Podcast Host (8:51)

And what was the Y Combinator experience?

Brian Armstrong (8:53)

It's really about three or four months long. And you get together with a bunch of other startup entrepreneurs.

Interviewer / Podcast Host (8:59)

How many were there, would you say?

Brian Armstrong (9:01)

I think in our batch, there was maybe 70 companies, something like that. And so they put you into this pressure cooker of an environment where you're just working 12 hours a day on your company and they're bringing in other entrepreneurs who are kind of mentoring you, they're coaching you. You go to these dinners and it's a community and you build a lot of friends. And then at the end of the program, after three or four months, they. You go to demo day, where you basically get on stage and for five minutes, you pitch your company to a room full of investors and you see if they want to invest. And then you're part of the YC community, you've graduated, and it's, it's an incubator. It helps you get these ideas off the ground. And for people who are like me at that time, they were interested in high level, in trying to build something, but they didn't quite know how to do it. I mean, I remember just to give you a specific example, one of the first things, the company, when I applied to the YCI or Y Combinator, I had called the company BitBank. You know, the name PayPal was in my head like, it alliterates. And it was like BitBank, you know. Anyway, I got there on the first day, there's these lawyers there who help you with your incorporation, all this stuff. And I said, okay, one problem is, like, it's actually illegal to have the word bank in your company name unless you're registered as a bank and you don't have a bank license. And so they're like, well, you got to change the name of it. That was just one example of like a hundred things of like, I didn't know what I was doing. And they just kind of helped you get a little farther along.

Interviewer / Podcast Host (10:17)

Was there a sense of competition between the 70 groups there, or was it more a sense of camaraderie, everyone trying to lift each other up?

Brian Armstrong (10:26)

Mostly camaraderie, I would say. But there was a bit of a competition, I'd say, towards demo day, of like, how Much have you raised? And. And I would say Coinbase was not a hot company at demo day. There was other companies that had raised already a bunch of money and they had all this traction. And I was trying to raise $1 million. I'd gotten the 150k check. I was like, let me try to raise 1 million so I can hire a few people.

Interviewer / Podcast Host (10:48)

How long would 1 million have lasted in what you wanted to do?

Brian Armstrong (10:53)

Well, at that time it was just me and I had some very moderate costs for running the servers, but I wanted to hire a team of maybe three to five people or I guess, you know, for a million dollars, you might have only gotten like two or three people for a year or two.

Podcast Host / Narrator (11:07)

Right.

Interviewer / Podcast Host (11:08)

Would that have been enough?

Brian Armstrong (11:10)

Yeah, I mean, a lot of times early employees of these companies will. They want more like equity in the company than. So they'll take a pretty low cash salary. I mean, I think I was paying myself 60k or something. So I, I had taken a pay cut to do this. I was really trying to preserve the cash. I failed to raise a million dollars. I basically, I was only able to get about 600 grand by doing a bunch of meetings. And, you know, you get sort of 9 nos for everyone. Yet if you go pitch 10 venture capital, it's like, that's what success looks like is 9 nos for everyone. Yes.

Interviewer / Podcast Host (11:39)

What does the rejection feel like?

Brian Armstrong (11:41)

It felt like a punch in the gut, you know, over and over. Yeah. Now I think I've built a lot of resilience to this. I. Because, you know, you get. It's like in sales, if you just get rejection. So now it doesn't bother me as much. But at that time especially, I was, you know, I looked up to a lot of these. These are like really smart people who are rich and they have all this, you know, they're like, they've seen thousands of startups and they're telling me my idea sucks. So, like, they must be right. What do I know?

Interviewer / Podcast Host (12:03)

Do they just say they don't want to invest or they tell you why they don't want to invest?

Brian Armstrong (12:07)

Well, this is an interesting debate. So some of them will tell you why, but it's often not the whole why. Right. It's just like, I don't know, it's probably like in dating or something. Right. If someone doesn't want to go on a date with you again, they might tell you a part of partial truth, but there's not the whole, you know, so you always have to trust. Trust the. No, but not necessarily the Reason there might be. There is an art to try to extract, like, feedback out of people, which I actually, I felt like I always tried to lean into that. And I, and I kind of tried to make it a safe thing for them to do. Like, hey, you're not going to hurt my feelings. I'd rather like, get the feedback, like, what's, what's the actual concern? And once in a while they would tell me something more.

Interviewer / Podcast Host (12:44)

Remember what some of the concerns were?

Brian Armstrong (12:46)

One of the concerns that got got relayed back to me was people just said, why would anybody trust a currency that's not issued by a government? You know, that they.

Interviewer / Podcast Host (12:56)

So it wasn't against your company, it was against crypto?

Brian Armstrong (13:01)

Yeah, actually, that's an important point. I would say anybody who came into the, to the meeting skeptical on crypto. I didn't manage to convince any of them. The only people who invested, they were already at least open to the idea of crypto. They were just looking for the right company. Yeah.

Interviewer / Podcast Host (13:16)

What do you think was different about the people who were open to it? To the ones that weren't?

Brian Armstrong (13:21)

Yeah. Because you're right. It's a contrarian idea and a bet. And this is the art of entrepreneurship is you have to find, like Peter Thiel would say, something's contrarian, but. Right. That's the sweet spot. Right. So, I mean, I do think that kind of more global mindset was important. Like I said growing up, you know, I'd spent a year in Argentina, people who'd only lived their entire life in the U.S. they're like, Ah, why would anybody not trust the U.S. dollar? Right. That was part of it. There's also, I, I've noticed the. If you look at the ethos of crypto, a lot of it is about distrust in government, really. I mean, it's. It's kind of saying, what if we unbundled money from the state and people had more sovereignty over their money and their wealth in a way that it couldn't be manipulated or taken from them? So you can imagine a certain category of people, the government is like, sacrosanct to them. And like, this is the source of American soft power in the world. And like, how dare you question, you know, the validity of the United States government. Some people, it actually really, it gets under their skin. Like, you know, and other people, that was very. It's a more of like a libertarian mindset. Right. They would say, oh, absolutely. Like, we need that as a check and balance against, you know. Yeah, bad government. Right. So you can see how it might have started to really polarize people.

Interviewer / Podcast Host (14:34)

I see. Yeah, that makes sense. And then what happened next?

Brian Armstrong (14:38)

I'd raised the 600k, fell short of the million. And the folks at YC that I. The Y Combinator folks that I was talking to, they like, great, just get back to work with 600k, keep making progress. And at that time, I was lucky enough to find a co founder. I'd been trying to find a co founder for about a year, unsuccessfully. And just making a little bit of progress, like. Like raising that $600k, getting the product out there. It caused the right person to reach out to me.

Interviewer / Podcast Host (15:02)

Right.

Brian Armstrong (15:03)

And that person was Fred Ursum. So he messaged me cold. He had seen a prototype of the app that I'd put out on Reddit. And I was going through this process that a lot of early entrepreneurs do, where you go talk to a few customers, you know, you try to improve the product and talk to a few customers, improve the product, trying to find what they would call product market fit. And Fred reached out and we went for kind of like a coffee date in San Francisco. Right. He had studied computer science also and economics at Duke, but he had worked at Goldman Sachs, so he had more of like a financial background. And through a few meetings, we decided, let's just try working together for a few weeks and see what happens. And immediately he came in and I noticed a few things about it. One is that he had incredible work ethic. So we were just there till midnight every day. Number two, he would challenge me on things and be right. And I give you an example. So I remember there, we were probably there at like 10 or 11pm One night, and he's like, comes over to me. He's like, all right, I've been going through the entire way that people buy bitcoin on the app, and I'm pretty sure we're losing money on every trade. I'm like, how could that be? That's not. We're charging a fee, like, and. And he walked me through it, and he was right. And there's a heuristic I've come to appreciate around this, which is you kind of want to find someone to co found with that you're a little bit intimidated by. Right. Which is to say you're a little bit afraid of saying something dumb around them or they kind of. They can challenge you and be right. I mean, it's probably true in a lot of partnerships and business, marriage, whatever. And he. And he was definitely that he was pushing me on things. And I was like, oh, okay, that's true. But have you thought about this? And so we were making each other better. Yeah. I mean, I'd say the early stages was a lot about trying to get product market fit, which was like, the hard thing is to get anybody to even care about the thing you've put out in the world. And there was a moment that flipped into, okay, we clearly had product market fit, which I can tell that story too, if you want.

Interviewer / Podcast Host (16:56)

Yeah. What was the first time that anybody cared?

Brian Armstrong (16:59)

So the initial version of the app was a bitcoin wallet, and we put it out on Reddit and whatnot and like 100 people would sign up and then basically none of them would come back to the app. And this is a common experience for a lot of people trying to build products. And so following the advice of Y Combinator, I essentially just emailed three or four people who had signed up for the app and I said, hey, I worked, I built this app and I'd love to get your feedback. And I get on the phone with you. So I get on the phone and I remember one of the, one of the people, I was like, yeah, like do you have any feedback? And he was, and he was like, well, yeah, I mean I, the app was cool, but I just don't have any bitcoin right now. So I was just checking it out and after a few of these conversations, like a light bulb went off my head. I was like, well, if there was a button to buy bitcoin in the app, would that.

Interviewer / Podcast Host (17:43)

That.

Brian Armstrong (17:43)

Would you have used that? And he was like, oh yeah, probably. And it sounds so simple and obvious now, but at the time you actually couldn't buy bitcoin inside Coinbase's app. And so. Okay, well how do we make a simple buy experience? You know, it was non trivial. We had to go get bank rails and payment methods. We had to go get. You know, there was a whole whole open legal question about like, are you a money transmitter? And there's a whole licensing regime for this. We had to go get these things done. And I remember at one point we had this decision about whether to go get a money transmission license. And our lawyer, we talked to these lawyers and they told us it was going to cost like $5 million and take four years to get these licenses in all 50 states. And I was like, well, you only raised 600K. And so we had to get started with something. And we found this law firm. I remember that the bank was telling us, we can't process your payments unless you either have this license or you can convince us that you're not. You don't need the license. And I remember we found this lawyer who, he was like, well, you might. There is an argument that you might not be a money transmitter if you do the following subject to the blah, blah, blah. And he's like, I'll write you a legal opinion letter on this, but it's going to cost $30,000. And I was, at the time, I was like, you've got to be kidding me. Like for like a three page piece of paper, you're going to charge me $30,000 right now? Now we probably spend hundreds of millions a year on legal, but. And I remember working it through in my mind and getting advice from Y Combinator and they were like, well, yeah, if it lets you open the bank account and then you can process the payments and your product, like pay the $30,000 out of. Out of the 600,000 you've raised. And so we did that. We put the buy button live and every day thereafter more people came in to buy than the pre. Previous day. And we weren't doing any marketing dollars. So it was all organic. It was word of mouth. It was the easiest way to buy bitcoin at that time, especially in the United States. And we had a whole different set of problems really quickly, like, how do we keep up with demand? You know, how do we start answering customer support tickets, how do we hire a team, how do we go raise more capital? Because our bank started calling us with these very frantic calls where they're like, you guys are moving tens of millions of dollars a day in volume and you only have 500k in your account. If there's a single error in one day, you're insolvent, you know, and so they're like, you need to go raise money or we're going to close your bank account in the next seven days. So these were the kinds of calls that suddenly started to happen.

Interviewer / Podcast Host (20:00)

How were you getting the bitcoin at the time?

Brian Armstrong (20:02)

So, yeah, we were sourcing it off of an exchange called Mount Gox, which of course famously blew up. And so we were not an exchange at that time. We were really kind of like a wallet or a broker's interface. Subsequently, we decided we had to build our own exchange because the Mount Gox was blowing up. We knew the whole, the infrastructure just wasn't there. But at that time we were using Mount Gox.

Interviewer / Podcast Host (20:20)

Was the original plan only to be a wallet?

Brian Armstrong (20:23)

Yeah. I mean, it sounds like silly in hindsight, but yeah, it was just purely to be a bitcoin wallet. And then we realized trading was actually this the best business model. Yeah, it evolved from there.

Interviewer / Podcast Host (20:32)

It's so interesting how now looking back, it seems so obvious, but at the time, unless you get that feedback, it's impossible to know.

Brian Armstrong (20:40)

Yeah. And the lesson I take away from that is just get started. Yeah. You know, you can sit there in an analysis paralysis forever. And I think there's a lot of value in just kind of stepping into the unknown. And Paul Graham actually has a great saying. He says action produces information. And that was very true for us.

Podcast Host / Narrator (21:02)

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Brian Armstrong (22:30)

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Interviewer / Podcast Host (22:38)

What do you think it is about you that feels comfortable stepping into the unknown? Many people are terrified doing that.

Brian Armstrong (22:45)

Yeah, I actually think that's one of the key things that is worth cultivating as an entrepreneur. And I've asked myself that question. I do think I'm more comfortable doing it than most people. So one theory I have on this is that I think I'm somewhere on the spectrum for autism. And I've never been formally diagnosed, but I've taken online tests and I usually score on the spectrum somewhere. And I think there's something about autism which is correlated with tech entrepreneurs. There's various ways that it can show up, but one of them is that you're a lot less concerned with, I don't want to say social pressure or social norms, let's say social cohesion or something like that. And so sometimes I'm completely oblivious to it, but other times I'm aware that what I'm about to do would be considered. Like I might ask a really dumb question in the room and I realize most people wouldn't do that, but I don't care. I just genuinely want to know the answer. And so there is an aspect of that where I'm okay trying ideas either on for size or stepping into a project with the. I'm totally okay if it doesn't work like nine out of 10 times because I'm trying to find interesting opportunities and I don't really care about looking dumb as much as the average person. I probably still have some of it, but like I don't have complete ego death or something like that.

Interviewer / Podcast Host (24:00)

Do you think it has to do with confidence in the ideas or.

Brian Armstrong (24:02)

Not necessarily, no, because I'm usually very unconfident in the ideas. I actually think a lot of the ones I'm trying on, I'm like, oh, this might have like a 5 or 10% chance.

