Kings of Crypto One Startup's Quest To Take Cryptocurrency Out of Silicon Valley and Onto Wall Street (Jeff John Roberts)

Kings
of
Crypto
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Kings
of
Crypto
One Startup’s Quest to
Take Cryptocurrency out of
Silicon Valley and onto Wall Street
JEFF JOHN ROBERTS
Harvard Business Review Press

Boston, Massachusetts
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Copyright 2021 Jeff John Roberts

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Library of Congress Cataloging-in-Publication Data
Names: Roberts, Jeff John, author.

Title: Kings of crypto : one startup’s quest to take cryptocurrency out of
Silicon Valley and onto Wall Street / Jeff John Roberts.
Description: Boston, MA : Harvard Business Review Press, [2020]
| Includes index.
Identifiers: LCCN 2020036284 (print) | LCCN 2020036285 (ebook)
| ISBN 9781647820183 (hardcover) | ISBN 9781647820190 (ebook)
Subjects: LCSH: Armstrong, Brian, 1983- | Cryptocurrencies.
| Cryptocurrencies–United States. | Money–United States. | Currency question.
Classification: LCC HG1710.3 .R85 2020 (print) | LCC HG1710.3 (ebook)
| DDC 332.4–dc23
LC record available at https://lccn.loc.gov/2020036284
LC ebook record available at https://lccn.loc.gov/2020036285
eISBN: 978-1-64782-019-0
The paper used in this publication meets the requirements of the American National
Standard for Permanence of Paper for Publications and Documents in Libraries and Archives
Z39.48-1992.
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For my wife, Amy
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Contents
A Note on Sources ix
PA R T O N E
From Open Secret to Civil War
1. Brian Has a Secret 3
2. The Outlaw Currency 17
3. Running through Brick Walls 33
4. Bust 53
5. Hard Times 63
6. Civil War 75
PA R T T W O
From Boom to Bubble to Bust
7. Enter Ethereum 87
8. Wall Street Comes Calling 99
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viii Contents
9. Brian Has a Master Plan 109
10. Uncle Sam Comes Calling 121
11. Initial Coin Insanity 133
12. Coinbase Crackup 149
PA R T T H R E E
From Crypto Winter to the Crypto Future
13. Hangover 165
14. “Getting Our Asses Kicked” 177
15. Power Struggle 185
16. Bitcoin Triumphant 201
17. The Future of Finance 211
Epilogue 221
Index 227
Acknowledgments 235
About the Author 237
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A Note on Sources
I first encountered bitcoin and Coinbase in 2013. I was a reporter at

the tech blog GigaOm, where I reported on collisions between law
and technology—including the then-novel phenomenon of cryptocur-
rency. On a hot July day, I set out to investigate an event called Satoshi
Square, which took place in a corner of New York’s Union Square.
Believing I would need a bitcoin to participate, I bought one for $70
from Coinbase, intending to expense it. Happily, I forgot to do so and
ended up holding on to it—and sold half of it later that year when the
price hit what seemed to be an absurd high of $800.
Since then, I have been fascinated with cryptocurrency and the role
Coinbase has played in bringing it to the general public. I have writ-
ten about the company numerous times since 2013 for GigaOm and for
Fortune magazine.
In researching this book, I drew on my earlier work and also con-
ducted numerous additional interviews with Coinbase executives and
board members. I also interviewed many other influential figures in
the cryptocurrency world, including academics, investors, and those
close to Coinbase’s competitors. Most of the accounts in this book,
including nearly all of the quotes attributed to people at Coinbase, are
from those interviews.
I have also drawn extensively on secondary material, including
news reports from Wired, the New York Times, Forbes, and Coindesk. The
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x A Note on Sources
reporting in Kings of Crypto also makes use of the excellent first gen-
eration of cryptocurrency histories, including Digital Gold, The Age of
Cryptocurrency, and Blockchain Revolution. When I have relied on mate-
rial directly from these sources for my own narrative, I’ve made every
effort to identify them accordingly.
Finally, this work represents a more polished version of the audio
version of Kings of Crypto, which came out in May 2020. The book
you now hold in your hands includes more recent news surrounding
Coinbase and corrects several minor errors.
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PA R T O N E
From Open
Secret to
Civil War
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1
Brian Has
a Secret
B
rian Armstrong stepped out of his car, felt soft California
sunshine on his bald head, and smelled eucalyptus. He gazed
at the façade of Y Combinator: the one-story building, just
five miles from Google’s Mountain View campus, looked more like
a sleepy suburban office park than a famous startup school that had
educated the founders of Stripe, Dropbox, and other billion-dollar
companies. Brian didn’t care about the place’s humdrum appearance.
He knew who had gone there before him. The founders of Airbnb, a
company he’d just left, had come out of Y Combinator, and so had the
CEOs of other Silicon Valley stars like Doordash, Twitch, and Reddit.
Brian, pale and shy-looking at first glance, exuded a quiet confidence
from his trim frame and wasn’t bothered that he’d broken up with his
would-be cofounder just days before, making him the rare entrepre-
neur to do the program alone. It was the summer of 2012, and Brian
was brimming with certainty that he would build Y Combinator’s
next famous startup.
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4 From Open Secret to Civil War
It wasn’t always this way. Twelve miles to the south, in San Jose, is
where Brian had spent his early teenage years in the 1990s, restless and
vaguely unhappy. San Jose is the tenth-largest city in the country and
the hub of Silicon Valley, but it could still feel—then and now—like a
lifeless parking lot where many people have nothing to do. Brian felt
like that a lot. Until the internet.
As it had for so many other intelligent but introverted kids, the
appearance of the World Wide Web brought friends to Brian as well
as a flood of exciting ideas. Being stuck in poky San Jose didn’t matter
now that he had a global community of hackers and philosophers at
his keyboard. By the time he arrived at Rice University in 2001, Brian
knew he wanted to use the internet to remake the world in the way
an earlier generation of tech visionaries had done with microchips and
desktop computers.
But there was a problem.
“I always had this thought, ‘I wish I was born a bit sooner.’ By the
time I graduated from college and I was starting to work, I worried
maybe I was too late,” Brian recalls. “The formative internet compa-
nies had been built, and the revolution had happened.”
He was wrong, of course. The internet revolution is still blazing,
and entrepreneurs, for better and worse, are using it to remake our
homes and our lives. And in late 2008, a mysterious person using the
name Satoshi Nakamoto published a nine-page white paper on the
web that would bring that same revolution to money. Brian discovered
that paper a year later.
It was Christmas, and Brian was in his old room back at his parents’
house in San Jose, reading tech news on the internet, as usual. Someone
had posted Satoshi’s paper on a computer discussion forum. Right
away, he was rapt. He read and then reread what the paper described:
a new type of digital currency known as bitcoin that operated outside
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Brian Has a Secret 5
the realm of any bank, company, or government. Bitcoin kept track of