Interviewer / Podcast Host (24:11)

So do you think it's more a curiosity of wanting to see if it can work?

Brian Armstrong (24:15)

Yeah, to me I'm a little confused about the opposite. Like why? Sometimes people like try an idea and it doesn't work and they get really down on themselves about it and I'm like, but that was just the first thing you tried. Like what? You could try like 10 or 100 more things. So I think there's something about my psychology that makes me more, more willing to do that. I mean, from an evolutionary psychology point of view, it would be dangerous to have too much of that because you know, if you're just trying ideas, who knows, you might offend the wrong person and the tribe leader just kills you or whatever. I mean, there have been people in history, right? Like was it Galileo or Copernicus that, you know, had the heliocentric version of the universe and they got, I think the church killed him or something, right?

Interviewer / Podcast Host (24:55)

Yes.

Brian Armstrong (24:55)

Or like even Alan Turing, I think was like chemically castrated or something by the, the government. Right. So they're actually. There is a danger from an evolutionary psychology of being too open minded about new ideas. They can be taboo, they can offend people. But also society needs those kind of people to advance.

Interviewer / Podcast Host (25:15)

Do you think there's some aspect of it that's like similar to gambling?

Brian Armstrong (25:21)

No, I think it's a different thing for me at least. Like I actually don't, I actually hate Vegas. Like when I go there, I never play craps or anything. I just, I just watch other people do it. I don't get like a high off of gambling really. I love looking for opportunities to optimize and improve systems, especially like the big meta problems in the world. Like if I see a problem, oh, if we solve that problem, it could automatically solve a whole other category of problems. Like, you know, if I was frustrated with the global financial system, one way to do that would be just I'd start my own bank and try to make it a better run bank. But the thing that got me excited was what if there was an entirely new system, right. That could exist outside of that and operate on a different paradigm that, that would be really cool. Or you know, I, I co founded this longevity company and called New Limit. And the thing that got me excited about that was like all these major diseases are correlated with aging. And you know, if we could actually just restore function our cells had when we were younger, maybe it would automatically knock out a bunch of these things, diseases that happen later in life so, you know, don't treat the disease like there's a higher root cause. I get excited about those kind of things.

Interviewer / Podcast Host (26:30)

How is bitcoin different than all other crypto?

Brian Armstrong (26:33)

Well, bitcoin is special and unique in the sense that it is like digital gold. It has the highest trust, I would say, because it's the original incarnation of crypto. It was truly a computer science breakthrough. It also, we don't know who the founder was exactly. Right. So it was a very fair launch of the coin into the world. It's not like if someone is starting a project today and they're kind of like, like, all right, I'm going to own 20% of it and like the rest will be distributed. They, I mean, there are some original satoshi coins, but they've never been moved. And most people believe that they're, they're lost, like they're not going to ever be utilized. And so I think it's. Bitcoin is digital gold. I don't see that ever changing. It's kind of the original one. So it has the most trust. And then there's lots of cryptocurrencies that got built as a derivative of that that have other purposes.

Interviewer / Podcast Host (27:23)

And what's the status of bitcoin today compared to over its history?

Brian Armstrong (27:28)

Yeah, I mean, it's doing great. It has like roughly a 2 trillion market cap. I mean, it's about on the order of like 10% of the size of gold. I would say it probably was the best performing asset class of the last 10 years. Just recently, with some of the legislation getting passed in the US it's gotten more established. You know, there's Bitcoin ETFs. Like the United States government now has a Bitcoin strategic reserve which wasn't expecting that to happen quite so soon. So it kind of quickly went like 10 years ago. It was like people were just laughing at this of some kind of Internet thing. And it's kind of quickly on its way to being a major asset class that governments and financial institutions around the world are all using. Like even you know, blackrock and JP Morgan and all. Like it's kind of become mainstream.

Interviewer / Podcast Host (28:11)

Would you say it's living up to its promise?

Brian Armstrong (28:15)

I mean it is living up to its promise in the sense of it's still quite decentralized, there's no entity that controls it. I would say it's doing a pretty good job of holding value. And like, you know, it still has some volatility, but a lot less than it did five years ago or 10 years ago. So it's becoming, the volatility is becoming more like gold than it was like some know, the Russian ruble or something like that. I think it has some challenges ahead of it. Like one is that because it is truly decentralized and if it needs to make an upgrade, like let's say quantum computing comes on the horizon, it will need to have an upgrade to the, to the protocol. And that can be achieved through consensus of all the people. But getting a lot of people around the world to all agree on something, the best implementation, you know, it's like cat herding. Right. So but I, I think it can.

Interviewer / Podcast Host (29:03)

Overcome everyone's incentives are aligned in that nobody wouldn't want it to remain safe.

Brian Armstrong (29:09)

Right. Everybody wants it to get upgraded just.

Interviewer / Podcast Host (29:12)

How to do it.

Brian Armstrong (29:12)

Yeah, I see, yeah.

Interviewer / Podcast Host (29:14)

What causes Bitcoin volatility?

Brian Armstrong (29:17)

So some people are storing, they think of Bitcoin as like a, a high growth asset and they're like, just like they would hold Nvidia or something. And like if drone Powell comes out and says they're going to cut rates and like you know, it can move the market just in stocks like it does with crypto. Other people are thinking of crypto or Bitcoin specifically as almost like an asset they would flee to in times of uncertainty, like gold. Right. So it's kind of, it has multiple of these properties. So anyway, people react to and trade Bitcoin just like they do with any kind of macro events around the world. Regulatory clarity is another one that tends to move the market a lot. And there's also something called Bitcoin halving events which happen every, I think it's every four Years or so. But basically the rate at which new bitcoin are being mined is continually being reduced. And so there tends to be trading events around those moments, things like that.

Interviewer / Podcast Host (30:09)

But if it's halved, nothing really happens.

Brian Armstrong (30:12)

Well, yeah, it's cutting in half the rate at which new bitcoin is issued into the world. Not to get too in the details, but it's. Whenever the network mines a new bitcoin block, which requires all this computational power, the person who mines the block successfully gets awarded these new bitcoin. That's how new bitcoin have been released out into the system. But that gets cut in half every four years. So basically it's like an asymptotic curve of the amount of supply of bitcoin that will ever. 21 million is the most it'll ever be there. But It'll take like 100 years to get to that final last bit of it anyway. So it's another way of saying if on any given day, let's say that there's, I don't know, a billion dollars of demand for people buying bitcoin and there's, you know, a billion people selling it, it would be, the price would be flat. But because of the mining, there is like another, I don't know, whatever, some small percentage being mined every day. So you have more supply than demand. It's basically, it's basically like a way of saying there'll be less and less supply in the market every day.

Interviewer / Podcast Host (31:09)

But we know that anyway.

Brian Armstrong (31:11)

Yeah, you can predict it out into the future. Yeah, it's just like a lot of markets are not rational. People are trading what they think other people will do.

Interviewer / Podcast Host (31:19)

I understand.

Brian Armstrong (31:19)

Yeah, yeah.

Interviewer / Podcast Host (31:20)

What are stablecoins?

Brian Armstrong (31:22)

Well, stablecoins are, I'd say, the next big product market fit for crypto. After trading, people started tokenizing the dollar. In other.

Interviewer / Podcast Host (31:31)

What does that mean?

Brian Armstrong (31:32)

If you have a dollar in a bank account, you can issue a token out there on a blockchain in the world and say this token represents that dollar that's being stored, event count. So it's a one to one representation. Some of you might say, why, why do that? You know, I can already send dollars around in different ways and that's true, but the traditional financial system is pretty inefficient. Right. There's a lot of people, let's say only 4% of the global population lives in the United States for one thing. Right. We always forget that. So there's billions of people around the world who actually have very high demand for the dollar because Their local currency is high inflation or you know, it has various issues. So like in Turkey or Nigeria there was like I think 50 or 70% inflation last year. So people there really want to hold dollars. They can't open dollar denominated accounts. With stablecoins anybody with a smartphone now can hold a dollar denominated account. They can get access to dollars. They can also send them instantly anywhere in the world for like less than $0.01. Right. So previously if you needed to send money via Western Union or MoneyGram or maybe you're using some of the whatever remittance apps you know, you know you might pay anywhere from like 5 to 12% fees or like people who are sending money home to their family in other countries. This is a very high fee delay type environment. And with stablecoins they can now send it instantly like under one second anywhere in the world, less than one cent. There's no other payment rail globally that can do that. Right. You can kind of compare it to like credit cards or bank wires or these different things. And it's crypto. Rails are the only ones that are global, cheap and fast. Check all three boxes. So that turned out to be a big use case for payments. There's something like $40 trillion a year of volume for like cross border payments and like I think 70% of that is for business to business payments. And that's been a. They've been an early adopter of stablecoins. So not, not just people sending money home to their family but B2B transfers. Like you know, I want to buy goods from Asia to sell in my shop or these kinds of things. So stablecoin payments have been on a tear. I mean they're just, they're growing enormously and it's just, it's kind of like water flowing to the path of least resistance. Like payments will flow to the, the lowest friction payment rails, cheap, fast, global and so it's making that part more efficient as well.

Interviewer / Podcast Host (33:47)

If the dollar is backing a stablecoin and if now the stable coin flows easier than a dollar ever did, it seems like that strengthens the dollar, it doesn't hurt the dollar. Is that correct?

Brian Armstrong (33:57)

That's correct, yeah. I'd say people who I speak to in the US government are thrilled about stablecoins and you may be aware that in the United States they just recently passed legislation called the Genius act which kind of established a regulatory framework for dollar stablecoins because they wanted to ensure that these get more widely adopted. It's a huge part of American soft power to Export the dollar and dollarize these economies around the world. Right. And now, by the way, the rest of the G20 countries are all kind of scrambling to get their own kind of equivalent stablecoin legislation because they see it as a threat. And they don't want their economies to be totally dollarized. They want some sovereignty. So, yeah, crypto is helping the dollar. I also think, by the way, bitcoin, in an indirect way, is helping the dollar in the sense how? Yeah, because people sometimes say, well, isn't bitcoin a threat to the dollar? I would say it provides a check and balance on the dollar in the sense of if there's too much deficit spending or inflation in the US People will flee to bitcoin in times of uncertainty. And so democracies around the world, including the United States, as I'm sure you're aware, they are trying to figure out how to fix deficit spending. The incentives are just not aligned to actually balance the budget. And it might be okay to have 2 to 3% inflation if the economy's growing 2 to 3%, but if your inflation actually outstrips the growth of the economy, you'll eventually lose the reserve currency status. And so that would be a massive blow to the United States and China and these other superpowers are coming and trying to compete for that over time. So I actually think in a strange way, bitcoin is helping extend the American experiment in the sense that it creates.

Interviewer / Podcast Host (35:36)

Competition with the dollar in a way that's healthy for the dollar.

Brian Armstrong (35:39)

You said it better than I could. Yeah. And I. I sometimes wonder, like, if you were the founding Fathers, you know, and you go back and read, like, the Federalist Papers, and I. I think they were geniuses, like, unequivocally, all these things. I wonder if they would have written in the Constitution something around a balanced budget. Right? Because, you know, and Warren Buffett famously had this quip like, you have to pass a constitutional amendment which says any member of Congress who votes for an unbalanced budget should be ineligible for reelection. Right. He's like, instantly, you'd get a balanced budget every time. And people have proposed these different ideas like that, like, okay, what if America had a sovereign wealth fund and every citizen when you're born gets a share, and when there's a budget surplus, it pays a dividend. Okay? Suddenly everyone's like, okay, I'm participating in the upside of this economy. Like, we should run a surplus. I get it. You know, but currently, the way it's set up is that the more the government Spends, you kind of get more free stuff and that's how you win elections.

Interviewer / Podcast Host (36:34)

And so no incentive. No incentive to balance a budget.

Brian Armstrong (36:37)

Exactly. Yeah.

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Interviewer / Podcast Host (38:11)

How are the stablecoins minted?

Brian Armstrong (38:14)

So they're, they are minted by centralized entities, right? So in that.

Interviewer / Podcast Host (38:18)

Private companies.

Brian Armstrong (38:19)

Private companies, right. So usdc for instance, which is the largest regulated stablecoin, the one in the U.S. we, we work with them. Circle is a company that is the issuer of that. So literally they're storing a bunch of dollars in banks in the United States. They actually buy US Treasuries to earn a little bit of yield on it. And then they mint or create a token on these blockchains that is one to one backed and you basically have to trust them that it's one to one back. Now they have, you know, know they can pass like an audit from a big four accounting firm. Like they're a trusted legitimate public company now. So that, you know, we can believe that that's actually 100% of it's there, but it is a centralized entity doing the minting and burning of it with like kind of a traditional checks and balances around big four accounting firms auditing them and things like that. Now how is Bitcoin truly decentralized? Okay, so anybody can run a bitcoin node, which is a kind of just a piece of software and you can run it on your, your own computer, you can run it in a data center. And this node is essentially talking to all the other bitcoin nodes.

Interviewer / Podcast Host (39:19)

How many nodes?

Brian Armstrong (39:19)

Oh, how many are there now? I mean it's been years since I looked at this, but like, and it. So there's people who are running like nodes that are just relaying messages, others are actually doing the mining. So it's a complicated question, but let's just say in the, I don't know, it's like 5, 10,000 at least, probably more. There's always an argument about like what would be sufficiently decentralized, right? Like if you only had five people globally doing it, could they be co opted somehow or collude? But if you get into like tens of thousands, it starts to be hard to like imagine true collusion happening. Your question's more complicated because the hashing power can actually be more concentrated.

Interviewer / Podcast Host (39:57)

But I don't know what that means.

Brian Armstrong (39:58)

Okay, okay, let's just say for now just number of nodes, okay? So these nodes are all sending messages to each other about transactions being generated, et cetera. And then the question is, how do you come to consensus about who spent what? Because any node could just say anything. And the brilliance of the Bitcoin white paper, this algorithm they came up with, I'll give you kind of like a simplified version of it, they said, okay, any node on the network can package up the current list of pending transactions and you're going to put them into a block and basically just determine what is the order of them and package them all up and to sort of certify that block as the official one. Any node on the network can do some amount of computational work and search for a very, let's call it like a very rare number in mathematics that would kind of like certify that block as the official one. So it's not free to just say sort of stamp it with a certification. It takes some work. This would be, people call this a proof of work algorithm.

Interviewer / Podcast Host (41:02)

That's why it's called crypto, because it's like cracking a code each time.

Brian Armstrong (41:05)

Yeah, yeah. And so this gets into hashing and everything. But the way to, simple way to think of it is like you're finding a rare number in mathematics. Like if I said, can you come up with like a prime number that has a million digits in it? The only known algorithm to do it is to have a computer kind of iteratively search through every single one until you find it. And so anyway, once one of these nodes on the network, they're all kind of churning away looking for this code or this rare number. The minute the first somebody finds it, they broadcast it, they announce it to the rest of the nodes, and it's very cheap to confirm it. Once you Broadcast it. Someone will say, oh yeah, you definitely found it. Like, it's very cheap to. It's hard to find but easy to confirm. That's a key property. So now everyone just kind of agrees, okay, that block is the next one, and they start working on the next block. And so it's a little bit of like a lottery based on how much computational power you have to see who can win the race to find the next block. And their reward for doing that is they actually get. That's how new bitcoin are issued. They get not only the block mined, but they actually get new bitcoin rewarded for that. So these are the bitcoin miners that are out there you might have heard about. Anyway, this is a key property because it's truly decentralized. There's no central authority to it, but the network comes to consensus and can all agree. And as long as 51% or more of the network is operating kind of in a, let's say, a benevolent way, Bitcoin continues to function. You could have a single bad actor on the network that's kind of, I don't know, spamming with invalid blocks or trying to fork things off in a different direction. But it relies on this kind of beautiful idea that at least 51% or more of the world have good intentions and they will be good actors. And as long as that is true, bitcoin will continue to function. And it's big enough now, and there's so much computational power that even a single bad actor, like, I don't know if you imagine like a state actor like North Korea or something, tries to spin up a huge data center to attack bitcoin, even that would not get to be more than 50% now. It's beyond the reach of, I'd say, any sovereign entity in the world from a resource point of view. So anyway, it got big enough now where it's defensible in numbers.

Interviewer / Podcast Host (43:17)

The fact that stablecoin are minted by private companies, why is that different than if the government minted them?

Brian Armstrong (43:25)

Well, okay, so again, stablecoins do not have that same guarantee around decentralization that bitcoin does. So I think that is an important distinction. And so, yeah, I mean, you really are. You're relying on the trust in that company and the auditor who audited them and maybe the banks to some degree that are holding it. So you are trusting a centralized entity. With stablecoins, it's an important distinction not to get too in the weeds, but there actually have. They are people who are trying to create decentralized stablecoins as well. How would that work by the guy who I mentioned at the beginning of the story, Brandon, who I. My friend actually the. One of the company he started and co founded is working on this exact problem.

Interviewer / Podcast Host (43:59)

It's an exciting idea.

Brian Armstrong (44:01)

Yeah, yeah, yeah. The company is called Ampleforth and they actually created a centralized stablecoin called Spot and it actually has held its value pretty consistently, I think over the last five or six years since they. Since they launched it. And I'll be honest, the. The way that they do it is a little complicated. Not sure if I'll be able to give a concise explanation of it here live, but it involves tranching and I.

Interviewer / Podcast Host (44:25)

Don'T know what that is.

Brian Armstrong (44:26)

It's a more complex financial instrument which is part of the. I actually having diligence that at one point I believe they actually did do it correctly. But the problem is it's so complicated to explain. It's. They've had a hard time getting people to adopt it.

Interviewer / Podcast Host (44:38)

I see. But you think it works?

Brian Armstrong (44:39)

I. So it's. It's gone through lots of ups and downs over the last six years and it's. It's held its value. So I think they may have cracked the code on that. But it's. It's hard to explain and people don't. I don't. I would. Getting over that barrier does create a hurdle to trust.

Interviewer / Podcast Host (44:52)

Who are the big players in stablecoin?

Brian Armstrong (44:55)

So usdc, which we're partnered with Circle, is the largest regulated one in the U.S. but there's one that's bigger globally called Tether, and then there's a number of others that are much smaller. A lot of people are issuing tether based. It's moved around a bunch, I believe. I want to say El Salvador or something like that. Now it's one of those ones that kind of looking for the right jurisdiction to land in.

Interviewer / Podcast Host (45:18)

And how are the stablecoin players different from each other?

Brian Armstrong (45:24)

A lot of companies have tried to issue their own stablecoin and they see it as a business opportunity, which I think is fine. But there is some network effect to these stablecoins in the sense that like if I'm sending one and the merchant wants to receive one, it's better if it's the same one. Not exactly what you asked, but I'd say a lot of companies are just creating their own stablecoin now because they want to have something branded to their own platform and use it as a way to generate some income. I'd say I Don't, I mean Tether is a competitor. So I don't want to like say anything too critical, but I think they started to their credit, you know, offshore and they, they identified that a lot of the people in these emerging markets have high demand for the $. USDC which is issued by Circle, is based in the United States and so I'd say it has more buy in from US institutions and it's certainly regulated under this new US law. So I'd say there's the big international one and then there's the US one and those are the two big players right now.

Interviewer / Podcast Host (46:21)

But if they're really all representing a dollar, if you have a blue dollar and you have a purple dollar, it's still a dollar. Why would it matter?

Brian Armstrong (46:31)

Yeah, I mean there is, you can exchange like one of these into another one and it's a, it's basically trades almost exactly right at a dollar. There's minor differences, so fine details about how you might want to evaluate one versus another. Kind of like trading between the dollar and the euro or something like that. But yeah, to simplify it, they are mostly just a dollar underneath and so they trade almost exactly right at a dollar.

Interviewer / Podcast Host (46:54)

What's the EU's position on crypto?

Brian Armstrong (46:58)

So the EU actually got legislation out before the U.S. sometimes Europe. They're not great at like tech entrepreneurship compared to the US in my view. But they put out a lot of regulation. So there's a funny story behind that. But they put out some legislation called Mica M I C A which helps regulate crypto and stablecoins. This was probably about a year ago. So yeah, we were able to get a license in Europe for instance and established an entity in Luxembourg of all places, which actually is very good as a financial hub. There's a lot of financial service companies have a center based there that you can use to passport around the eu.

Interviewer / Podcast Host (47:34)

How are stablecoin and bitcoin related?

Brian Armstrong (47:37)

Well, okay, so bitcoin I think of as like digital gold.

Interviewer / Podcast Host (47:39)

Yeah.

Brian Armstrong (47:40)

And that's useful as like a store of value, right?

Interviewer / Podcast Host (47:44)

Digital gold versus digital dollars. Is that the difference?

Brian Armstrong (47:47)

Yeah, exactly. Like somebody might say I want gold for store value. It's deflationary. There's not going to be, nobody's going to like print a ton of it. Like there's not somebody with their finger on the dials who can like find a bunch more gold or something. And then dollars you'd use for payments. Right. So it's a medium of exchange. So bitcoin is like digital gold. It's Your store of value, stablecoins are like it's for payments and medium of exchange.

Interviewer / Podcast Host (48:14)

So if the dollar is worth less over time, the stablecoin is worth less over time because it just reflects the dollar.

Brian Armstrong (48:21)

Correct.

Interviewer / Podcast Host (48:22)

I understand. What's the role for banks moving forward?

Brian Armstrong (48:27)

You know, I think banks are still going to have a very important role to play. Many of them probably look at crypto still a little bit as a toy. But I think like the really smart ones, they're all doing things in crypto now. They realize this is an important trend. I mean for one thing they are storing like all the reserves in many cases behind stablecoins. So they're doing that. They're still providing the payment rails between Fiat and crypto. We work with banks all over the world. Many of them are deep partners of ours. What a lot of them are now doing to get ready for the next five years is their, their clients. They want to trade crypto like in their private wealth management divisions. They want to send payment with stablecoin because it's faster and cheaper, more global. We Coinbase are actually now powering crypto integrations for a pretty large number of banks. Some of them we actually, we can say publicly like JP Morgan, PNC bank, we just announced a partnership with Citi actually to do payments with them with stablecoin. So we are not just a retail app. Coinbase is not just a retail app, which most people know us for, but we also have a crypto infrastructure. It's kind of like AWS at Amazon. Right. But we have a crypto infrastructure business that we, we have 264 institutions now that are building on top of our of platform with a crypto.

Interviewer / Podcast Host (49:38)

So you're bringing them into the future?

Brian Armstrong (49:39)

Basically, that's the goal, yeah.

Interviewer / Podcast Host (49:42)

How do you personally use Coinbase?

Brian Armstrong (49:44)

Well, I use it to invest. I increasingly use it for payments.

Interviewer / Podcast Host (49:48)

How do you use it to invest?

Brian Armstrong (49:50)

Well in, in crypto crypto assets. And actually a big trend that we're currently working toward is what we call the everything exchange, which basically just means every asset class is coming on chain. So stocks are coming on chain, prediction markets are already on chain, which is like a really interesting topic we could talk about. To me, that's actually the big third product market fit. So first it was trading, then it was payments, now it's prediction markets is the next big one. So we can talk about that. Yeah, people are trading commodities, doing borrowing and lending. So I used the Coinbase app. Increasingly it's becoming like a bank replacement actually where I can get A loan. I have the credit card. I can do direct deposit, but I can also invest in any asset class and I can send money instantly anywhere in the world. So it's getting to be more of a bank placement for some people.

Interviewer / Podcast Host (50:38)

Tell me about prediction markets.

Brian Armstrong (50:41)

Yeah, well, these have also really gone mainstream. I'd say the big moment was the last US Election where people started to really track this as a signal on what was going to happen in the future. And in a prediction market, anybody can place a bet on the outcome of something. It could be a sports game, it could be an economic indicator. It could be. Do you think the Suez Canal is going to be reopened for shipping lanes? And so, you know, it's an interesting one because some people think of it as like another trading use case, and there are people trading it. But I'd say for like, for 99% of people who never trade prediction markets, they're actually using it just to try to figure out what's going to happen in the world. It's almost more like a competitor to the New York Times than it is to the Nasdaq or the New York Stock Exchange. Right.

Interviewer / Podcast Host (51:26)

And it's got no agenda because it's only people betting against each other. There's no.

Brian Armstrong (51:31)

Yeah, and they, they all have skin in the game. Yeah. It's not just some, you know, expert kind of pontificating about what they think is going to happen because they have some agenda.

Interviewer / Podcast Host (51:39)

It's like someone betting on what they believe is going to happen.

Brian Armstrong (51:42)

Right. And so it tends to be much higher signal about what's really going to happen in our experience so far, by the way, one kind of interesting topic that's come up recently is like, should insider trading be allowed in prediction markets? Right. Because in the stock market, for good reason, I think, like, insider trading is prohibited. You know, you basically wouldn't have any kind of integrity to the market. So insider trading is prohibited there in commodities, you know, like copper or weed. There's no, again, there's no centralized entity. So I, I think the rules there are not really as strict around that. And somebody in the US Government was kind of asking me this, like, do you think there should be insider trading in prediction markets? And I, I'm still making up my mind on it. But if you're optimizing for it as a trading and asset class and you want to make sure you preserve the integrity of the market, I'd say no, you shouldn't have any insider trading. But if you're actually optimizing it for a source of news and what is really going to happen in the world, you 100% want insider trading because that's where you get real signals. So, like that Suez Canal example I mentioned, where it's like, is the Suez Canal going to be safe to open in July or whatever? There's probably some Navy admiral sitting on a ship in the Suez Canal who knows where the Houthis are and this and that. You want that person betting on that market because that's where the real source of truth is going to come from. I love how kind of innovations break the mold and they're like, it's not A or B. It doesn't fit cleanly into one of these boxes. It's a new thing. It's an interesting question.

Interviewer / Podcast Host (53:08)

Yeah. Where do you think it's going to go?

Brian Armstrong (53:10)

Well, I think that we're going to see prediction markets on just the long tail of things, like, not just big elections and sports games and stuff.

Interviewer / Podcast Host (53:19)

But it wasn't started for elections. Like elections just kind of became part of what it does. But I don't think that was initially in the thinking of what it was. Is that correct?

Brian Armstrong (53:30)

The history goes back quite a ways. Like, I actually don't know the full history of it, but there's. People have been thinking about variations of the study for a long time. So some of them probably thought about it as for elections. Other people thought it for different things. One of the more interesting use cases, I think that hasn't happened yet, but I think could happen, is actually to make policy decisions, right? So if you're a government leader or a member of Congress or legislator, you could actually say, okay, if this policy were to be enacted, what do you think GDP will be? Or what do you think unemployment rate will be? Or whatever you're trying to fix with that policy. And then the market can tell you, they can say, all right, if it becomes a law, like, the market is telling you 90% chance that this economic indicator will be higher or lower, whatever, and you could actually make better policy decisions this way. Right. So the limits to this we haven't fully explored yet. It's early days. It's pretty cool.

Interviewer / Podcast Host (54:16)

You say better policy decisions or popular.

Brian Armstrong (54:18)

Policy decisions, whether it's better or worse, they're just trying to win money on what's true. So I think it would give you more accurate signal into reality, not because otherwise you're hearing all this noise. But everybody has their own biases and like they stand to benefit or lose based on the policy. So they're making clever arguments for it or against it. But like, just what do you think is actually going to happen? The prediction market is a, a kind of like a truth serum, you know, it's like cuts through all that. No.

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Interviewer / Podcast Host (56:28)

What do you think the promise of bitcoin is to shape the future? What can it do that it hasn't done?