who paid whom just as a bank did, but the transactions were recorded
by random people on computers scattered around the globe. It was
real money without banks or borders. Brian began reading Satoshi’s
paper a third time, ignoring his mother’s calls from downstairs to join
the family for dinner.
Two and a half years later, as he walked through the doors of Y
Combinator, Brian was more fixated on bitcoin than ever. By now, he
had developed a special insight of his own about the currency, one that
he would soon deliver to millions of people.
• • •
In his startup bible, Zero to One, mercurial billionaire Peter Thiel talks
about “open secrets”—business ideas that are just there for the pluck-
ing by those who are not afraid to challenge conventional thinking.
Thiel gives the example of Airbnb, whose founders saw a latent market
for empty rooms, and Uber, whose founders realized it was possible to
replace taxis with a GPS signal and a smartphone app.
The books of business writer Michael Lewis provide other exam-
ples of open secrets. In Moneyball, Lewis describes a general manager
who built a winning baseball team by relying on data rather than the
long-held wisdom of veteran scouts. And in Liar’s Poker, he recounts
how a trader made a killing at his Wall Street firm by bundling home
loans into mortgage bonds—an obvious idea, but a secret at the time
because popular consensus dismissed it.
In 2012, Brian had grabbed an open secret of his own. He knew
bitcoin could be a world-changing technology, but that buying it—
for most people—was a confusing, convoluted experience. What
if he could make it simpler? Y Combinator President Sam Altman
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understood the power of such simplicity and what Brian sought to do.
“Making things easy to use is important to 99 percent of people, but
technical people overlook that. When Dropbox launched, program-
mers would say, ‘I don’t get why anyone needs this when you can use
these command line tools and make backups of all your files,’ ” he says,
describing a computer process obvious to programmers but baffling
to everyone else.
The same reasoning applied to bitcoin. More people would try it if
only someone built a website where they could buy it the same way
they bought stocks online. But the bitcoin devotees who could build
such a site scoffed at the idea. They didn’t see the point. Instead, many
sought to lift the technical principles of Satoshi’s paper and build a
cryptocurrency of their own in hopes of getting rich. In Altman’s
words, “Everyone in the crypto community wanted to start a new
version of bitcoin. There was this mindset at the time of, ‘I’m going
to get rich quick by making a new coin and keeping 20 percent for
myself.’ ”
Brian saw it differently. Seizing on that open secret—the pent-up
demand for easy access to bitcoin—he built a mockup of what would
become the website Coinbase. And on August 21, 2012, Brian took
the stage on Y Combinator’s Demo Day, a semiannual event where so
many startups strut their stuff before venture capitalists and the tech
press. It is a small moment of glory for the founders to savor before,
inevitably, most flame out in the following months. That’s the ordi-
nary fate of startups, but not all of them, including two other compa-
nies in Brian’s class: one was Instacart—now a billion-dollar grocery
service—and the other Soylent, a meal-replacement product that’s
since built a cult following in Silicon Valley and beyond.
When it was his turn to present on Demo Day, Brian stepped onto
the stage with quiet confidence. He turned to the audience and shared
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his idea with the simple slogan: “Coinbase: The easiest way to get
started with bitcoin.”
It seemed so obvious—in retrospect.
• • •
Brian’s early insight into bitcoin would make him a billionaire. But
it would cost him a friend. In that summer of 2012, Brian had not
planned on going to Y Combinator alone, where one-man bands were
discouraged. The startup school wanted cofounders. Plural.
Despite Silicon Valley’s veneration of individual entrepreneurs, the
reality is that tech startups, like so many creative endeavors, are very
much a team sport—often a two-person partnership. In works like
Collaborative Circles and Powers of Two, researchers have shown how
genius is rarely solitary: John Lennon and Paul McCartney relied on
each other to compose timeless Beatles hits; Pablo Picasso and Georges
Braque used their brushes side by side to create Cubism; biologists
James Watson and Francis Crick worked intensely together to discover
the double helix and DNA.
Tech is no different. Apple is famously associated with Steve Jobs,
but, in its early days, the computer company wouldn’t have gotten off
the ground without the other Steve—Jobs’s partner and programming
virtuoso Steve Wozniak. The same is true with Google. The Stanford
graduate supervisor of Larry Page and Sergey Brin has remarked on
the near total mind-meld of the search engine founders. And a garage
in Palo Alto, known as the birthplace of Silicon Valley and now an offi-
cial California state landmark, did not belong to a lone inventor but to
two men: Bill Hewlett and Dave Packard, who founded HP.
Experience had taught Y Combinator’s overseers that a good
cofounder is as important as a good business plan. “If you look at the
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history of successful companies, they’ve been founded by partners,”

says Y Combinator’s Altman. “In our experience, it’s very, very hard to
be a single founder. The ups and downs of a startup are so intense that
you need to cheer each other up when someone is struggling.”
And right up until the start of the Y Combinator program, Brian had
a cofounder. His name was Ben Reeves. A shy, young British kid, Ben
was a programming wizard who believed in bitcoin with the same pas-
sion as Brian. The pair clicked upon meeting on a bitcoin discussion
website. Before long, Brian and Ben made plans to start a company
together. They applied to Y Combinator as a team, and the presti-
gious school accepted them. But days before Ben was due to board
a plane from the UK, the pair clashed on a key issue and Brian jilted
him. “Cofounding is really like a marriage. Even though I think we
have mutual respect for each other, we don’t work together extremely
well,” Brian emailed Ben a few days before Y Combinator.
For good measure, Brian changed the passwords to the libraries of
code they had been building together. In startup land, it was the equiv-
alent of cutting off a spouse from a joint bank account. But it had to
be done.
The point on which Brian and Ben had disagreed wasn’t an aes-
thetic one or even a strategic one. It was an existential one. Their
dispute turned on a near-religious clash about what bitcoin was sup-
posed to be.
When the pseudonymous Satoshi Nakamoto revealed bitcoin in his
nine-page paper, he described the invention of a new and decentralized
technology. That word, decentralized, is critical. It meant no single per-
son, company, or government could control the network on which bit-
coin is built. Meanwhile, people who bought and sold bitcoin could not
rely on a bank or anyone else to manage their stash of digital money.
Owning bitcoin meant using something called a private key—a long
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gobbledygook string of letters, numbers, and symbols—that opened

and closed your online wallet. If a person lost that key, it was gone
forever. It was the digital equivalent of a pile of cash in an unbreakable
safe to which no one knew the combination.
That’s where Coinbase came in. Brian’s idea—the open secret he
seized on—was to provide a service where you could own bitcoin
without controlling a private key. Coinbase would do it for you.
It was a commonsense solution. But bitcoin purists saw it as heresy,
against everything Satoshi stood for. It didn’t matter that customers
could use Coinbase to buy bitcoin and then transfer it to a wallet they
controlled with a private key. It was a matter of principle. In the eyes
of the purists—the overwhelming majority in the crypto community
back in 2012—Brian and his vision of Coinbase stood for the c-word:
centralization. He was a heretic and a traitor to Satoshi’s vision.
Brian and Ben never reconciled. Ben would go on to build a success-
ful bitcoin company of his own, but he has never forgotten how Brian
had jilted him. Years later, he allowed Wired magazine to publish ver-
batim the text of Brian’s break-up email. His LinkedIn page still reads,
“Coinbase founding team member.”
Brian today plays down the rift. The divorce with Ben came at the
prodding of a senior executive at Y Combinator, and Brian believes it
was necessary. But at the time, it was also a major problem. As a result
of his last-minute breakup with Ben, Brian became the rare entrepre-
neur to go through Y Combinator as a single founder. In doing so, he
had reaped the accelerator’s coaching experience and could tap into its
fantastic Rolodex of mentors and investors. But he had no one to cheer
him up or encourage him when things got hard. And they were about
to get very hard.
While Y Combinator offered prestige and publicity because of the
small number of companies it accepted into its fold, acceptance was not
ch01.indd 9 05/10/20 3:02 PM

the same as success. The reality was, after the program’s much-hyped
Demo Day, over 80 percent of the startups quietly ran out of money
and turned to dust. And those companies typically had two or three
founders pulling out all the stops. In the summer of 2012, Coinbase was
little more than a marketing idea and an unfinished website with a sin-
gle founder. The company needed much more to get off the ground—
millions more lines of code, product testing, a business plan and, of
course, real-life customers. If Brian couldn’t pull this off, Coinbase
would share the fate of most startups: failure. Brian’s odds were grim.
• • •
Five miles south of Y Combinator in Mountain View is another Silicon

Valley town called Sunnyvale. It has the same soft air, eucalyptus
scent, bland suburban streets, and a stop for the Cal-Train, the region’s
poky commuter rail service. It’s home to dozens of notable tech com-
panies, including Atari, Yahoo, Palm, and the chip maker AMD. That
same summer of 2012, it also become home to a young Wall Street
refugee named Fred Ehrsam.
Fred was one of those golden kids everyone knows in high school.
He had a model’s good looks—a chiseled face and a flop of blond hair—
and he radiated swashbuckling athleticism. Growing up in Concord,
New Hampshire, he had run with the popular crowd—of course he
did—but it never felt right.
“I felt like an observer of my own life,” he says. He did what he was
supposed to do: got good grades, excelled at lacrosse and basketball.
The desire to please his father gnawed at him. Fred’s dad was a hard-
charging engineer who had graduated from Harvard Business School
and expected the world. Years later, staring out from a magnificent
penthouse with bountiful views of the city of San Francisco and the
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ocean beyond, Fred still didn’t know if he measured up. “Even if you’re
very good at a video game, the levels keep getting harder and harder,”
he said wistfully.
Fred’s choice of metaphor is fitting. Video games are something he
knows better than almost anyone else. Although the world around
him in high school never felt right, the one he found on the internet
sure did. Every day, he would leave lacrosse or basketball practice as
soon as he could and rush to play World of Warcraft or Call of Duty,
often staying up all night so he could stay competitive in two online
leagues—one in the US and another in Europe. By the time he was
a senior, he was a professional gamer, entering and winning tourna-
ments around the country.
Video games gave Fred an escape from the pressures of high school
and family life, but only a temporary one. Soon enough, it would be
time to get a college degree, which he earned as a computer science
student at Duke University, and then it was time to make a respect-
able living. And he did, taking a job as a foreign exchange trader at
Goldman Sachs. “Being a forex trader at Goldman Sachs was the clos-
est I could get to playing a video game in real life while also having a
job that came with money and prestige,” he admits.
Fred looked the part, and he was good at the job. That didn’t mean
he liked it. In fact, he was dying inside. His bosses at Goldman Sachs
were old-school Wall Street types who had come up bellowing into
telephones and jostling with other men in trading pits. And they didn’t
like the new style of trading that was creeping into the finance indus-
try, one that largely rewarded those who wrote the best algorithms.
The prophecy of the famous West Coast venture capitalist (and future
Coinbase board member) Marc Andreessen, “Software is eating the
world,” was coming true. And it was going to swallow up those old-
school traders. Even if they didn’t want to admit it.
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“They called the software engineers ‘IT’ and treated them as second
class,” Fred recalls. “They had this aversion to automation. If I wanted
to do something that could replace half the trading desk, they didn’t
want that. It was a very bizarre time.”
It was like high school all over again. On the surface, Fred looked
and acted the part of a hotshot trader, and he was pleasing his parents,
but deep inside he wished he was anywhere else. So he responded as
he had back then, taking refuge late at night on the internet, discover-
ing people and worlds and a place he belonged. This time, he became
transfixed by blogs and Reddit threads about a new digital currency
that anyone could access without a central bank—or, for that matter,
a merchant bank like Goldman Sachs. Bitcoin, a currency free of gov-
ernments, wasn’t just an intriguing idea, Fred felt. It was a necessary
one. Day after day, he watched Wall Street gorge itself on Federal
Reserve funds. The situation overseas was even worse—countries
like Greece fumbled from bailout to bailout as a result of epic mis-
management by political leaders. In contrast, the once-crazy concept
of bitcoin looked sane. Also, Fred saw in bitcoin a job for which he
was born: he knew about digital money from years of using video
game currency, and he knew about finance as a Wall Street trader. He
wanted in on bitcoin.
There was just one problem. All of the action appeared to be
taking place in Silicon Valley. This was a place he’d heard about,
of course, but growing up in New England, he didn’t grok what
it was all about. Gradually, though, he came to realize—just as
painters f locked to Paris and moviemakers to Hollywood—Silicon
Valley was where you went if you wanted to do great things with
software. Even New York City, which supposedly had everything,
didn’t offer that particular mix of business hustle and computer sci-
ence wizardry. It was time to go. After two years at Goldman, Fred
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took leave of the tall buildings of Wall Street and struck out for
suburban Sunnyvale.
• • •
Fred and Brian met at The Creamery. Like so many other famous Sili-
con Valley venues, The Creamery doesn’t look like much: a low-slung,
single-story wooden building with white letters above the doorframe; a
small patio; some seat-yourself indoor tables; a menu of breakfast sand-
wiches, salads, and the usual assortment of cocktails and cappuccinos.
It’s a modest place on a nondescript San Francisco street corner, yet its
walls have heard billions of dollars’ worth of venture capital deals and
countless startup pitches for massive successes and failures alike.
Maybe The Creamery is popular because it’s right near a freeway
off-ramp and a Cal-Train station. Maybe it’s because patrons can walk
right in and out, with no fuss. Or maybe it’s just because tech peo-
ple have always met there. (Its numerous well-heeled customers could
not help The Creamery survive the pandemic, however. The famous
establishment closed in August of 2020.)
In Brian’s case, he chose The Creamery because it was right across
the street from the makeshift office he had rented at 1 Bluxome Street.
He had wrapped up at Y Combinator a few months before with a bulg-
ing list of contacts and potential investors, while the startup school—
as it does with everyone who enrolls—took 7 percent of his company.
Still, Brian was very much alone, professionally and personally, when
Fred replied to one of his bitcoin threads on Reddit.
Fred had left Sunnyvale a few weeks before, where he had been
bunking with old college friends, and was now living in San Francisco.
When he met Brian, it was like one of those rare Tinder dates that
actually clicks. “Something felt right in my gut about this. It just felt
ch01.indd 13 05/10/20 3:02 PM

exciting,” Fred recalls. This emerging company called Coinbase felt

like a rollicking video game he had never played before. But it was
real.
The bromance between the mid-twenty-somethings was mutual. If
Brian had had cold feet about a startup marriage with Ben, this time
he was ready to jump in quickly. In Fred, he had found a cofounder,
a friend, and a fellow fanatic. Together, they bashed their keyboards
around the clock, often working sixteen-hour days as they struggled
to compile the code that would let people do what hadn’t been done
before: acquire bitcoin simply by providing a bank account number.
No overseas wire transfers, no intimidating mathematical strings—
just a basic website that felt like online banking.
It had been nearly four months since Brian had taken the stage at Y
Combinator. Now, in November of 2012, it was time to see if Coinbase
was for real. It was time to launch a feature to buy and sell bitcoin
with one click. A whisper of San Francisco fog sat outside the win-
dow as Brian and Fred huddled anxiously over a laptop as the feature
went live.
• • •
Success!
A trickle of customer orders came dribbling into the website. Weeks
later, it was a stampede. Word got around about this new and easy way
to buy bitcoin. Volume increased, and so did their workload as Brian
and Fred struggled to keep the site up and running.
The first crisis came when a software bug skewed the appearance of
customers’ bitcoin balance. On the Coinbase side, things were fine—
the bitcoin was there—but for some customers, it looked like they had
been wiped out. Coinbase’s crude customer service portal flashed with
ch01.indd 14 05/10/20 3:02 PM

dozens, then hundreds, then more than two thousand frantic requests
from panicked clients.
“Where the hell is my bitcoin?” “Is this a scam?” “Give me my
money back!” The anxious, often abusive, invective kept pouring in. It
was a critical moment for a fragile startup with an even more fragile
reputation in an industry fraught with distrust. Brian and Fred worked
around the clock, taking turns sleeping on the floor while the other
beat back the cascade of customer requests and repaired the bug.
Finally, following hour after hour of exhaustive coding, the fire was
out and the site was fixed. Coinbase’s credibility was restored. Brian,
calm as ever, turned back to reading tech news. Fred, too frugal to
take an Uber, stumbled toward home in San Francisco’s notorious
Tenderloin district, whose streets jangled with broken glass and the
screams of junkies. Fred passed through it all oblivious. At one point,
he shuffled for two blocks behind a blind man who staggered pitifully
down the wretched sidewalks.
Finally, Fred found his way into his bed. People outside were still
stirring.
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ch01.indd 16 05/10/20 3:02 PM
2
The Outlaw
Currency
K
atie Haun typed the letters F-N-U L-N-U on the new crim-
inal file—“first name unknown, last name unknown.” It’s
how federal prosecutors refer to suspects yet to be identified.
They pronounce it “fe-new el-new.”
Haun was glad for the opportunity to track down this FNU LNU,
whomever he was.
A blonde woman brimming with energy, she had arrived in San
Francisco in 2009 as someone streaking to the top of the legal world.
Haun had clerked for Justice Anthony Kennedy at the Supreme
Court—a ticket to whatever high-paying job she liked. Instead, she had
chosen to work for the feds. For three years now, her job had revolved
around some of the most violent degenerates in the Northern District
of California, and she prosecuted them with zeal: organized crime
bosses, biker gangs that brutally murdered their rivals. She put them
on trial and sent them to prison. The work was interesting as hell, but
she was ready for something new, something less bloody.
ch02.indd 17 05/10/20 3:04 PM

This FNU LNU character fit the bill. Details were sketchy—all her
superiors could tell her was that the case involved computers and a
whole lot of illegal activity. “My boss came in and said, ‘How would
you like to prosecute this other new thing called bitcoin?’ I had never
heard about it at the time,” Haun recalls.
Still, she said yes immediately.
• • •
The idea of prosecuting a currency seems ridiculous. It makes as much

sense to put bitcoin on trial as it does to cross-examine a hundred-
dollar bill. But for prosecutors in 2012, unclear on what bitcoin was
but clear on what was happening around it, it made sense. The digital
money kept turning up in a whole spate of criminal activity—from
money laundering to drug sales to extortion. Many in law enforce-
ment were connecting dots between the currency and crimes. Some
kingpin surely had a hand in all of this.
It didn’t take Haun long, though, to figure out that her FNU LNU
suspect was not a crime boss or mob outfit. It was a radical new tech-
nology. And so she did what most people do when they become inter-
ested in bitcoin. She started reading.
Bitcoin newcomers quickly discover the subject is a rabbit hole, and
that it can take hundreds of hours to learn the ins and outs of top-
ics like “hash rate” and “consensus mechanism.” Haun didn’t need to
know all that. She needed to know the basics. And at the most basic
level, she realized that bitcoin is a computer program, albeit a very
clever one. Anyone can download and run it on a home laptop. On
its own like that, it’s not that inspiring, or even useful. The clever-
ness—the magic of bitcoin—is that it runs on thousands of computers
around the world. And together, all of those computers are creating a
ch02.indd 18 05/10/20 3:04 PM