Brian Armstrong (56:36)

I think that the ultimate potential of bitcoin is that it's going to unbundle the state. And by that I mean we rely on the government to issue money. Okay, if we don't need it to do that, what about identity? Right? We also rely on the government to like issue these driver's licenses and passports. And crypto is now coming out with these decentralized identities where you can feel like your sense of ownership around that. You know, there's a guy, really smart guy, who used to work at Coinbase, named Biology Srinivasan. He wrote this book called the Network State. And his view, which I tend to agree with, is that people are going to eventually have a greater sense of identity with Internet communities than they do even with their country of origin. Right. If you kind of think about there's almost like a hierarchy in people's minds of different tribes they belong to. It's like my religion, my city I grew up in, my state, my country. And then there's like, what sports team am I aligned to? Like, what military unit was I in? And like people are inherently tribal. Goes back to again, our evolutionary psychology and all of this. And you know, I think historically people would say like forgotten country, right? And like, you know, maybe they identified most strongly with a certain religion and then the state and then the country they were in and Then they had, like, their sports team or whatever. I think for a lot of people, government has taken the top spot, and there's a lot of, like, identity around that. And his theory is that as the state gets unbundled, like, what latitude, longitude, I happen to be in at this moment is not the most important part of my identity. They might start to think of themselves a little bit like a global citizen or like an Internet native. Someone would say, you know, people have made these kind of quips like, you know, Facebook has 2 billion citizens in some sense, like, more than any country right now. How much allegiance do you feel to Facebook versus, like, if you live in China? It's not quite there yet. But I think people even, like, we were talking about Y Combinator earlier. Y Combinator. I feel a strong sense of identity to it, having they gave me my big break, you know, and it's a strong community, and they're a global community, and, like, I feel, like, a sense of allegiance to them. I mean, don't get me wrong, I actually am pretty patriotic about the US Too. We can talk about that and how we need this as a bastion of freedom in the world and it's under threat and everything. But I do think that people are going to form more. Like, more and more of our lives is happening on the Internet, for better or worse. And I think people are going to form these, like, digital communities where, like, freedom can exist on the frontier. And that is kind of the potential of. Of Bitcoin. It's unbundling the state. It's shifting power from the state to individuals that are going to form in new tribes. And we can talk about special economic zones, all kinds of crazy stuff related.

Interviewer / Podcast Host (59:23)

To free speech as well, would you say, somewhat?

Brian Armstrong (59:26)

Yeah, I'd say, like, crypto is the freedom stack to build all kinds of things on, like, certainly economic freedom with your money and, you know, not having it taken from you without permission, not having the value eroded by inflation. But there, for instance, there's people building decentralized social networks on top of crypto that are inherently guaranteeing free speech. I mean, you know, I think when Elon took over X, this was a big focus of his. I think he looked at that time to see could. Could we actually build the next version of X on top of blockchains to guarantee these principles? Like, you know, the true test is, like, you don't want Elon sort of being the last bastion of freedom. It's like, if he got hit by a bus, how could you guarantee that the freedom of speech was maintained and, like, the blockchain is the right solution for that. At the time he took over X, the blockchains were not scalable enough, et cetera, et cetera. There's now some projects which I think are on the cusp of making this work. There's one called, like, the Farcaster Protocol. There's one called Zora. We're actually launching the Base app, which makes this whole thing hopefully easy to use very soon, to general availability. So we're experimenting in this realm too. But it's earlier days.

Interviewer / Podcast Host (60:32)

Something happened in the last few years where big companies got somehow sucked into politics, where it seems like that never used to be the case. Yeah, you seem to avoid that at Coinbase. How were you able to do it?

Brian Armstrong (60:46)

Yeah, during the kind of zero interest rate phenomenon, especially in Silicon Valley, like, all these companies were very much competing for talent, and it was like a war when the economy really takes off sometimes in these markets. And as a result, I think a lot of the big tech companies, including Coinbase at that time, we were sort of giving everything to employees they wanted. Right. And in some ways that was good, but in other ways it was bad because it allowed a certain group of activists to kind of infiltrate these companies and really start to, I would say, like, hijack the company for their own purposes, like if they were very concerned about some social issue. But they essentially came in and they decided they wanted to hold these companies to go do their bidding in the world. And we actually had a very crazy moment at Coinbase where at one point I was doing a town hall, and normally people would ask questions about, like, the product and regulators and different things, but in. In these town halls, it was increasingly getting awkward. Like, employees were asking, like, what is your view on this, you know, social issue?

Interviewer / Podcast Host (61:41)

Something that has nothing to do with your business.

Brian Armstrong (61:43)

Right. And so as like a young CEO, like, I didn't really know what to do about this. I was kind of walking on eggshells. Like, I was like, yeah, there's a lot of challenges in the world and let's move on and not talk about that. And at one point, this was around the George Floyd, you know, riots that were happening, and somebody in the company came up and said, I want to know if we're going to support Black Lives Matter. And I said, you know, it was just like a live open mic, you know, in front of the whole company. And I. And I said, I don't know too much about it, but I'll look into it. Like, let's move on to the Next question. You know, and they said, like, that's not good enough. I need to know, is this company going to stand behind Black Lives Matter or not? And I declined to answer the question.

Interviewer / Podcast Host (62:21)

And you didn't know enough to answer the question?

Brian Armstrong (62:23)

Yeah, I didn't. I really didn't. And 300 employees did a walkout, so they left in protest.

Interviewer / Podcast Host (62:28)

Wow.

Brian Armstrong (62:29)

Yeah. And I remember I gathered, like, the executive team, and I was kind of asking everyone, like, okay, well, what does Black Lives Matter actually stand for? I'm so confused what's happening? You know, and by the way, later I learned that they were, you know, trying to defund the police and do all these. But at the time, people kind of just told me, oh, they're just standing for equal rights. And I'm like, okay, I don't understand why people. What does our company have to do with, like, police brutality or anything? Doesn't make sense to me. But let's get everyone back to work. And just like, you know, and after a few weeks or months went by of this, I really started. I couldn't stop thinking about it because I was like, some. This. Something new is happening here. I've never seen an employee walk out like that on some issue that's very unrelated to the company. And I started reading all these books, like Jonathan Haidt's book. And I started going down these because I knew there was always a lot of activism on college campuses and stuff, but I never thought it was making its way into certainly Coinbase or the workforce. And so eventually I started to write down my thoughts because I was trying to formulate my thinking on this. And then it ultimately became this blog post called Coinbase is a mission first company. And it talked about how we're going to be an apolitical company except for our mission, which increasing economic freedom in the world will be very political and focused on that. But it seems like such an obvious idea. It's like, we're actually going to focus on work at work, and you can't have the company come in and do your bidding for whatever issue that you're very passionate about in the world. But if you want to do that in your free time, go for it. People in the company, some people who read this blog post were like, do not post this. It's going to create, you know, a storm. And, like, all these people are going to quit and everything. And I felt like I had to do it. And there this is another little bit of that, like, disagreeableness or, you know, something about my personality where I Was like, well, I don't want to be the CEO of a company where you come in and you get kind of pressured by activists all the time to do things like, are they running the company, or am I running the company?

Interviewer / Podcast Host (64:24)

And it takes you off your core mission. You're focused on your mission.

Brian Armstrong (64:27)

Yeah. It's hard enough. Like, you could spend a decade trying to make a dent in the universe in one thing. If you get pulled into whatever the current issue is, you're never going to accomplish anything. So I just kind of, in my gut, I felt that it was wrong, so I published this story. And where did you publish it? I just published it on our blog, external blog, so the whole world could see it.

Interviewer / Podcast Host (64:46)

I see.

Brian Armstrong (64:47)

Yeah. But I did, actually, before I published it externally, I did do a town hall meeting internally, where I walked through it, and it was actually really tough for me to get through it. I almost. I was like. Because I knew how much it was gonna create drama and hurt feelings and all kinds of things, but I felt like it was the necessary thing to.

Interviewer / Podcast Host (65:02)

Do when I heard the story of this happening. That was the reason that I wanted to talk to you, because it seemed both obvious and no one else was doing it.

Brian Armstrong (65:12)

Yeah.

Interviewer / Podcast Host (65:12)

So interesting.

Brian Armstrong (65:13)

Yeah.

Interviewer / Podcast Host (65:14)

So what happens?

Brian Armstrong (65:15)

Yeah. So I. I published this to the world, and.

Interviewer / Podcast Host (65:18)

Oh, what happened in the town hall?

Brian Armstrong (65:20)

So in the town hall, I was almost, like, crying on stage as I was delivering this, because I knew that it was going to be so controversial.

Interviewer / Podcast Host (65:27)

How many people are in the audience in the town hall?

Brian Armstrong (65:29)

About a thousand.

Interviewer / Podcast Host (65:30)

And it's in person?

Brian Armstrong (65:32)

Actually, it was virtual, because I think this was during COVID I see. Yeah. And that was part of the issue, by the way, too. I think that people were not getting together in person as much. And so there was this lack of cohesion of the team. All kinds of things were happening at that time, and I felt like I had lost control of the company. Like, they were against me, and they were, you know, this and that. So it was an interesting leadership test of leadership moment. But I remember somebody before we went onto the town hall, someone was like, brian, are you sure you want to do this? What if there's another walkout and whatever, 300, 500 people walk out, and they were in protest because of what you're doing. And I remember I. I said, if people refuse to come to work after I do this, I will fire every single one of them. And people got the message, like, real quick. And I think they thought, like, how could you fire half the company? And I remember Just thinking, like I remember when the company was just me, I can build it again if I need to, right?

Interviewer / Podcast Host (66:36)

And you want a team that's aligned on the mission, right?

Brian Armstrong (66:40)

You have to have everybody rowing in the same direction. And I had failed as a leader because I was walking on eggshells, refusing to create clarity about this. And that's why the company was misaligned and was creating all this internal conflict. So I had to get the company back aligned. And if half the people needed to leave to do that, so be it. Right? Now, it turned out only 5% of the company left, so it was below our worst fears, but that was still a material number. And we offered exit packages to anybody who wasn't aligned. So 5% of people took the exit package, and we suddenly all got back into alignment, and a lot of work started happening again. And it was great. It was one of the best things we ever did. Subsequently, a lot of big companies copied it in various ways or emulated it. One of the other just interesting things that happened was the New York Times right after I announced this. People who worked inside the New York Times later told me this. They created a small team essentially, to just go after us and write negative articles, dig up dirt. They started publishing articles essentially implying that we were like a racist.

Interviewer / Podcast Host (67:39)

What to do with reporting the news, nothing.

Brian Armstrong (67:43)

But I've subsequently learned that some mainstream media organizations are not really interested in doing journalism. They're more like political advocacy organizations, I believe. And so news has become very polarized, et cetera, as you can imagine. I'm not a big fan of the New York Times, but I think new media is kind of disrupting them for good reason. But I developed thick skin after that. Like, there's something actually really great about, you know, getting canceled or whatever the word would be. Like, most entrepreneurs would be like, oh, my God, like, the New York Times is going to write an article with some terrible thing about you. And somehow it was actually, like, very freeing. Now I don't really read mainstream media that much, and there's probably been lots of negative articles, lots of very positive ones, too. But I try just to never read any of it, because it doesn't. It doesn't matter. Being unafraid of that has allowed me to go make decisions without being worried about it. With what people who don't have our best interest at heart think.

Interviewer / Podcast Host (68:35)

Did any other companies do it at the same time as you, or were you the first?

Brian Armstrong (68:40)

I mean, subsequently, I think there's a company called basecamp or 37 signals, which did something similar. I think that was after hours. I think actually Toby at Shopify published some kind of a letter there. I don't want to claim this was entirely unique. I mean, there may have been versions of it before that, but I think we were like one of the first, if not the first, big tech company that did it. And I do think it moved the needle. Still to this day, maybe once a week or something, I have people come up and thank me for that, which at the time, I had no idea that that would have such a long lasting impact.

Interviewer / Podcast Host (69:10)

And probably because of the reaction to it. You know, you can thank the New York Times for shining a spotlight on it in such a way.

Brian Armstrong (69:19)

Yeah.

Interviewer / Podcast Host (69:20)

In their mind, they were smearing you, but in reality, people saw through that.

Brian Armstrong (69:25)

Yeah. After that happened, actually, a lot of other Fortune 500 CEOs started reaching out and they were like, oh, man, how'd you do this? And that. Like, the greatest irony, though, was actually about a year later, the New York Times had this big issue with employee activism. I don't know if you tracked any of that, but no, I think somebody, one of their executives, like, reached out to someone. One of our team was like, so how did you guys deal with that? And they were calling for, like, tips on how to deal with the employee activism. I was like, oh, my gosh, this is so ironic.

Interviewer / Podcast Host (69:53)

I love it.

Brian Armstrong (69:54)

Yeah.

Interviewer / Podcast Host (69:55)

How has the fact that major financial institutions are buying bitcoin now changed the market?

Brian Armstrong (70:02)

Well, it's made bitcoin less volatile, more steady. There's kind of like more of a price floor, I would say. And it's brought in new pools of capital. Like, there's certain funds out there that they're not allowed in their bylaws to buy cryptocurrency, but they can buy an ETF or a public company stock like Coinbase. So it just started bringing in a bunch of institutional money. I didn't really know a lot of this until I got more into financial services running a big company. But actually something like 90% of all the money in the world is tied up in institutions. It's not like individual people like you and I holding money. And so to get the really big pools of capital, you kind of have to unlock things that their risk committees would approve. You know, for lack of a better.

Interviewer / Podcast Host (70:46)

Word, how is the nine to five, five day a week banker economy obsolete? And how can it change to be more like the Internet? You know, I could buy something on Amazon 24 hours a day.