The Outlaw Currency 19
permanent ledger of transactions that show who’s spending the digital

money the program creates. Collectively, they’re a bookkeeper that
never takes a break and holds a record of every bitcoin transaction ever
made. A bitcoin spent in 2010 appears on the ledger for all to see today.
A millionth of a bitcoin paid today—yes, that’s possible—will show up
on the ledger within minutes and never leave it. It can’t be removed or
erased, and everyone can see it. Bitcoin also uses fancy math to make
every transaction nonrepudiable; that is, both technically and legally,
there’s no disputing that it happened.
The transactions don’t appear one at a time. Instead, every ten
minutes or so, one of the computers on the network rounds up a new
series of the most recent transactions and stuffs them into a package
of computer code called a block. Each new block refers to the one that
came before it, resulting in a long series of transactions wrapped into
parcels and visible to everyone. It’s called the blockchain. Today, there
are many blockchains, and the term can refer to any piece of software
that relies on multiple computers to create a ledger of transactions. But
the bitcoin blockchain is the first and the most famous one.
The first block appeared on the bitcoin blockchain in 2009 when
bitcoin’s shadowy creator, Satoshi Nakamoto, put it there. Since
then, computers around the world have added more than half a
million additional blocks. At the end of 2019, block 600,000 arrived.
It was chained to block 599,999 and, like the others before it, it con-
tained a list of transactions showing how people spent bitcoin. The
blockchain doesn’t spell out the names of who owns each stash of
bitcoin. Instead, it shows a long jumble of letters and numbers associ-
ated with each bitcoin owner. Everyone on the blockchain has one of
these number-letter jumbles. They’re called addresses. If this sounds
familiar, that’s because this concept of a jumble of letters and num-
bers came up earlier in the context of a private key, which is how an
ch02.indd 19 05/10/20 3:04 PM

owner gets access to the bitcoin associated with a given address. The
important thing to know is the computer program assigns every bit-
coin owner two number-letter jumbles: one for the address everyone
sees on the ledger and the other for the private key needed to access
their bitcoin.
What Brian did by creating Coinbase was remove all the complexity
around addresses and private keys in the first place and let people get
bitcoin in a way that resembled online banking. Storing private keys
on thumb drives and special software wallets was well and good for
techies. Most other people, though, couldn’t be bothered. They pre-
ferred to turn to a technical middleman: Coinbase.
Coinbase, however, still uses the blockchain. When it buys and
sells bitcoin on behalf of its customers, it generates transactions pack-
aged into blocks and added to the ever-growing ledger, just like any
other. But unless you knew which address Coinbase was using for a
transaction, you would be hard-pressed to know the company was
involved. That’s the thing about bitcoin: even though the blockchain
is public for everyone to see, you don’t know to whom a given stash of
bitcoin belongs unless the owner identifies the address as their own.
The blockchain might show $1 million worth of bitcoin sitting in an
address that could belong to a Silicon Valley big shot or a Russian oli-
garch or some college kid in Korea. Today, a number of blockchain
forensics firms can, in some cases, make a good guess about who con-
trols a given bitcoin address itself. But in many other cases—especially
when the owners of accounts are careful about covering their tracks—
there’s no way to know whose transaction is showing up on the ledger.
This is the brilliance, and some say the danger, of bitcoin as a truly
anonymous currency. It’s also why Katie Haun and other members of
law enforcement thought bitcoin could only be the creation of a secret
criminal mastermind.
ch02.indd 20 05/10/20 3:04 PM

But for all bitcoin’s technical elegance and brilliance, there’s still
one more bit of engineering—this time social—required to make bit-
coin go. The blockchain ledger requires a distributed network of vol-
unteer computers. Why would anyone go to the trouble of lending
their computer to this global record-keeping system? Satoshi thought
of this incentive problem, too. His answer was an ingenious lottery
system baked into the core of bitcoin. This system invites anyone to
enter a contest to win bitcoin by solving a math problem that can only
be deduced through a massive process of trial and error. The contest
takes place every ten minutes or so, and whoever is first to find the
answer broadcasts it to the other computers on the network. In doing
so, that person adds the latest block—which contains both the solu-
tion to the math problem and the most recent batch of bitcoin trans-
actions—to the ledger. Provided the solution is correct, the lottery
participants—known as miners in the bitcoin world—move on to solv-
ing the next math problem. For their trouble, winners gets a stash of
bitcoin associated with each block. Some people call this stash the block
reward. Some call it the coinbase.
Bitcoin’s blockchain and reward system is clever—brilliant, even.
But that doesn’t explain why bitcoin are worth anything in the first
place. After all, bitcoin aren’t even coins. They amount to no more
than wisps of computer code you can’t see or touch.
But that doesn’t matter. Bitcoin is currency, and currency is trust.
What matters is that enough people agree bitcoin are worth some-
thing and will give up something of value to get them. In this sense,
bitcoin is no different than any other currency people have used over
the course of history: shells, chunks of yellow metal, pieces of paper
printed by a bank or government. Right now, tens of millions of people
believe bitcoin is valuable—and will pay thousands of dollars to own
one coin.
ch02.indd 21 05/10/20 3:04 PM

In the beginning, bitcoin was worth what skeptics say it should be

worth: nothing. Well, nearly nothing. In early 2010, a handful of online
exchanges sprang up selling dozens of bitcoin for mere pennies. These
exchanges offered an easier way to get hold of bitcoin than trying to mine
them through a math-problem lottery. But for most people at the time,
buying bitcoin with US dollars made as much sense as trading a cow for
magic beans. It was a make-believe currency for fools and fanatics.
Then, on May 22, 2010, bitcoin gained currency, literally. A Florida
man named Laszlo Hanyecz sought to show the world that bitcoin
could be worth something in the real world. On an online forum,
Laszlo made an offer: “I’ll pay 10,000 bitcoin for a couple of pizzas . . .
like maybe two large ones so I have some left over for the next day.” A
fellow in the UK accepted the offer. He received the 10,000 bitcoin—
then worth around $35—and sent two Papa John’s pies to Laszlo’s
house. The bitcoin-for-pizza swap made news in tech outlets around
the world, and the wave of publicity helped the price pop. If Laszlo had
done the transaction a year later, in 2011, his 10,000 bitcoin would have
bought him hundreds of pizzas while, a decade letter, he could have
used the bitcoin to buy dozens of Papa John’s franchises. At the time,
though, Laszlo was just trying to make a point—and he did. He has
since become a minor celebrity and his purchase is celebrated annually
as bitcoin Pizza Day. Nine years after the event, with bitcoin’s value
having skyrocketed since his pizza buy, Laszlo sat down on CBS’s 60
Minutes, where Anderson Cooper asked what it felt like to have blown
his 10,000 bitcoin, which at the time of the interview was worth $80
million, on two pizzas. “I think thinking like this is not really good for
me,” a stammering Laszlo tells the camera, before adding that he is
simply happy to be the hero of bitcoin’s official holiday.
By 2012, when Brian started Coinbase, a bitcoin was no longer
worth pennies but a few dollars. Now, millions of people around the
ch02.indd 22 05/10/20 3:04 PM

world knew what it was and how to use it. What people—including
Assistant US Attorney Katie Haun and her boss—still did not know
was, who was behind it? There was only that nine-page paper by the
person with the strange pseudonym: Satoshi Nakamoto.
So who is Satoshi Nakamoto? This is a taboo topic among most bit-
coin believers, who don’t like to discuss it. This is by design. As authors
Paul Vigna and Michael Casey explain in The Age of Cryptocurrency, bit-
coin is a religion as much as it is a technology. And like every good
religion, its origin story is surrounded in sacred mystery. Asking a bit-
coin fan to disclose Satoshi’s real identity is like asking an observant
Jewish person to say the name of the Lord or a Christian to explain the
virgin birth. Faith doesn’t require explanation.
Be this as it may, there’s enough evidence to make a strong guess
about who the white paper’s author really is. The signs point to an
American polymath named Nick Szabo.
Szabo is a lawyer and sophisticated coder with deep ties to an online
community, known as cypherpunks, that spent years experimenting
with digital money. This community shares a love of cryptography and
a deep distrust of government, which is reflected in Szabo’s Twitter
feed and rare public appearances. While there are other cypherpunks
closely associated with the first days of bitcoin—notably, the late pro-
grammer Hal Finney—some big clues point to Szabo as the paper’s
author. These include anecdotes, set out by New York Times reporter
and Digital Gold author Nathaniel Popper, that put Szabo at the cen-
ter of early development of bitcoin. Additionally, linguists have com-
pared the white paper and Satoshi’s emails with writing samples from
Szabo, Finney, and other possible candidates. Szabo is far and away the
closest match. Satoshi Nakamoto’s initials are also the inverse of Nick
Szabo’s. It could be a coincidence. All of it could be a coincidence. But if
you subscribe to the philosophical principle known as Occam’s Razor,
ch02.indd 23 05/10/20 3:04 PM

which holds that simpler solutions are more likely to be correct than
complex ones, it makes far more sense to accept that Szabo is the
author than to insist it’s either someone else or a mystery incapable of
being unraveled. In fact, most longtime bitcoin owners will concede
quietly in a one-on-one conversation that they, too, accept Szabo as
Satoshi. Just don’t ask them to do it publicly.
Today, it doesn’t really matter if Szabo is Satoshi. Bitcoin has evolved
past the paper and one person or a small group of people. The currency
and its backbone, the blockchain, pulses on thousands of computers
around the world, and no army or government could get rid of it, short
of turning off the internet.
Even back in 2012, the proverbial toothpaste was out of the tube.
When Katie Haun’s boss asked her to investigate Mr. FNU LNU, the
chance to shut down bitcoin was gone. Maybe two years earlier, when
bitcoin first began to circulate, it might have been possible to halt it
by rounding up the early users and seizing their computers. Maybe.
But that window had long closed. The more Haun learned, the less
the notion of filing criminal charges against bitcoin made sense to her.
“It’s like you would prosecute cash. It wasn’t something you could
do,” recalls Haun.
She was right. By 2012, bitcoin had given rise to a full-fledged
economy. A Papa John’s pizza purchase might have been a novelty in
2010, but now a growing number of merchants were accepting bitcoin
directly. Some people even aspired to live on bitcoin.
• • •
Olaf Carlson-Wee was a skinny blond kid resembling an elf from

Lord of the Rings—if elves hung around skate parks. As a teenager,
he followed his dreams, literally. He took up a deep interest in the
ch02.indd 24 05/10/20 3:04 PM

phenomenon of dreaming. He studied neurology to learn what causes

dreams and, through practice and by reading authors like Carlos
Castaneda, he learned how to turn sleep into profound, vivid quests.
Olaf even claims he learned to wield magical-type powers when he
sleeps. “In a lucid dream, find a mirror. If you get good at lucid dream-
ing, you can summon things using a mirror. If you walk so close to the
mirror that you lose peripheral vision, then you can summon your-
self,” he says.
Face to face with the other Olaf in the mirror, Carlson-Wee says
he would pose questions. He had control over the questions but not
the answers, which the other Olaf would supply. Those answers—
summoned from somewhere deep in his psyche and released in the
dream—often scared the hell out of him. It’s no surprise that the eight
hundred other students in his rural Minnesota high school voted Olaf
as “most unique.”
Olaf discovered bitcoin in early 2011 and, like other things he cared
about, he didn’t just like it—he obsessed over it. The child of two
Lutheran pastors, Olaf had been raised to live according to his con-
science and explore the meaning of justice. Later, during the financial
carnage of the Great Recession—where millions of ordinary people,
including his parents, had their hard-won savings wiped out while the
bank executives most responsible received bonuses—Olaf saw bitcoin
as an economic system that could not be rigged.
“This was the ultimate cyberpunk authoritarian thing,” he recalls.
He plowed almost all of his life savings of $700 into bitcoin and urged
his friends to do the same.
In his final year at Vassar College in upstate New York, not long
before Brian left Airbnb for Y Combinator and Katie Haun’s boss
asked her to prosecute FNU LNU, Olaf selected bitcoin as the topic
for his final thesis. His professor was bemused at first, then tried to
ch02.indd 25 05/10/20 3:04 PM

discourage Olaf after discovering “The Rise and Fall of Bitcoin,” an

article that appeared in the November 2011 edition of Wired magazine.
The article concluded that the upstart currency was a failure based on
a market meltdown that saw the price fall from $31 to $2.
“Pick another topic,” said the professor. Olaf, a full-fledged bitcoin
believer, refused. He doubled down on his research and made a sweep-
ing economic case for why digital currency would change the world.
The professor gave him an A+. (It probably didn’t hurt that, by the
time Olaf submitted his thesis in 2012, the price of bitcoin had inched
back up to $10.)
During all this time, Olaf kept buying bitcoin. This was no easy
task in Poughkeepsie, New York, population 30,000. Sometimes it
meant meeting someone on campus who would sell bitcoin for cash.
Often, Olaf had to resort to more exotic measures such as placing
a deposit into the account of some shadowy online money transfer
operation. This entailed walking into a local bank and depositing
a very specific amount—say $103.83—that served as a code to tell
the operators which bitcoin address belonged to Olaf. If all went
smoothly, the corresponding amount of bitcoin would show up in
Olaf ’s account, minus a stiff transaction fee. If it didn’t go smoothly,
Olaf would get burned—receiving no bitcoin for the money. Maybe
the site he paid had been hacked and all the bitcoin were gone or, just
as likely, the site owners had pulled an exit scam—claiming they had
been hacked and then vanishing into the ether of the internet with
his cash.
“Those were scrappy times,” Olaf recalls. “Getting bitcoin was a
hard thing. Those days, everything got hacked, everything was an exit
scam. There was a site called ‘Mybitcoin’ to buy from, and the joke
was it had that name because the site owners treated it as ‘my bitcoin,
not yours.’ ”
ch02.indd 26 05/10/20 3:04 PM

When Coinbase came on the scene, it was a godsend for a bitcoin

believer like Olaf. Finally, here was a site that promised to make bitcoin
easy to get—and was trying hard not to be shady. The company was
based in California, not overseas, and you could see who was running
it: a guy named Brian Armstrong, whom you could Google, and who
talked about things like compliance and regulation. Those were dirty
words to the antigovernment zealots who had helped bitcoin gain
traction in the first place, but they sounded great to Olaf. Like Brian,
he thought the only way his beloved currency would catch on in the
mainstream was if ordinary people could get it and not get scammed.
“You heard the same taunts a lot about Coinbase—‘not your keys,
not your coins,’ ” Olaf says. That phrase popped up on Reddit threads
about bitcoin and reminded people that they were trusting a company
to manage their stash of digital gold. A heresy in the church of Satoshi.
And so it was that even though Coinbase introduced cryptocurrency
to millions of non-technical people, many of bitcoin’s early champi-
ons reviled the company. These included the radical libertarian Erik
Voorhees, who had denounced the Federal Reserve as “fraudulent,”
and Roger Ver, a flamboyant figure known as “Bitcoin Jesus” for his
habit of giving away bitcoin while proselytizing about the currency. In
2014, Ver renounced his American citizenship over a professed belief
in open borders. (That was his explanation at least—skeptics think it
was tax avoidance more than principles that motivated Ver.) Whatever
their true intentions, figures like Voorhees and Ver were the public
faces of bitcoin in the early days, believers who inspired others to
adopt the currency, and a worldview that saw Coinbase as a betrayal
of Satoshi’s vision.
Some people saw Voorhees and Ver as saints. Olaf just thought they
were nuts. Coinbase, he reasoned, didn’t betray bitcoin—it gave peo-
ple a way to get it. Once they did, they could transfer their crypto
ch02.indd 27 05/10/20 3:04 PM

treasure to their own software wallet, a hard drive, or a USB drive. It

was up to them. For people with ordinary tech savvy, the difference
between Coinbase and managing their own bitcoin was like the differ-
ence between learning to drive an automatic Toyota Corolla compared
with a stick-shift eighteen-wheeler with ten speeds and two reverse
speeds. A Corolla might be boring, but anyone could drive it.
Olaf adopted Coinbase and also wanted Coinbase to adopt him.
He wanted to join the company. And that was a problem, since he’d
never applied for a real job before. After college, he had gone full bohe-
mian—spending months tramping around the Sierra Nevada moun-
tains in California before finally landing a gig as a lumberjack in an
outpost called Holden Village in Washington State. Holden Village
had been a deserted copper mining town remade as a Lutheran revival
center by hippies in the 1960s, and it offered three square meals and a
yurt to sleep in for those willing to work there. It suited Olaf just fine,
save the fact it was far away—figuratively and literally—from bitcoin.
Despite his lack of a resume or any other obvious qualifications,
Olaf applied for a job. He emailed Fred Ehrsam and attached his thesis.
He mentioned his A+ grade. Fred wrote back right away. Olaf had his
first job interview.
This meant turning up weeks later at Coinbase’s office in San
Francisco. Olaf had friends in the city who were glad to let him couch-
surf, but his clothes were a problem, still covered with sap stains from
his lumberjack work. At his friends’ urging, Olaf hit a Uniqlo and
bought one clean white shirt, tearing off the packaging and donning
the new garment right before ringing the buzzer on Bluxome Street
across from the Creamery.
At the time, Brian and Fred were asking job candidates to make
two fifteen-minute presentations—one on their vision for Coinbase
and the other on a topic of their choice to teach the pair something
ch02.indd 28 05/10/20 3:04 PM