Brian Armstrong (71:02)

Yeah, well, that is one of the cool things about crypto is These markets are 24 7, 365. Crypto never sleeps. It is kind of inherently more fair and more global. Yeah, but there's, I mean there's lots of things about crypto that I think it's, it's like democratizing finance in a way. Right. It's anybody in the world with a smartphone can get access to not just sound money like the dollar, but they can also get access to like get a loan to start a business, buy a house. That was another thing I saw in Argentina, spending some time there was that we sort of take it for granted you can get a mortgage to buy a house in the United States. In Argentina, at least at that time, only wealthy people who could pay 100% of the purchase value could buy homes. So basically everybody else was a renter. And because there was no credit market, how could that be? Right. And we sort of take this, again, we take this for granted in the United States that some of these financial markets are a little more built out. So now with crypto it's anybody who has a smartphone can actually, they can get a loan using defi, which is decentralized finance. They can do payments, they can invest in not just crypto assets, but increasingly like US stocks are getting tokenized. Like they could buy Tesla or Nvidia. These are things that people all over the world have high demand for. So I think it's really, how does.

Interviewer / Podcast Host (72:19)

That work, the tokenizing of stocks? Are you actually buying the stock?

Brian Armstrong (72:24)

So again it's similar to like a stablecoin where there's a share of the stock is stored in some US custodian bonus. They're issuing a token that's a one to one backed up.

Interviewer / Podcast Host (72:32)

So the token rises and falls with the stock.

Brian Armstrong (72:36)

Yeah, and right now we are in the early stages of working on something like this along with the rest of the industry in the U.S. but no one's actually done it in the U.S. yet, but in Europe people have done it. So I think that'll come to the US relatively soon, hopefully.

Interviewer / Podcast Host (72:50)

That sounds great. Yeah, that sounds great. What's the difference between holding your own Bitcoin versus keeping it in the bank like Coinbase?

Brian Armstrong (72:58)

Well, when you say holding it in a bank. So there's kind of like a custodial way to hold it, like a self custodial and a non, like at a Coinbase custodial. Like if you want to trust Coinbase to store your crypto for you, you can do that. We're a big public company, we store actually over $500 billion or half a trillion dollars of crypto assets for people. I think we're quite good at that. And if you, you know, if you forget your password, we'll help you reset it. Or if people pass away and the estate planning, like we can kind of do the things that a trusted financial institution would do. But I also believe strongly in self custody, like why should you have to trust Coinbase to store your crypto? Maybe you want to store it yourself. And in the past there were various ways to do this. They were kind of technical and people unfortunately have lost lots of crypto because they were trying to store it themselves and maybe they lost the key or it got in a fire or a flood or whatever. And so the self custodial wallets have luckily started to get better and better, especially around like account recovery. That's something we're deeply invested in as well. We actually put a lot of time and effort into our own self custodial wallet called the Base app, which is coming in the next version of it's launching soon. And yeah, for the people who are really more like preppers or they really want to store their own crypto, like they'd store bars of gold, there's other ways they can, like you can literally just have us 12 words on a piece of paper or hopefully something more durable than that stored in a safe or a couple locations around the world and that it's not going to be very easy to use that crypto, like to spend it anywhere. But you can make sure that it's stored in a way that no one can ever take it from you. It's kind of powerful.

Interviewer / Podcast Host (74:32)

What are all the services Coinbase provides now?

Brian Armstrong (74:35)

Well, there's a lot. So we're $90 billion public company, but we serve retail customers, we serve big institutions and governments. We have that developer crypto as a service infrastructure that it helps power other companies doing crypto. And there's a variety of services there. So we do trading, payments, custody. We're increasingly adding more of those types of services. So our mission is to increase economic freedom in the world. So we're trying to really update the global financial system to run more and more on these crypto rails, which have these freedom principles embedded into it. Yeah, that's what we're doing.

Interviewer / Podcast Host (75:12)

How easy is it to use?

Brian Armstrong (75:15)

Well, Coinbase is very easy. I mean you can just sign up with an email address or a phone number and be up and running on the app very quickly. I'd say some of the things that are more on the frontier, like in Defi. And these kind of are still like a little tricky to use. And we try to make them simple to use in our app so you don't have to understand what's happening underneath unless you really want to. Coinbase isn't good at everything, but what we are really good at is we've built the most trusted crypto app. We consistently are number one in terms of the one that people trust. And then we've tried to make it easy to use for regular people so you don't have to be some computer scientist to use it.

Interviewer / Podcast Host (75:48)

Is your relationship to crypto the same today as it was when you first imagined forming a company?

Brian Armstrong (75:54)

I mean, I still feel the same way about it in the sense that I think it's an important technological innovation. It's about freedom, which I'm really passionate about. We didn't talk too much about that, but I've read, growing up, I read lots of books, books, you know, like Milton Friedman and Ayn Rand and all these things. It's worth admitting, I think, that there's people that are drawn to crypto, I think for the wrong reasons. And it has created like a reputational issue in some cases. Like there's people who have created companies that have just blown up that have lost people's money. There are some people that are trying to do get rich quick schemes and like more gambling oriented stuff. You know, that's not really appealing to me. I think it's damaged the reputation of it. You know, in some ways it's unavoidable. Like the traditional financial system is full of this kind of stuff too, right? Like Bernie Madoff and Enron and people are doing all kinds of scams in the traditional financial system. And so unfortunately that does make its way into crypto as well. But what I hope and I think we've done at Coinbase is try to be a source of legitimacy and trust and just have the right long term view and do the right thing and not get caught up in these short term fads. But like running any company, like that's, that's the thing you have to look at every, every month or whatever. It's like, okay, people really want to do this new thing. Is this an important business innovation? That's going to be a lot of times new things look like a toy and then they turn out to be really important. Right? Like early YouTube was like cat videos and stuff and now it's bigger than the TV networks or. So are we being like high and mighty about this or is this actually something we should stay away from. And these are the hard calls that we have to make oftentimes as an executive team.

Interviewer / Podcast Host (77:29)

What are your thoughts on Sam Bankman, Fried?

Brian Armstrong (77:32)

Oh, man. You know, I interacted with him a handful of times as he was building his company and he really kind of rocketed up onto the scene. And, you know, part of me at first, I think was a little bit like frustrated about it. I was like, man, I've been working on this industry for so long and this kid is just like taking. He's on the COVID of every magazine and they're executing so fast and maybe my company is inefficient and slow. And so it really caused us to kind of look at how we. It's competition, right? Competition breeds excellence. So I think it's good. You want to have people coming up and challenging you and it creates a fire and drive. Now, I always kind of felt like he was very smart and I always felt like he just had very high risk tolerance. But I will, I will admit I never suspected he was actually like a fraudulent person, right. Or, you know, some, I don't. Some people might say a con man. Like, he did not trigger that for me, which actually makes me nervous because it caused me to be more skeptical of people. I was like, man, if I completely missed that one, like, who else could I get fooled by, right? And the key thing that he did right, which was unethical in my view and illegal, is that he took the customer funds and he invested them kind of out of his hedge fund without their permission. Right. And so he kind of said, hey, all the, all the money people have deposited here, which they've trusted me to hold on to, and maybe the customer wants to trade, but that's fine. They're making the decision to do that. In this case, he said, you know what, I'm going to make a decision on their behalf. He moved a bunch of the money into his hedge fund and then he made a bunch of high risk investments without their permission. So that's the illegal thing that he did. I do think that that was a crime and I'm not here to pass judgment on anybody, but I, I do think that was wrong. And so it's, in some ways I think it was justified that he got this prison sentence and everything.

Interviewer / Podcast Host (79:22)

How did his fall impact Coinbase?

Brian Armstrong (79:25)

Well, I just knew that for about a year it was going to set the industry back. It wasn't going to be permanent. Like, we had seen Mount Gox blow up, we had seen Silk Road happen There were other things like this. Unfortunately, they did happen periodically, but I know, like, for instance, we were trying to get legislation passed in D.C. at that time. He had made a bunch of donations to Democratic candidates, and I just knew that everybody wanted to, like, wash their hands of the crypto industry at that point. And it was like, Persona non grata. All the legislation talks stopped. He was a competitor of ours. Right. So I'm not totally unbiased here, but so in that sense, actually, a lot of the people that had money in crypto at that point, they were looking for, like, a refuge. And they said, oh, Coinbase is a public company. Their financial statements are audited and all these things. Like, at least I believe I can trust that. So we actually benefited in the sense that a lot of those clients came to us and funds deposits came to us, but it did set the industry back.

Interviewer / Podcast Host (80:21)

How difficult was it to be vetted in that way? How much of a leap was that?

Brian Armstrong (80:28)

Yeah, I mean, it is incredibly challenging to do it the right way, quote, unquote. Especially if you see offshore companies that are breaking the rules and sometimes rocketing up in volume and competition. Like, you have to sit there and have a lot of tough decisions about risk tolerance. Right. Because sometimes the law is very clear and it's like, okay, do not cross this line. Other times, you know, the lawyers, they love to tell you these answers, like, it depends. You know, it's a lot of times the law is unclear, especially in new markets, that, yeah, you're doing something new.

Interviewer / Podcast Host (80:58)

Hasn'T been done before, so who knows what the rules are?

Brian Armstrong (81:00)

Yeah. So, you know, we always try to have these heuristics, like, do I feel good enough about this? Where I could recommend this product to my friends and family. Right. Or, you know, if everything that we are doing in this meeting is just someone leaks it to the world like a video recording, how would we feel about that? Could we stand behind it, you know, or do we feel like we're being a little cute with this and that, to try to just make more revenue because we were worried about competition and you had to make dozens of decisions like that along the way. And we don't get everything perfect, but I think we got more right than wrong. And that is a lot of what contributed to the trust. Now, we probably gave up some profited market share along the way. I mean, we certainly did, but we're trying to play for the long term here. So. Yeah.

Interviewer / Podcast Host (81:46)

What are future uses for blockchain that haven't been touched yet?

Brian Armstrong (81:51)

Yeah. So we mentioned Payments, prediction markets. I mentioned decentralized social media. Decentralized identity, I think is another big one where people will have like their assets could be associated with that, but also you could have access stations associated with a decentralized identity, which, you know, might be able to say, like, okay, I'm a US citizen or I'm over 21 years old, or like if you need to get access to certain things, you can do what's called a zero knowledge proof. Like you don't have to give them a copy of your driver's license. You can show cryptographically that actually I am an accredited investor based on this attestation, but I'm not going to give you all my financial statements because that could just get leaked out there into the world. So it's improving privacy with decentralized identity. This is kind of a new thing. It's on the horizon.

Interviewer / Podcast Host (82:37)

That sounds really useful.

Brian Armstrong (82:39)

Yeah, that's getting better and better. Yeah. And then ultimately I think we might end up seeing some physical territories in the world that get crypto communities start coming together and special economic zones and try to get really like civilizational progress happening with higher freedom zones.

Interviewer / Podcast Host (82:56)

Has that happened in El Salvador? Is that what is happening there?

Brian Armstrong (83:00)

A little different? I mean, El Salvador is doing lots of novel things, I guess under Bukele, but there is a special economic zone in Honduras called Prospera, which is kind of an early take on this. They're actually that company Prospera, which Coinbase invested in. We're. They're looking at actually ways to create these zones in even in the US and other places which could be like federal land that would be exempt from rules, like other regulations. So that in that sandbox of innovation you can go do things like there's so much red tape to make a nuclear reactor for like a data center. Right. And we can carve out, you know, maybe not the entire United states, but like 10 areas or something like that where these zones could take place. And you could have accelerated clinical trials for biotech, you could have nuclear reactors, you could have drones innovating without oversight from the faa. Right. You could have crypto economies like performing there. So I think it's a big open question of like, how do you accelerate technological progress, civilizational progress. And some people would say, well, there's not enough talent, there's not enough capital. Like, I think one of the big reasons is there's too much, there's too many rules. Right. And if we can have these zones, they can actually help accelerate progress. Like much like in China, actually, you know, Shenzhen is a special economic zone that's been incredibly.

Interviewer / Podcast Host (84:19)

I didn't know that.

Brian Armstrong (84:20)

Yeah, that's probably one of the most. Shenzhen is an amazing success. Or, you know, Dubai, even Hong Kong or Singapore, you could argue, are kind of like special economic zones. And so I think it'd be amazing to see some of those created in the US there's interesting legal frameworks that. That could happen. Like you. You could either get something passed by Congress or Native American tribes actually have special exemptions, or there's something called an interstate compact actually as well, which allows states to collaborate on something outside of the federal purview. It's typically done for things like water rights and highways and things like that. But in theory, you could use that construct to create special economic zones in.

Interviewer / Podcast Host (84:57)

The US Sounds very exciting.

Brian Armstrong (84:58)

Yeah. Prosper is looking into this.

Interviewer / Podcast Host (85:01)

Is technology a force for good in the world?

Brian Armstrong (85:05)

I think, yes, unequivocally. You know, it really goes back to, like, eyeglasses are a technology. Right. The first person who wore those probably looked pretty silly running around, you know, but now it's just kind of normal. Or if you go back to like, stone tools and fire. So fire is just like a great example. Right. I mean, you can. Fire has burned down people's cities and villages and burns your hand, but it can also warm your home and do all kinds of things, cook your food. That is, you know, just going back to Icarus and all these things. Like, you can fly too close to the sun, Right. Sam Bankman, Fried, probably flew too close to the sun.

Interviewer / Podcast Host (85:41)

So anything that's powerful, that can have a positive change, something negative could happen. Yeah, just the nature of it.

Brian Armstrong (85:47)

Yeah. That is the challenge we have in society today is I think it's easy to point out risks and say, okay, my kids are addicted to social media and Chernobyl created damage to the environment, and you can go on down the list. But if we stop innovating with science and technology, we stop all progress. I mean, technological progress and scientific progress are the root of everything that has gotten us out of being cold and dark and hungry and diseased in the world. Right. It doesn't really matter what it is. If you want to have a better economy, if you want to have great education, healthcare, if you want to have a stronger military, whatever. The root of all of this is science, technology, creating more economic activity that can create better jobs, like better healthcare outcomes. Everything comes back to technology. So I think a lot about how we accelerate technological progress and move it in a positive direction. But Mostly it's about accelerating it.

Interviewer / Podcast Host (86:49)

What are the biggest roadblocks to accelerating?

Brian Armstrong (86:53)

I used to think it was capital. Like, I felt like, you know, it's so hard to raise money. Like I told you my early story about raising money from Coinbase, et cetera. I now feel like there's actually more of an abundance of capital now that I've met more people who have it and like venture firms and things. Then there's the issue of talent, right? It is pretty hard to find these entrepreneurial people or early employees for these things that are willing to take the leap into the unknown and do crazy things. But they're also, they're not just crazy people. Like, they're also like, really deeply competent as a biologist or an engineer or whatever it is. So talent is more scarce than capital. But then you go even a layer down further and you're like, okay, the barriers from a regulatory point of view are enormous. Right. It's so hard to build something new in terms of getting, getting licensing, getting sued by the government, getting blocked from permitting. Like, it's hard to even build like a house in California, right. Much less high speed rail, you know, that whole thing they've been working on. And so I think if you go down even one level deeper, it's really. Culture is like the biggest barrier, because to have a society that can rapidly advance, you have to have a culture of people that want to do that. They are willing to every time something bad happens, not say, well, this, this would never happen again. We need to put some new rule in place. They actually have to still have freedoms in society where people can be allowed to experiment, try ideas, live on the frontier. And we have to sort of. We have to celebrate it right when it happens. Like Elon Musk, people may not agree with like, his management style or his personal life or whatever, but it's kind of hard to deny the fact that he's built some really amazing things that can help advance humanity like, that no one else was able to do. Some people want to celebrate that and some people want to vilify it, you know, and that's a fork in the road for a civilization to advance or go into decline.

Interviewer / Podcast Host (88:42)

Has the government ever come after you?

Brian Armstrong (88:44)

Yes.

Interviewer / Podcast Host (88:45)

For what?

Brian Armstrong (88:46)

Okay, well, you know, I used to be naively what I thought growing up was the government publishes the rules, like laws and things, and you just make sure you never break the laws and then you don't really have to engage with the government.

Interviewer / Podcast Host (89:01)

Yeah, follow the rules.

Brian Armstrong (89:02)

That's what I thought.

Interviewer / Podcast Host (89:03)

Easy.

Brian Armstrong (89:03)

It turns out Life is way more complicated than that. So first of all, the laws are often not clear, right? And you have. So, okay, you have to pay lots of lawyers to help you figure that out. But worse than that, the government will sometimes come after you even if you're not doing anything wrong. How could that be right in the United States of America? And we, we experienced this firsthand with Gary Gensler, who was the SEC chair under the last administration, and Elizabeth Warren and one of the senators, where they got into their head that they really didn't want crypto to exist. Now, it wasn't illegal anything that we were doing. In fact, we were pushing for new legislation that would prevent a lot of the back activity that was happening offshore. But for a bunch of reasons, including the fact that Elizabeth Warren, in my view, believes that the government should run financial services. And she has kind of her hooks into the big companies in financial services. If she doesn't believe that they should give lending to oil and gas companies or firearms companies or whatever kind of social issue, she can basically, through her bank regulators, pressure the banks. The banks are quasi government institutions at this point because they're so heavily regulated. And so crypto was kind of an end run around her control of this. She couldn't get her ideas kind of approved through Congress because they weren't democratically popular. But she had a backdoor to control these people. So she hated crypto. She still does. And she kind of convinced Gary Gensler, the new SEC chair, who she appointed or helped get appointed, to go after crypto and penalize it. So we started having a lot of really strange interactions with the last SEC chair where they were, they would come in and say, hey, we have a lot of questions about what you're doing. And we'd say, no problem, like we'll come in and talk to you. We did something like 30 meetings with them over a period of like a year. And I remember in some of these meetings it was so awkward because I'd go in there and I'd say, you know, here's 14 areas where our team would love more clarity about what the rules are. The law is kind of unclear. Maybe we're trying to get legislation passed, but in the absence, we'd love it if you could actually just publish some guidance to the industry about what you want to happen and we can all follow it. It'll be a level playing field. And I remember he told me in one of these meetings, he said, I'm not going to help you with that problem. Talk to your lawyers. I remember Being kind of confused by this. Cause I thought, doesn't he want companies to follow the rules? I'm sort of offering to follow the rules. And I realized on the call, one of his enforcement people was there, like, just taking notes of everything I was saying. And then, like, a week later, we got a Wells notice, which was basically an intent for them to sue us in court for violating all these rules. And so it was not like a good faith conversation. You know, he was kind of telling people in the industry, well, just come in and talk to me. And we'd go in and talk to them, and he'd get sued the next week. And it was kind of. It was a trap.

Interviewer / Podcast Host (91:44)

They wouldn't tell you what you were doing wrong.

Brian Armstrong (91:46)

Right. And actually, there's an area of the law where they are called the Administrative Procedures act, where if the rules are not clear, they actually are required to, like, engage with industry and publish rules within a certain reasonable time period. So we actually sued them, and we said, you're not following the Administrative Procedures act, which Congress requires you to do. Later, a judge found that we were correct, and they said the SEC was acting in a, quote, arbitrary and capricious manner. So I realized something interesting about this, which is that I used to think that, like, regulators were here to, like, hold companies accountable and especially punish bad companies. And that is true to some extent, but it's also true that sometimes companies need to hold bad government accountable. And that's what we essentially shifted our mindset at a certain point where we said, okay, they're going to just unlawfully strangle our entire industry in the United States unless we become politically active. And we had tens of millions of people who had signed up on Coinbase. There was something like 50 million people in America who had used crypto. We said, this is a major voting block. How do we get these people organized? And we actually helped fund this 501c3 called standwithcrypto.org and it got 2 million people to raise their hand in the United States and say, I want to elect pro crypto candidates. I think this isn't something I want to use. There should be clear rules. Why are you attacking this industry? And it actually became a very powerful organization in the last election where, you know, not to put it too bluntly, but, like, certain members of the Senate, like, got voted out of office because of the crypto voters.

Interviewer / Podcast Host (93:13)

Wow.

Brian Armstrong (93:13)

And Suddenly everyone in D.C. started to take it more seriously. Okay. Oh, okay. There's a real. This is something I need to really have an opinion on. And I can't just willy nilly attack this, this group of people. It's politically unpopular or politically risky to be anti crypto. So anyway, that really shifted my worldview where I felt like I could just follow the rules and stay out of it. But no, like, if we don't develop political power as an industry or a group of people using this new technology, someone is going to unlawfully come and try to kill us, which is the.

Interviewer / Podcast Host (93:43)

Last thing you want to do. You really just want to be left alone.

Brian Armstrong (93:46)

Yeah.

Interviewer / Podcast Host (93:46)

You found out that you'll be attacked for just trying to follow the rules.

Brian Armstrong (93:51)

Yeah.

Interviewer / Podcast Host (93:52)

That's amazing.

Brian Armstrong (93:52)

Yeah. And there were. And there were no clear rules, even though we asked for it. But you're right, there was some great phrasing like that where it's like, even if you're not interested in the government, the government is interested in you. And, you know, it's like a lot of people who've never tried to start a company, I understand why they might just feel like, yeah, there should be more rules and regulations and all this, but if you've ever gone and tried to build something new in the world, you realize how much not just red tape there is, which can be bureaucracy that's expensive and slows everything down, but actually like really unethical behavior, that you can just get attacked for these things. Like, I kind of naively assumed if you're trying to build something new in the world, some people might not care, some people might think you're crazy, but nobody would actually be trying to stop you. But no, it's like people will actually come and try to attack you if you try to build something new in the world. And so you have to develop thick skin.

Interviewer / Podcast Host (94:41)

You were called crazy in the beginning by people who were on your side, told you your ideas were bad ideas, don't do it. And now you get presented ideas that could be crazy by a lot of different people. How do you know what's crazy good versus crazy bad?

Brian Armstrong (94:58)

Yeah, well, this is kind of one of my biggest fears. You know, like Steve Wozniak, he was working at HP before he co founded Apple with Steve Jobs. And I guess the lawyer is like, he went to his boss at HP and was like, I think we should build a personal computer. And you know, his boss was like, I don't know, we don't have time for that. And so he left and created Apple. Right. So this is one of my big fears. Like someday there's going to be a young, probably young, maybe old engineer in my company or something that comes to me and tells me some crazy idea and I'm like, no, we don't have time for that. And it turns out to be, you know. Anyway, how do you know if it's a crazy good or crazy bad? Yeah, because you don't really know for sure a lot of times. So I'll tell you how we do it. So twice a year at Coinbase we have something called Next Bets where anybody in the company can come in and pitch. And I've designed it a little bit like Y Combinator, actually that demo day I told you about, where in most companies you actually have to get your boss to say yes and your boss's boss and boss's boss all the way up to the CEO. So you have to get like six yeses in a row, which is kind of like saying it's a committee.

Interviewer / Podcast Host (95:56)

Impossible almost.

Brian Armstrong (95:57)

Yeah. If one person says no, it's likely. So I wanted to switch it where if you get one person to say yes, then it's green lit. Right. And so what we do is we have in this Next Bets, there's about seven people or so in the room. They're like the leaders of our different product groups that have their own budgets. They can decide to fund things unilaterally. Some of them are also just like really high potential young engineers. We try to make a variety of people, and I'm on that list of people too. So they come in and they pitch it and it's kind of like pitching seven different venture capitalists. If you get one of us to say yes and fund it, then it's greenlit. And these are not big. They're not like 100 people or something. It's like two people. If you're not sure if it's a crazy good or crazy bad, as long as it's not illegal, it's okay to try it with a small bet, like two or three people. And if it starts to show promise, do the Series A, Series B kind of internally. If it doesn't work, shut it down. There was a great example where I voted no and luckily somebody else on our team voted yes. It turned out to be like an $800 million a year line of business for us, which was the USDC Stablecoin. Right. I actually voted no on it because I thought it was too centralized. You know, we talked earlier, you asked me about centralized and I was like, it's not. It's kind of centralized.

Interviewer / Podcast Host (97:11)

Goes against the bitcoin.

Brian Armstrong (97:12)

Yeah, yeah. But luckily somebody on our team decided to fund it out of their budget, and now it's a massive product line for us, so. And it's added a ton of value, so it shows you how much I know. Right.

Interviewer / Podcast Host (97:23)

It also sounds like in the future it may be a big part of your business.

Brian Armstrong (97:27)

Yeah, I'm sure it will. I'm sure it will. Yeah. So that's one way we look at kind of crazy good, crazy bad. You want to build a portfolio of these bets, and then some of them are going to return, you know, but a lot of them, we have a pretty high tolerance for things not working. It comes back to that sort of thing I mentioned about autism at the beginning. Right. Like, if we try five of these venture bets internally with two or three people and four of them round a zero and one of them works, that's an 80% failure rate. I'm totally okay with that, you know, and I'm not embarrassed about it. In fact, I think if we ever stopped doing that, I'd be worried. So that's. That's part of what we try to do.

Interviewer / Podcast Host (98:01)

So do you see Coinbase as being much more than it currently is?

Brian Armstrong (98:07)

Well, I mean, our goal is to get to, like, a billion people accessing this open financial system through our products every day. Right. And that's where I'll start to feel like we're really making a dent in the global economic freedom problem. Yeah. It started with a trading thing. Now we're doing payments with stablecoins. Like I said, eventually I think it'll be like a bank replacement for a lot of people. Or like, there's this next generation of kids growing up that'll never actually have a bank account in the way probably you and I have, like, you know, with a checkbook and the branch on the corner and all that. I think crypto is essentially eating all of financial services. It's just going to take some time.

Interviewer / Podcast Host (98:40)

Why do you think so many are not open to new ideas? Is it just lack of imagination?

Brian Armstrong (98:45)

My guess is, again, this comes back to, like, evolutionary psychology where, you know, if you imagine, like, all of our hard wiring is really about these tribes of 150 people running around in the Savannah. Like, our hardware software has not really updated since then. And so you can imagine if you're like, a really high degree of openness in one of those tribes, you're like, I don't know, I'll try eating that berry or, like, going over this mountain or, you know, whatever. You're less likely to reproduce. Yeah, right. Which was all that natural selection kind of optimizes for survival and replication until you replicate. And so it was more rare in society to have people with that high degree of openness. Now it's a higher risk strategy from, like, an evolutionary point of view of, like, somebody with a high degree of openness might find a new way to make a bow and arrow that could get you more meat or something, right? Anyway, for whatever, there's actually a psychology test, like Ocean or the Big five, right? And one of those is around openness to new ideas. And I. When I've taken those tests, I score quite high. I don't remember if it was like, 99th percentile or something. Very high on openness, where it doesn't mean I'm going to just. I'm naive. Like, I'll try it. I'll do anything, even if it's dumb. But I'm open to hearing ideas. And for whatever reason, I actually really like novel ideas. I kind of crave hearing those.

Interviewer / Podcast Host (99:55)

Have any of your crazy ideas ever backfired or got you in serious trouble?

Brian Armstrong (100:01)

Yeah, sure. I mean, actually, there's a funny story. When I was in elementary school, actually, I'd go to the hardware store and buy candy after school. And, like, I remember, I think you could buy these candies for like, 25 cents or something. But I decided to go buy a bunch and try to sell them on the playground for like, 50 cents or a dollar. And I remember the principal, like, called me into his office one day and was like, hey, you know, you're not. You can't be, like, charging kids for, like, food on the playground and stuff. And I remember I'd never really been in trouble with the principal before, so it was kind of a big deal. But I remember seeing something in his eye, even at that young age, where he was like. He didn't want to completely deter me of this notion because he was like, this might be valuable at some point. But I was. In that sense, I was kind of breaking the rules. I'm trying to think like a more. Maybe like a more recent example where it's gotten me in trouble. I mean, we did get sued by the federal government, so that, you know, but I think we. We won that one in court. That. That we. We won that case. You know, there is, like, a certain amount of joy that I take that's unreasonable in kind of blowing people's minds, right? Like, what I mean by that is there are certain people who. They're just very orderly. And it's like everything needs to fit in its place in the world. And like, sometimes we go in and meet with these financial regulators and their whole life is built around like, are you an X and a Y or a Z? And now I know how to regulate you, like which box to put it in. And I do take a certain amount of pleasure in coming in and just like creating another box. And they're like, oh, no, no, you can't make another box. Like, my whole worldview is shattering and I just, I can't help it. I love like kind of poking on these things and, you know, being a little bit of a troublemaker in that regard.