they didn’t know. Fred also liked to throw in a logic puzzle, like the
ones used in the early days of Google, to test prospective employees’
analytic chops.
They posed this to Olaf: “So there are one hundred lockers in a row.
They’re all closed. A kid goes by and opens every single locker. A sec-
ond kid goes by and closes every other locker. A third kid comes by
and, for every third locker, he opens it if it’s closed and closes it if it’s
open. Same deal for the fourth kid, who changes the state of every
fourth locker. A hundred kids go by. How many lockers are open?”
Oh shit, thought Olaf. Fred had given him a few minutes to figure
it out, but Olaf knew it would take him much, much longer to run
through the sequence. There had to be a trick. Olaf, a sociology major,
also liked math, and he realized the locker problem was about perfect
squares—the answer would be obvious for numbers like 25 or 64 or . . .
100 lockers. He told Fred the answer: 10 lockers. One hurdle passed.
For his presentations, Olaf sketched out a plan to fix the dumpster
fire of a public relations situation at Coinbase because Brian and Fred
couldn’t keep up with the volume of business. They liked his plan. For
his teach-us-something-we-don’t-know presentation, Olaf tapped into
his favorite topic after bitcoin: dreams. He explained how ingesting
certain over-the-counter drugs like valerian could induce especially
lucid dreams, adding details from all the neurology books he had read.
They found the dream presentation weird, but interesting. And Brian
and Fred learned something.
Olaf had been Coinbase customer number thirty. Now he was hire
number one. The drifter-lumberjack now had an office job, and his friends
told him that meant he had to look the part. Olaf turned up the next day
and every day for the next two weeks in his one white Uniqlo shirt.
In San Francisco, Olaf found a growing community of other bitcoin
believers, merchants who had started to accept bitcoin as payment.
ch02.indd 29 05/10/20 3:04 PM

He was far from Holden Village now. To his delight, he discovered he

could pay for meals, drinks, and other day-to-day essentials with his
magic money. And whatever he couldn’t buy with bitcoin in the city of
San Francisco, he could obtain online from crypto-friendly websites.
Soon, Olaf decided that not only could he live on bitcoin, he would live
on bitcoin. For the next three years, that’s what he did.
• • •
It wasn’t just in San Francisco that bitcoin was breaking through. In

cities across the United States—and in places like Prague, Tokyo, and
Adelaide, Australia—people were coming together for “bitcoin meet-
ups” where they talked about a world beyond the control of govern-
ments while buying, selling, or sometimes just giving away bitcoin.
Every Monday in New York City, a corner of Union Square turned
into “Satoshi Square.” It was a strange sight. Crypto-anarchists with
dreadlocks mingled with Wall Street traders wearing $5,000 suits and
clutching fat stacks of bills, all of them gone mad for bitcoin. The open-
air trading space harked back to one more than two hundred years
earlier, when popular lore says men in Manhattan first traded stocks
under a buttonwood tree.
Many of the people at the meetups were like Olaf, using bitcoin for
fun or in the name of some ideal. Unfortunately for the credibility
of the young currency, they were far from the only ones using bit-
coin. So were drug dealers, money launderers, hit men, extortionists,
and every sort of hustler and lowlife imaginable. Satoshi’s invention,
it turned out, was a criminal’s dream: an anonymous currency that
could be used to pay anyone, anywhere.
The wider world first learned of bitcoin’s criminal potential in 2011
when the muckraking website Gawker published a now-famous article
ch02.indd 30 05/10/20 3:04 PM

titled “The Underground Website Where You Can Buy Any Drug
Imaginable.” The article described the Silk Road, a multimillion-dollar
online crime bazaar run by a shadowy figure called Dread Pirate
Roberts. As Nick Bilton explains in his page-turning account of the
Silk Road, American Kingpin, the Dread Pirate was only able to pull off
what he did thanks to the arrival of three new technologies. The first
was the web browsing software called Tor, which let people browse
“dark web” sites like Silk Road undetected. The second was the prolif-
eration of cheap, new cloud computing services that let anyone run a
massive website on the cheap. The third magic ingredient was bitcoin.
Until it arrived, there was no quick and easy way for strangers to pay
each other for illegal transactions on the internet. Now it was a relative
cinch. Little wonder that law enforcement figures like Katie Haun’s
boss took a dim view of bitcoin and asked her to open an investigation.
Haun soon realized her FNU LNU was not a criminal mastermind,
and that bitcoin was not intrinsically bad or good. Bitcoin was like
another once-novel technology: paper money. A stack of $100 bills can
finance a drug deal or be donated to an orphanage. Bitcoin is no differ-
ent, despite its perception as an outlaw currency.
Haun found that the more she learned about bitcoin, the more she
wanted to know. She talked to special agents from the FBI, the IRS,
and the Secret Service, all of whom told her how bitcoin kept turn-
ing up in their cases. Some mentioned a company called Coinbase.
Haun figured she would pay a visit. It didn’t take long for her to see the
Coinbase guys fit a stereotype. But these were not mafia wise guys or
cop-hating biker gangs she was used to prosecuting. Instead, she saw
tech nerds.
“I had a sense they were more like your traditional startup than
people trying to run a criminal operation,” she says. “Criminals don’t
welcome you to come by the office.”
ch02.indd 31 05/10/20 3:04 PM

ch02.indd 32 05/10/20 3:04 PM
3
Running through
Brick Walls
H
igh above Market Street, Fred and Brian stared at the sun
breaking through fog-dappled San Francisco Bay. Coinbase
didn’t have anything resembling a real boardroom on
Bluxome Street, so they had borrowed space at LendingClub, whose
posh corporate headquarters would be the backdrop for a make-or-
break meeting.
It was April of 2013—less than a year after Brian’s Y Combinator
stint and just five months since they’d turned Coinbase on—and the
startup needed more money. Brian and Fred had put all the pieces in
place to persuade venture capitalists to open their cash spigots and
crown Coinbase with a Series A round—a multimillion-dollar invest-
ment that would let the company ramp up operations and signal to
Silicon Valley that rich, influential people believed in Brian’s vision.
Then Fred saw it. His stomach sank as he watched the team from
Union Square Ventures file in, without Fred Wilson.
“We are so fucked,” he said to Brian.
ch03.indd 33 05/10/20 3:04 PM

Fred Wilson is the mercurial cofounder of Union Square Ventures,

one of a handful of New York City–based VC firms that rivals the pres-
tige of the august Silicon Valley outfits. He is scheming, cold-blooded,
and brilliant. As a board member at Twitter, Wilson had presided as a
cruel puppet master—summarily purging not just one, but two CEOs.
His relationship with the press is famously fractious. Upon learning a
reporter was contacting his associates after he had refused to cooperate
for a magazine profile, Wilson had warned the journalist that he “might
want to think about making friends instead of pissing people off.”
Wilson is ruthless, yes, but he’s also been a mentor to a generation
of startup founders. And unlike other venture capitalists, he was an
early bitcoin believer. Satoshi Nakamoto’s creation, he thought, could
change the world—if only someone could act as a cheerleader who
was neither a zealot like Roger Ver nor a criminal like those Katie
Haun had heard about from her FBI colleagues. In Brian and Fred, he
saw a public face for the technology: two buttoned-up young men with
entrepreneurial spirits.
Unfortunately, on this particular May morning, Wilson was home
sick in New York City. This left Brian and Fred to make their pitch to
the other partners at Union Square Ventures, none of whom shared
Wilson’s enthusiasm.
“We are so fucked,” Fred said again.
The words echoed in Brian’s head as he played it forward: What
would happen if Union Square Ventures failed to pony up? Like other
graduates of the Y Combinator program, he had scraped together a
series of $50,000 investments to fund Coinbase’s seed round—the little
pot of money a new company needs to try to get off the ground. Those
investors included the cofounder of Reddit, Alexis Ohanian, whose
future wife—tennis star Serena Williams—would, years later, also
invest in Coinbase. Brian had also persuaded the entrepreneur Barry
ch03.indd 34 05/10/20 3:04 PM

Running through Brick Walls 35
Silbert to chip in. Silbert, who had become a stockbroker at the age of
seventeen, had been buying masses of bitcoin since 2012, and when his
wife insisted he diversify his wealth, he began investing in cryptocur-
rency companies too.
Upon approaching Coinbase, however, Silbert was taken aback when
Brian told him he could buy in but only in the form of an uncapped
convertible note. Such an arrangement would give Silbert the right to
receive shares in Coinbase’s Series A round, but with a big drawback:
“uncapped” meant there was no limit to how much Barry’s investment
could be diluted by competing investors. Typically, only the hottest of
hot startups have the clout to demand an uncapped note, and Silbert,
who had invested in dozens of companies, had never agreed to such
terms.
“If you believe Coinbase has the best shot to be the number-one
wallet, the valuation is almost irrelevant. Look at PayPal. The inves-
tors are rich, and the investors in number-two got nothing,” Brian
wrote to Silbert. It was a cocky email, but it also amused and impressed
Silbert, persuading him to take a flyer on Coinbase. He decided to
invest $100,000—in bitcoin.
These early investments from Ohanian, Silbert, and others got
Coinbase up and running, but that’s it. If the company wanted to
scale—Silicon Valley–speak for growing into a colossus—Brian and
Fred needed venture capital firms to rain down millions of dollars.
And making it rain cash required Coinbase to show it was moving
“up and to the right.” For venture capitalists, the phrase is a near-holy
invocation. Up and to the right. It means a startup is adding both users
and revenue month after month, making a beautiful diagonal line on
their PowerPoint slides.
Since late 2012, Coinbase had been up and to the right. On
three occasions, Brian and Fred had taken their beautiful line to
ch03.indd 35 05/10/20 3:04 PM