Interviewer / Podcast Host (101:43)

So has AI impacted Coinbase at all?

Brian Armstrong (101:46)

Yeah, for sure. I mean, so we're implementing a lot of things like that I think are just best practices now that most companies are doing, like how we write software, how we answer customer support, like certain risk models. But we're also, we're looking into ways that people actually might use these LLMs and AIs to manage their financial life. Right. Where there's a whole question about financial literacy. People have, like, how do you teach people about dollar cost averaging and tax loss harvesting? And I think an LLM can be very beneficial to that. Like, it's, it's the kind of thing that only wealthy people would typically get. If you had enough money in an account and you would get like a dedicated advisor, wealth manager, you can have that now available for everyone. You can start to ask it questions like, hey, you know, can you rebalance my portfolio? Or like, what would you suggest if I want to buy a home next year? Or whatever it is. We're building some features like that, which we'll hopefully be able to talk more about later this year.

Interviewer / Podcast Host (102:41)

Why is bitcoin dangerous for energy consumption but AI isn't? And isn't AI far more energy hungry?

Brian Armstrong (102:49)

That's a great point. Yeah. I mean, bitcoin does use a lot of energy for that proof of work or that computational power. I always made that case to people as well, which, you know, electric cars use a lot of power. Lots of things use lots of power. So I didn't think it was a very valid argument against crypto. But sometimes perception equals reality amongst people who have whatever motive or agenda. One great answer to that, by the way, is that like some of the blockchains like Ethereum moved to something called proof of stake instead of proof of work, which is just a different consensus algorithm. But the headline is that it uses 99.9% less energy. Right. So that was a big upgrade and that got some of the folks more bought in on crypto.

Interviewer / Podcast Host (103:31)

Should we let AI agents have Coinbase accounts?

Brian Armstrong (103:35)

Yes. I mean, I think AI agents need to get work done on our behalf and that includes money. Right. Like a simple example would be if you ask your AI agent to hey, book me this trip, plane ticket, hotel, or if you need it to go do a bunch of research and it needs to like get through paywalls on the Internet to read journal articles or if you say, hey, build me this website and it needs to spin up AWS and GitHub. And we've put a lot of work into actually enabling AI agents to have stablecoin wallets and be able to do these transactions. So we launched this protocol called X402 which allows any web request any agent makes to have a small payment attached to it. We made another one that lets any AI agent have a wallet inside it. And we're now seeing pretty rapid adoption of that, which is cool. And once in a while we see like an AI agent pay another AI agent, like a machine to machine payment. And these AI agents are essentially talking to other AI agents to get information, research tokens like words back from them and they'll ingest that and then use it in their response. Like one might be a specialist in something versus another and they're doing these microtransactions. And so yeah, the, the number of transactions in the economy I think could be orders of magnitude higher as we start to get machine to machine payments really that are low cost, global, frictionless.

Interviewer / Podcast Host (104:49)

And for the people who the agents are working for, would they just put limitations? You can spend up to this on this project, Is that how it would work?

Brian Armstrong (104:55)

Yeah, it's like an employee, you'd give it kind of spending limits and I mean the crazy thing is like you say, why wouldn't you give your AI agent like a credit card or something? But the whole apparatus behind banks that issue credit cards is they have to collect your identifying information and you have to be a human being and there's like chargebacks and user agreements. So the whole idea of like an AI agent, there's no human issuing a card to something that's not a human is like it breaks all of the financial services regulations around that. So I think stablecoins are a unique opportunity to get be the default rail for AI.

Interviewer / Podcast Host (105:27)

Are there any particular companies on the VC side of your business that you're particularly curious about?

Brian Armstrong (105:33)

Yeah. Okay, so Coinbase Ventures has invested in something like 500 Startups now and there's a bunch that are doing interesting stuff. Some of them are doing prediction Markets that are totally on chain, which I think is like an interesting next evolution of that. There's some that were building like an onchain ad network that I thought was interesting. Oh man, there's so many. Some of them are building just wallets and exchanges in emerging markets. Like they're really big. In a certain country around the world that is doing a good job. One that I think needs to still get developed, I haven't seen yet is like an on chain decentralized credit score. So, you know, like in the traditional world we have like a FICO score or your credit score and you can use that to get a loan or something. We don't have an equivalent yet in the decentralized identity world. I think that somebody should probably build that. So there's things like that.

Interviewer / Podcast Host (106:25)

Tell me about the idea of going public now. It's a hundred times easier to start a company, but it seems much harder to go public.

Brian Armstrong (106:35)

Yeah.

Interviewer / Podcast Host (106:35)

Is there a way around that?

Brian Armstrong (106:39)

Well, I mean, you can stay private forever, of course, and some big companies do that. I think that what'll happen in the future is that the life cycle of starting a company, raising money and eventually going public will happen more and more on chain.

Interviewer / Podcast Host (106:54)

So describe that.

Brian Armstrong (106:56)

Well, I guess just to explain the full vision. So today you often will create like a C corporation in the United States in like Delaware or something. Right on chain. You can actually make what's called a DAO or a decentralized autonomous organization. So it's kind of like the Delaware C Corp equivalent. And you can manage all of your governance and voting and things like that on chain in a smart contract. Okay. Then you need to raise money so you can issue shares out of that DAO and go on a platform like Coinbase. We're building this functionality now. We just acquired this company Echo that does this, but we're trying to integrate it where you could actually go in there and click a button and say, I want to raise money. In my series A kind of like what I did with Y accommodator back, whatever, 13 years ago. And anybody around the world who reads your investment memo or whatever, they could decide to invest and click a button and like the USD COIN or Bitcoin or whatever they want to use just instantly flows in Right today. Raising money is a huge pain for companies. It's like all you're chasing all these lawyers and there's all these bank transfers and it takes months and months and it's super expensive. So, okay, so you got capital formation happening more easily and then you can get to a certain maturity or size of company where you now want to go public, but do it on chain and make it available to retail investors. Right now, depending on which country you're in, like, you still need to probably follow the rules there. But like, auditing the company should be easier if it's all on chain because like, every transaction is just on a transparent ledger. Right.

Interviewer / Podcast Host (108:24)

You know, I think this be a whole alternate marketplace.

Brian Armstrong (108:28)

I think that from a customer point of view, they won't really know what market it's trading on. Like, one thing I've realized is a lot of people don't care about whether it's trading on chain or in a centralized exchange or something. They just want to buy cool things that they think are interesting. Right. Like, so we're trying to just take all that complexity out from the interface from their point of view. But yeah, I think like today it's actually very difficult to, to raise money. And there's only a few places like Silicon Valley where you can walk down Sand Hill Road and someone will be crazy enough to write you a check for this next crazy thing. You know, I went to school in Houston. Like there was no venture capital there and that. Imagine you grew up in like, you know, Bangladesh or something. Like, there's definitely nobody writing you a check for your crazy tech robot thing or whatever. So if we can actually just democratize capital formation and fundraising, there's people all over the world have cool ideas, they just don't have the ecosystem built up. Yeah, I think there could be something like a thousand X the number of startups or something per year.

Interviewer / Podcast Host (109:26)

Wow.

Brian Armstrong (109:27)

Hopefully good ones. You know, if you fixed like the friction around fundraising, capital formation and just incorporation and all that, if that all.

Interviewer / Podcast Host (109:36)

Happens and works, would Wall street become obsolete?

Brian Armstrong (109:40)

Well, it's like any big paradigm shift, like some of the firms will be smart and make the leap and others will not. And so, yeah, it's the innovator's dilemma.

Interviewer / Podcast Host (109:48)

Do you have any competitors?

Brian Armstrong (109:50)

Sure.

Interviewer / Podcast Host (109:51)

And how would you describe them versus you? And are any of the old model financial institutions, are they your competitors or do they look at you as their competitors?

Brian Armstrong (110:05)

Well, yeah. So a lot of times in financial services, it's funny because you're competing with them on one thing, but your partner on another thing. And so I don't want to like disparage any other company out there, but I will say from criminal point of the thing we try to do is we try to be the most trusted. We try to make the easiest to use products and we try to have deep crypto experience. Right. That's what we're trying to be the best in the world at. So yeah, we work with lots of those firms that are coming into crypto for the first time or, and there's other people doing stuff in crypto which I think is not as trusted or it's not as easy to use. That's what we try to do is most trusted, easy to use, deep crypto expertise.

Interviewer / Podcast Host (110:43)

Now with stablecoins, do you think any national currencies around the world will disappear?

Brian Armstrong (110:49)

Actually yes. I mean I think there's something like maybe like 150 or so fiat currencies in the world. This might be a provocative statement, but I'd say like maybe the top five or the top ten should exist and the rest should probably just all go away and be replaced by Bitcoin and crypto. I mean there's no reason to have every long tail country have its own fiat currency. I think most of those currencies are abused and not well managed and have low trust. And so yeah, I think crypto can update that.

Interviewer / Podcast Host (111:19)

Tell me about your relationship with Visa.

Brian Armstrong (111:23)

Well, we work with Visa on a number of things. We issued like a Coinbase debit card through them. They've done some really interesting pilots just in terms of starting to work with stablecoins and things like that. And I think they have really great leadership that understands this technology trend and why it's potentially something they should get involved in. And yeah, and I do think it's, there's a big open question for them, which is that that 2 to 3% that I mentioned, not all of that goes to Visa, but you know what happens if there is a global decentralized network that can move money instantly anywhere, anywhere in the world for less than a cent? That starts to sound a little bit like the card networks. Right. So I think the big card networks are looking at that and thinking about, okay, how do we make sure we embrace crypto and not be disrupted by it?

Interviewer / Podcast Host (112:05)

Yeah, Tell me about smart contracts.

Brian Armstrong (112:08)

Yeah, well, smart contracts are a really innovative concept, really pioneered in Ethereum, which is one of the blockchains that came after Bitcoin. And it allows you to put a contract into code. Right. And it can say, like I'll give you an example, let's say that you and I wanted to start an investment fund and you know, we each have like a 50, 50 vote and we both have to vote yes for an investment to be made. We can encode all of that into a smart contract. On chain and we can each put in our initial seed capital and then proposals can come into the chain and say, okay, Rick thinks we should invest in company abc, record all the votes, and the money just goes out. And all these rules can be enforced in the contract. Currently, the way this works in companies is it's enforced in legal contracts, which every time this needs to be interpreted, you have to pay lawyers. Oftentimes when people disagree, lawsuits ensue. It's all very slow and cumbersome. And so what if the law was code and it just, it executed literally what we agreed to? It's not like open to interpretation. Right. So smart contracts are a powerful concept. They're a little complicated to write. They need to get easier to write.

Interviewer / Podcast Host (113:18)

Would AI make them easier to write?

Brian Armstrong (113:21)

Potentially, yeah. I mean, AI is making every piece of code easier to write. And it's good at auditing code as well to look for vulnerabilities, which is important. But a lot of these things I, I've mentioned previously, like algorithmic stablecoin that's truly decentralized or decentralized identity, even like tokenized stablecoins or stocks, these are all really smart contracts underneath. So those are all ways that people have made novel things with smart contracts.

Interviewer / Podcast Host (113:44)

So it already is happening.

Brian Armstrong (113:45)

Yeah.

Interviewer / Podcast Host (113:47)

What is Give Crypto?

Brian Armstrong (113:49)

Well, Give Crypto is a nonprofit that I created. It no longer exists. This was a experiment that I tried. I was starting to get interested in the philanthropic side of things as Coinbase started to have success. And I was trying to think about, okay, what is crypto uniquely good at? So if it's good at making these global, fast, cheap transfers, what if we tried doing like, direct cash giving to people in emerging markets need and seeing if they can benefit from this? It was a little bit like, this is back around the time of like some of these universal basic income experiments. And like, Give Directly was another nonprofit I had looked at that was doing this kind of, you know, I guess like rigorous based giving around how could you save a life for the smallest, you know, like the most optimal amount of giving, Things like that. Anyway, I hired a guy to run it. We, we worked on it for a number of years. I guess one positive thing we learned was that if you do send small unconditional cash transfers to people in emerging markets, they actually can benefit from it. Like their scores around hunger and medical needs and things like that improved when the cash transfers stopped. Those metrics went right back to baseline, though. Basically it had no durable positive effect. And I guess what I was hoping maybe Was that, I don't know, people might use the funds to. People always proverbially in these micro loan things would talk about, oh, they'd buy a cow and that would allow them to create a business which in our experiments it didn't have any durable effect. The other thing that I learned about it, I'd say it gave me like a bit of a, kind of humbled me about how difficult it is to do philanthropy well. Like that was the first time I had tried doing something philanthropic. And I mean you can accidentally do harm sometimes in philanthropies, like if you give people free bicycles and it destroys the local bicycle shops or whatever. Right.

Interviewer / Podcast Host (115:39)

Yeah.

Brian Armstrong (115:39)

You know, I'd say I'm like more pessimistic on universal based income now. I don't, I don't, I, I think that idea is less likely to work. I'm more skeptical on micro loans. I actually think most charities, I guess it's true of most companies too, but most charities are not well run and don't have a good impact. Like there's various reasons people are doing it for like tax optimization and things, you know, and I guess like anything, like Maybe the top 1% of charities are probably doing great stuff. Charities attract a lot of like, I'd say unethical people too. For, for whatever reason. I'd say that made me like a little jaded on philanthropy, but yeah, it gave me respect for how to do it. Well, I don't know, I, I, I, maybe if it's not already clear, like I'm, I'm a big believer of like capitalism as a way to do good things in the world. I just think it's more clear. It's like, hey, if I make a product and people buy it, the only reason they're buying it is they're getting more value from the product than the money they paid. Like they want the jug of milk more than the dollar or whatever.

Interviewer / Podcast Host (116:36)

Yeah.