Paul Graham, the cofounder of Y Combinator and their rabbi of fund-

raising. The first two times, Graham had told Fred, “You are not ready,
my son.” On the third occasion, he stared at Coinbase’s performance—
still growing up and to the right—and gave his blessing for a Series A
funding round, introducing Brian and Fred to his well-heeled network
of money men.
But despite Graham’s endorsement and Coinbase’s growth num-
bers, the venture capital world—normally so risk-loving—was still
skittish. Most VCs didn’t understand bitcoin, and many of those
who did saw something that would invariably be snuffed out by
law enforcement. The biggest exception was Fred Wilson, who per-
suaded the other partners at Union Square Ventures to take a trip to
San Francisco for a serious look at Coinbase’s potential. If all went
well, the firm would lay down $5 million.
Now, on this fateful May morning, Wilson had called in sick. Brian
and Fred would instead have to make their case to Wilson’s skeptical
compatriots, including Brad Burnham, the cofounder of Union Square
Ventures and an open skeptic of bitcoin. “So fucked,” thought Brian,
again.
Only half-fucked, it turns out. Brian and Fred’s presentation, their
clean-cut appearance, and Coinbase’s up-and-to-the-right trajectory
persuaded the Wilson-less Union Square Ventures team to buy in—at
$2.5 million. They’d have to find the other $2.5 somewhere else.
For that, a white knight appeared in the form of Micky Malka,
who ran the VC firm Ribbit Capital, and for whom bitcoin was deeply
personal. Malka, a tall man with protruding ears and close-cropped
hair, speaks with a heavy Latin accent of his native Venezuela, where
he had seen firsthand how a venal, inept government could debase
a money supply. Like so many bitcoin believers, Malka saw digi-
tal currency as a torch for economic freedom that autocrats like
ch03.indd 36 05/10/20 3:04 PM

Hugo Chavez, Venezuela’s ruinous leader, could not snuff out.

“He could see the global money angle and for him, unlike other inves-
tors at the time, bitcoin was not heretical,” says Fred.
For Malka, a bet on Coinbase was a bet on bitcoin, and he could not
say no. Coinbase had its full Series A.
As lawyers put the final touches on the deal, Fred recalled how a
friend at Goldman Sachs had made him a promise. One of the bank’s
few senior directors who shared Fred’s frustration with Goldman’s
dithering digital ways, the friend told him he would cut a $25,000
check to invest in anything he pursued. Fred called and asked if he still
meant it. He did. And so, as Goldman Sachs sat on the sidelines while
bitcoin blossomed, at least one of its executives made out like a bandit
as his $25,000 early stake morphed into Coinbase stock worth millions
years later.
Not everyone thought so highly of Coinbase’s Series A round. Sam
Biddle of Valleywag, a now defunct muckraking site, greeted the
funding news with a sneering headline: “VC Dumps $5 million in
real dollars into bitcoin hysteria.” He also pooh-poohed bitcoin itself,
grousing, “We’re all talking about it because an obscure, obfuscating
group of libertarian nerds are gaga for the digital currency.”
The Wall Street Journal, the country’s business newspaper of record,
took a more upbeat tone. In a long article, the paper noted the $5
million investment as a landmark moment for cryptocurrency and
quoted an effusive Fred Wilson, who praised Coinbase as the “JP
Morgan of bitcoin.” Brian and Fred high-fived and went back to work.
• • •
The Bluxome Street place Brian had rented across from The Creamery
was actually a two-floor, one-bedroom apartment, but after the Series
ch03.indd 37 05/10/20 3:04 PM

A round, it started to resemble an office—and also a cult of bitcoin. Fred

had taped up an iconic “Dream” poster of the rapper Biggie Smalls, but
changed the “d” to a “b” so it read “Bream,” short for “Bitcoin Rules
Everything Around Me.” And occupying pride of place sat a wood-
and-glass cube containing a bright blue betta fish named Satoshi.
The apartment-turned-office was filling up with people too. After
Olaf came Craig Hammell, a talented engineer who had helped build
the dating site OK Cupid—perhaps a fitting career choice for some-
one so painfully shy with women that he didn’t have a girlfriend until
his senior year of college. Brian and Fred had met Craig on a trip to
New York and, discovering he was a bitcoin believer, invited him to
San Francisco for a work trial. Upon arriving, Craig moved into
“Hacker House,” a place that billed itself as a home for the city’s tech
elite, but for Craig was more of a hustle than a hot spot.
“I realized it was a way to rip off people by getting them to pay
$1,500 a month to live with nine other guys in a crummy apartment,”
Craig recalls. Soon after, the building’s owner discovered what was
going on and evicted everyone, including Craig. So he grabbed
his sleeping bag and moved into Bluxome Street for the next few
months, coding late into the night and rising early to shower and
code some more. For someone who, in Olaf ’s words, “is an insane
workhorse who just loved to ship coin,” a round-the-clock bitcoin
gig suited Craig just fine. Like Olaf, he took his salary in bitcoin, and
also like Olaf, he had been an early client of the company—Coinbase
customer number 80.
Years later, Olaf—now fabulously wealthy—would distill his
Coinbase experience into a nugget of advice for startups: Hire your
customers. In Olaf ’s view, Coinbase flourished even as dozens of other
bitcoin startups flamed out because it hired people who believed
in the company and loved bitcoin. It’s good advice, and not just
ch03.indd 38 05/10/20 3:04 PM

for crypto companies. Phil Knight, the legendary founder of Nike,

laid the foundation of his shoe empire with a small team of devout
sneakerheads.
Unfortunately for Brian, not all of his customers wanted to work
at Coinbase. One who said “no thanks” was Julian Langschaedel, a
superb coder who lived in Germany. For months, Brian had paid him
to help adapt Satoshi’s original bitcoin code—which was designed for
individuals to run on home laptops—into something sturdy enough
to serve Coinbase’s commercial purposes. Fred and Brian persuaded
Julian to come to San Francisco for a work trial. These work trials
were part of Coinbase culture and amounted to a several-days test to
see if a prospective employee would fit in. Julian fit in just fine but, for
his part, he had two objections. The first was that Americans worked
too much. He preferred a work culture that left more time for sipping
beer. Julian’s other objection was the beer itself—more specifically,
that Americans did not know how to make it right. He flew back to
Germany.
Coinbase had better luck with Charlie Lee. A stout, soft-spoken
man who wears his jet-black hair in a sharp part, Lee had used his
“20% time” at Google—a renowned perk that let employees spend a
fifth of their work hours on personal projects—to create Litecoin, an
early alternative to bitcoin. Charlie’s entire life had been shaped by
his extraordinary proficiency at math. This included his first day of
elementary school in Ivory Coast, where a teacher discerned that first-
grade mathematics was too easy for Charlie and promoted him to the
second grade. The second-grade teacher, however, drew the same con-
clusion and, the following day, Charlie walked into the math class of
the third grade.
“I’m Asian, so I was already one of the smaller kids, but walking into
that third-grade class, I was smaller than ever,” he recalls.
ch03.indd 39 05/10/20 3:04 PM