Brian Armstrong (116:36)

And so both parties benefit in capitalism in a very like honest way. And so in a charity, people only.

Interviewer / Podcast Host (116:43)

Come back and buy more milk if they like milk the last time.

Brian Armstrong (116:46)

Yeah. Or if your milk is better quality or lower price or whatever, you have to, you have to be doing something better. And it's, in some ways the like, free markets are the best regulator because if you're not making a good product or better quality, better price, like people are just going to leave and go somewhere else and they have choice. How do you create choice? You need a lot of people to try creating competing products Anyway. I, I'm very much like, yeah, more free market oriented on this. And, yeah, that's how I think you can protect people.

Interviewer / Podcast Host (117:11)

How did you come to the longevity company?

Brian Armstrong (117:13)

Well, yeah, so after Coinbase went public in 2021 and I, you know, I'd spent 10 years or so getting this thing from like, idea on my laptop to public company. And I remember I had this period of time where I was like, okay, do I want to be a public company CEO? I went and went around and talked to some other public company CEOs and they sort of told me the pros and cons of it. I figured, okay, I want to do another, at least another 10 years. Like, I really want to see this thing through. I feel like we're just getting started. But I also had all these ideas and I had some liquidity from the ipo and I was like thinking, okay, how can I try to help make progress? You know, there's a sort of golden age we're having in software where like, fortunes are being made. But like the hard tech companies, you know, robots and biology and space, and they require a lot more capital and they're a lot higher risk. And so I really admired some of these people who had taken money from their early software companies and tried even harder things, right? So I was like, okay, what do I want to try to do? And I, I think a lot of these areas that I identified that were like the biggest potential needle movers from like a civilizational progress point of view. It's like, okay, clearly AI and energy and robotics and like fusion energy and space and brain machine interfaces, which I'm very interested in. I was like, okay, I think there's like good teams working on, on these. And I didn't know, I didn't feel like I had something unique to contribute. The one of the other areas on the biology, you know, there's like digital life and there's like biological life. I'm like, who's working on biological life? Like, who's making that? You know, accelerating evolution and embryo editing and like, you know, there's all these human enhancement companies that are now like the GLP1s are an example of this. It's like a trillion dollar drug because, like, healthy people are taking it. Anyway, I started to host these dinners. I reached out to a couple friends of mine that were like the smartest kind of biotech folks. And I was like, let's put together some dinners and we go around the table and ask all these smart scientists and CEOs and stuff, like, what's the Most important thing on the horizon in the biospace that you think is not getting enough funding and attention. And people told me all kinds of crazy ideas, but one of the things they mentioned was epigenetic reprogramming, which is basically you can change your cell state. And this guy, this Japanese guy, Shinya Yamanaka, won the Nobel Prize in 2012, I believe, for demonstrating you could take a skin cell and reprogram it into a stem cell. You might remember under like George W. Bush, they, they had like sort of banned stem cell research. And so people were looking for ways to get skin cells into stem cells so you could have a way to do this. And I went down this another rabbit hole, kind of like with the bitcoin white paper where I started reading all about epigenetic reprogramming and okay, you can change cell state and some, some labs research on this. And I was like, okay, who's the company trying to restore function yourselves had when you were younger via this, this reprogramming methodology. And there wasn't really any company doing it. And so I had this same thought in my mind. I was like, hey, but I'm not like a bio guy. Am I crazy? Yeah. I started reaching out to a few interesting few of my friends that were the deepest in the space. And anyway, a company came together which I co founded with them, and it's called New Limit. So we're helping develop novel therapies that reprogram cells to have functions they had when they were younger. And that's been a really interesting experience too. So yeah, I'm trying to put capital into some of these really hard frontier tech, like hard tech problems of moving atoms, not bits. And that's been really fun.

Interviewer / Podcast Host (120:25)

That sounds really exciting. What stage are you at now with that company?

Brian Armstrong (120:29)

Well, we've raised a Series b. There's about 40 people in a lab in South San Francisco. And we have we done any trials. Our first drug candidate is probably going to go in clinical trials in 2027. Yeah, like we've built this whole machinery that kind of does like millions of hypotheses in using AI and then it takes the best ones and does them in the lab through this pooled screening approach. And the most promising, we do it in different cell types, like your liver cells and immune cells and your vasculature cells. And then we take the most promising candidates. With that, we run functional assays and then we test them on mice. Some of these are actually like humanized mice. They're like a mouse with like a Human liver inside it. And like different models people have come up with, we've demonstrated now for the first time that we've. We can restore the state that aged human cells had when they were younger or some of the function they had when they were younger. And so we're taking that, our first drug candidate, and it'll run through human trials in 2027. But there's a pipeline of these that we're going to do across different cell types, like your skin cells, your muscle cells. And so I'm hoping it throws off, you know, a dozen or more different drug candidates. Some of these might be base hits, some of them might not get approved. Some of them might be a home run. We'll see.

Interviewer / Podcast Host (121:41)

You created Coinbase to create an alternative financial system. If you were tasked with running JP Morgan, how would you change to be the company of the future?

Brian Armstrong (121:56)

Yeah, yeah. Well, those companies are already doing very well, I should say, so. It's not like. It's not a turnaround like they're failing, but I. I know what you mean. How would I, like, change the culture?

Interviewer / Podcast Host (122:04)

Yeah, yeah.

Brian Armstrong (122:05)

I mean.

Interviewer / Podcast Host (122:05)

Or future proof them, let's say future proof.

Brian Armstrong (122:07)

Okay. It's a good question. I mean, changing the culture of any organization is really difficult. Right. I'm doing it every day in kind of more iterative ways. But if you wanted to come in and just dramatically change the culture.

Interviewer / Podcast Host (122:19)

Yeah.

Brian Armstrong (122:21)

I think what you would do is you would first come in and take the lay of the land, Right. You'd come in, you have some biases in your mind coming in, but you don't want to just come in without any context and be like, you know, make some chopping heads off or whatever. So you come in maybe, I don't know, relatively quickly, let's say two weeks, four weeks. You don't want this to be a long thing.

Interviewer / Podcast Host (122:41)

Through interviews. How would you do it?

Brian Armstrong (122:42)

Yeah, you'd go around and try to, like, just meet a lot of the key people, and you'd get the lay of the land and reinforce some ideas here and there. What's good, what's not good. And then I think after 30 days or so, you would try to write down a set of changes. And you don't want to make it like a hundred things. You got to. You got to boil it down and keep it simple for people. And, you know, an example might be, let's say you had the insight that there's not enough engineers running things and there's too many lawyers or whatever.

Interviewer / Podcast Host (123:11)

Okay, that sounds like a realistic one.

Brian Armstrong (123:13)

Yeah. That would be an example. So like, if you want it to be a tech company, more engineers have to be in charge of stuff or something. Right. And then you've got to go in there and make major changes. Not like, not more iterative things. And so, yeah, you'd say, hey, look, today 80% of this is being run by. By lawyers. We love lawyers. We think they're important, but they should be input. They should not be the decision makers on these. If we're going to be a tech company, we've got to pivot in this direction. You know, these 25 engineers are now in charge of these. Thanks. Thank you very much. And by the way, some people might leave and that's okay. Like you might need to, because they just lost. Somebody's getting power, someone's losing power. So you have to be willing to break eggs along the way. Or if you thought the company was like, you know, too unprofitable or too profitable, these are the kinds of big sweeping changes you'd have to make. It would really depend on the situation of what you were trying to accomplish. But those are the. That's just kind of leadership 101 is like, go in and talk to as many people as you can, ask them what's going well, what's not going well, what would you change if you were me? But also have your own biases and then make big changes and don't be afraid to upset people.

Interviewer / Podcast Host (124:15)

And in the tech world, you would always put the most trust in the engineers. That's who you base it on.

Brian Armstrong (124:23)

Well, it's hard to make absolute statements. It's like anything. If you want to be a tech company, I do think you should have more engineers running things. And we have this debate inside Coinbase quite a bit. Like who should be the dri? Right. Like the directly responsible individual. There are situations where we put other, like product managers, designers, lawyers, other people in charge of. Like if we're saying, hey, we need to get a license in this country, let's make it a lawyer. Right?

Interviewer / Podcast Host (124:45)

Yeah.

Brian Armstrong (124:46)

It's situation dependent. But I do think in general that is a difference between traditional financial services and tech companies is that in traditional financial services, they think of engineers, software engineers, as like, kind of like the IT department.

Interviewer / Podcast Host (124:59)

Yeah.

Brian Armstrong (125:00)

And they don't have as much power within the organization. And in tech companies they do.

Interviewer / Podcast Host (125:04)

Do you think of the engineers as the company and then the lawyers keep the company out of trouble?

Brian Armstrong (125:10)

Yeah, there's like the go to market functions which are building the products for customers and then there's the risk functions. It's like HR compliance, finance and you want to make sure that like the risk function is there to make sure nothing get you don't blow the place up. But you should have the people the go to market functions, you know, product, engineering, design, et cetera being the owners of those things. Otherwise you have a company run by lawyers and it's, it's like super risk averse.

Interviewer / Podcast Host (125:35)

Yeah.

Brian Armstrong (125:35)

So you're not going to get in trouble but you're never going to do anything innovative ever again.

Interviewer / Podcast Host (125:38)

What are opportunities available for successful legacy companies to use blockchain to improve their business?

Brian Armstrong (125:46)

I mean one of the big ones is just upgrade to Stablecoin payments. Most companies are paying a bunch of fees and they have a bunch of delays. Like they have cash sitting accounts in different countries around the world. They're exposed to FX risk as they just start moving more and more to stablecoin payments. It takes a huge cost and inefficiency out of their company. You know, other people are like, let's say you're an E commerce site and you're trying to accept payments. Right. Like again you're losing 2 to 3% on credit cards. Like you can just update Stablecoin payments. Some companies are actually holding Bitcoin in their balance sheet now too because they're worried about inflation risk. So there's a whole like treasury management piece of that. Yeah. In the future there'll probably be other things, but those are some for today.

Interviewer / Podcast Host (126:27)

Why is crypto so difficult for us normies to understand?

Brian Armstrong (126:31)

Because it's complicated. I mean the average person, unless you have like a computer science degree and studied economics, it's difficult to get into the details of it. So I don't blame people for not understanding it deeply. But there's lots of examples of things in history like even electricity, people don't understand how electrons work, but in connectivity. But they can use a light switch. Right. Or the Internet. Right. The Internet, early Internet was like you know, command lines and dial up and IP addresses. It wasn't until we got like a web browser the average person could just click a link and benefit from it, share photos with their kids. So that's the stage crypto is going through is like it needs to become more scalable. Just like the Internet went from dial to broadband, it needed to become more usable. Like instead of these bitcoin addresses, like IP addresses getting human readable addresses. Now it's getting better security where people don't just lose their their self custodial wallets like all these Things are updating. The Internet is probably the best analogy actually to crypto, how it's evolving.

Interviewer / Podcast Host (127:32)

Is there a bank run equivalent scenario for crypto?

Brian Armstrong (127:36)

A bank run? I mean sometimes people may not know what that word means. So of course, you know, like in banks they actually do something called fractional reserve where they don't have all your money there, they're lending out sometimes like 95% of it. Right. And so if a bunch of people come and try to withdraw their money at the same time, it creates a liquidity crisis. And this is where you have FDIC insurance, et cetera. My view is that fractional reserve is actually one of the like original sins of the banking industry. I don't think they ever should have done that. Like, and the reason why banking is so heavily regulated is because they got permission with a bank license to not keep all your money there and they can lend it out. And so it's now creates the risk of these runs. So the better solution in my view is if someone is storing the money with you store 100% of their money there and if they want to earn a return on their money, they can choose to put it into some vehicle and earn rewards or yield or like lend it to someone. The customer makes that choice to lend it.

Interviewer / Podcast Host (128:36)

Yeah.

Brian Armstrong (128:37)

And, and then they're agreeing, oh, I'm not going to get my money back for like three years or whatever the time period. I think this next generation of financial service companies, including Coinbase, like we can make a good living, a very healthy business without doing engaging in fractional reserve and it eliminates this entire category of risk. So yeah, like with stablecoins they're 100% reserve, so there's no possibility of a bank run in that case. I mean you did see companies like FTX with Sam Bankman fried, that blew up in a run scenario. But that's because he was committing fraud. He was essentially, he took the customer funds without their permission, put them in a bunch of longer term investments, high risk things and then when everyone came to withdraw he's like actually I don't have the money. That's because he was violating the law and his user agreements. If you have 100% reserves, which, you know, Coinbase's reserves are audited and Deloitte comes in and looks at these things periodically and so you can trust them or in a self custodial wallet you don't have to trust us or Deloitte, you can just store it yourself. And it's 100% reserve. So that's an Important area crypto can create more trust.

Interviewer / Podcast Host (129:40)

It sounds like the fractional reserve issue is similar to fiat cash not being backed by gold. It's the same principle. Is that right?

Brian Armstrong (129:50)

So that's another great example. I mean, yeah. So fiat. A lot of people think the dollar is backed by gold. It's actually not anymore. Right. And through a series of events starting in the 1930s and then in 1971 under Nixon, it finally went off the gold standard. So it's not like for the dollar, they're claiming there's a certain amount of gold, and then you could go and see if it has fractional reserve or less. It's actually just not backed at all by gold. And there's a crazy video, if you go watch it, of Nixon announcing this during the Vietnam War, where he says, as a temporary measure, we will be disconnecting the dollar from the gold backing, which, of course became permanent. And the reason they did it was they essentially needed to print more money to fund the Vietnam War. And having a gold backing was a form of a control to have in place to make sure that we didn't have just runaway inflation. Right. There's actually a great website I don't know if you've ever seen. It's called WTF happened in 1971? And it's all these crazy graphs all over the world of something just inflected in 1971. It's basically the US went off the gold standard. And there's a lot of truth in that. In some ways, Bitcoin is a return to a new gold standard, right. For the monetary system. And I'm here for it.

Interviewer / Podcast Host (131:32)

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