As he grew older, Charlie’s talent served him well, helping him

build computers with his brother Bobby before he was a teenager, and
later as an engineer at Google, where he worked on building YouTube
and the operating system for Google’s web browser, Chrome. Charlie
applied his math skills to engineering but also to economics, which led
him to become a gold bug—a quirky class of investors that regards the
yellow metal as better value than stocks or bonds. He was a gold bug
until 2011, when he discovered bitcoin.
“It really made sense to me. I read the code part and realized it
would be big. I decided to go all in during 2013. It was a better version
of gold,” he said. Charlie meant it, barely blinking when the value of
his first bitcoin investments dropped from $30 to $2 in 2011—one of
many spectacular crashes that would help define the currency in its
early years. By 2013, he not had only put all his own money into bitcoin
but urged his family to do the same. His brother didn’t need much
persuasion—Bobby Lee was by now becoming fabulously wealthy by
founding China’s first bitcoin exchange.
Getting ordinary people to buy bitcoin, however, was a tall order.
Charlie shared Brian’s view that the rigmarole of wallets and private
keys was too daunting for non-technical people, and that it couldn’t go
mainstream without a service like Coinbase. He became Coinbase’s
third hire.
The small team—Brian, Fred, Olaf, Craig, and Charlie—quickly
developed an esprit de corps, hitting a local rock-climbing gym and
unwinding over Call of Duty and other video games—matches that pit-
ted Fred, the national gaming champion, against two or even three of
the others. But mostly the Coinbase crew worked like maniacs. They
treated the task of building the startup with the urgency of a military
operation, coding the website from morning until 10 or 11 at night,
then pausing to sketch grand schemes on whiteboards, then returning
ch03.indd 40 05/10/20 3:04 PM

to their laptops to code some more. High on startup endorphins, the

early Coinbase team followed Fred’s lead. Fiercely competitive, the
former lacrosse and basketball star took to bellowing about “running
through brick walls” until the phrase became a company mantra that
can be found on Coinbase’s website to this day.
One such brick wall came in the form of Apple. A teenage bitcoin
enthusiast had built an app for Coinbase as a quick way for customers
to buy and sell bitcoin on iPhones. Unfortunately, Apple didn’t allow
cryptocurrency trading and would bar any apps that offered it from its
App Store. Brian, though, came up with a plan to run right through
this wall: Coinbase would use a technology called geo-fencing to dis-
able the app’s trading feature, but only for the town of Cupertino,
California—the site of Apple’s headquarters and where its engineers
vetted new apps. As far as those engineers could tell, Coinbase’s app
complied with policy, and so it was allowed to remain in the App Store.
Meanwhile, Coinbase customers in the rest of the country began sling-
ing bitcoin on their iPhones.
It was a neat trick and a textbook example of how to run through a
brick wall. Unfortunately for the Coinbase crew, other walls were too
strong to bust. Two obstacles in particular loomed that could not only
halt Coinbase’s progress but kill it outright. The first was a serious
hacking attack of the sort that had already wiped out numerous other
crypto startups. The second was the US government. Coinbase came
perilously close to being crushed by both.
• • •
The hacking attack came in mid-2013 when the Coinbase team had
paused to eat dinner. An odd email alert notified Fred about a with-
drawal from Coinbase’s hot wallet—the place where the company
ch03.indd 41 05/10/20 3:04 PM

stored millions of bitcoin to handle day-to-day transactions. It had to

be a mistake, he thought. Coinbase guarded the keys to the hot wal-
let in the way a bank protects its vault and Coke protects its secret
formula. No intruder could come anywhere near it. Then came the
notification of a second withdrawal.
“Shit. Better check this out,” Fred told Charlie, who had his laptop
at hand during dinner.
Charlie logged in to the Coinbase control screen, and what he saw
made his heart sink. Someone else had logged in and was siphoning
out the company’s bitcoin. Worse, the intruder was growing bolder—
and greedier. The initial theft had been for only a few bitcoin, but now
the hacker was plundering Coinbase wallet in earnest. After the third
illicit withdrawal, Charlie frantically changed the password to access
the wallet and shut off access to everyone else, but not before the mys-
terious robber had helped himself to a hoard of bitcoin. The Coinbase
crew glumly finished dinner, their startup $250,000 poorer than when
the meal began.
The team quickly figured out what had happened. The thieves,
it turned out, had hacked one of Coinbase’s IT contractors to obtain
the password—an all-too-common trick in the cybersecurity world,
where hackers treat external vendors as the soft white underbelly into
a company’s network. Brian ordered a security overhaul, requiring any
firm that worked with Coinbase to use a Chromebook laptop provided
by the company. He also took stock of what had happened.
The robbery delivered a financial hit, of course. But it also posed
an existential threat to Coinbase’s reputation if anyone found out. In
those go-go early days of bitcoin, when hacks and scams were every-
where, Brian had branded Coinbase as a safe and secure alternative—a
place where customers could park their funds with the same confi-
dence as at a big bank. A media headline blaring that Coinbase could
ch03.indd 42 05/10/20 3:04 PM

not protect its own assets would be devastating. Banks that lose your
money don’t stay banks for long. Fortunately, no one spilled the news
about the hack, leaving Brian and the others to return to doing what
they did best: work their asses off.
Still, the robbery left uncomfortable questions hanging over the team.
The hacker had gotten into Coinbase’s hot wallet, which was connected
to the internet, but the company had millions more in bitcoin stashed
in “cold storage”—how crypto people refer to bitcoin stored on physical
devices like USB keys or even scraps of paper. These techniques meant
the all-important private key for a given bitcoin wallet was stored off the
internet so hackers couldn’t steal it. The obvious appeal of cold storage
meant there was a growing market for stashing private keys offline. One
company, Xapo, even offered a service that stored customers’ private
keys in a vault under a mountain in the Swiss Alps.
Coinbase’s own cold storage system was hardly that dramatic. In the
early days, for instance, a chunk of customer bitcoin resided on a USB
drive in Brian’s pocket. This produced some uncomfortable moments,
most notably when Brian arrived at US Customs after a trip overseas.
In response to a standard question from a customs agent about whether
he was entering the US with more than $10,000 in cash or cash equiv-
alents, Brian decided to say no. Better not to tell the agent about the
USB stick on his key ring holding millions of dollars in bitcoin.
As Coinbase grew, it quickly added other layers to its cold storage,
including a multicity system where private keys were broken into
different segments and scattered across the country. Similar to the
Horcrux puzzle in the Harry Potter series, the system relied on dif-
ferent people finding and reassembling the different pieces in order
to re-create a private key that held a store of bitcoin. It was a clever
way to guard Coinbase’s reserve supplies, but in the wake of the hack
of the company’s hot wallet, Brian and the others felt less confident.
ch03.indd 43 05/10/20 3:04 PM

In response, the company hired Andreas Antonopoulos, a well-

respected bitcoin scholar, to carry out an audit of its cold storage sup-
plies. Using a series of random samples, Antonopoulos tested whether
the private keys scattered across the country actually unlocked the
supply of bitcoin they were supposed to hold. Brian breathed a lot eas-
ier when Antonopoulos’s audit came out clean.
Hackers conducting out-and-out robberies were, however, just one
of the species of criminals who confronted Coinbase. Far more com-
mon were the fraudsters who used trickery rather than hacking to
steal bitcoin. In a common scam, these crooks purchased stolen bank
account credentials from sketchy sites on the internet and then signed
up as Coinbase customers. They then purchased bitcoin using funds
from the ill-gotten bank accounts in the hopes of whisking the bitcoin
to another wallet before the bank or Coinbase had figured out what
occurred. For Coinbase, such scams were a double disaster—not only
did the company lose bitcoin, but the bank would restore the victim-
ized customer’s loss by clawing back the funds Coinbase had received.
A variation of this scam involved crooks who bought bitcoin despite
not having funds in their bank account to pay Coinbase. At the out-
set, Coinbase made customers wait three days before delivering the
bitcoin a customer had purchased—the amount of time it took to
confirm, under the banking system, whether the customer indeed
had the requisite funds. Brian, however, believed Coinbase had an
opportunity to turbocharge its business by offering customers same-
day service, delivering bitcoin within an hour. Despite entreaties by
Craig and Olaf, who warned the plan would be a scammers’ bonanza,
Brian pushed forward. Big mistake. It took less than a day to realize
the same-day service was a fiasco as fully 10 percent of the company’s
transactions came back as fraudulent, costing Coinbase both cash and
bitcoin. The team wryly referred to the problem as “friendly fraud.”
ch03.indd 44 05/10/20 3:04 PM

The team also had to grapple with the uncomfortable fact that
some of their customers treated the company as their personal money-
laundering agent for a host of crimes. These included ransomware
operators who would lock up the computers of companies, cities, and
schools and only unlock them once the victims had paid a ransom in
bitcoin. Once crooks had collected their ransoms, a site like Coinbase
offered an excellent place to turn those bitcoin into US dollars.
Coinbase was hardly the first company to be an unwitting agent
to money laundering. Extortionists and drug dealers have long used
money-transfer services like Western Union and even Apple gift cards
as a way to move their ill-gotten loot. But unlike Western Union and
Apple, Coinbase did not enjoy decades of goodwill. Worse, it dealt in
bitcoin, already a red flag. If criminals ran rampant on Coinbase, a
host of powerful agencies would waste no time shutting it down.
Olaf, already swamped with thousands of customer support tickets,
did his best to squelch the crooks who crawled like cockroaches from
one Coinbase account to another. If he saw activity that looked like
money laundering, he would cut off the offending customer and file a
document called a “Suspicious Activity Report” with the US Treasury,
a process he later described as “covering your ass.”
The process worked for a while, keeping Coinbase in the good
graces of law enforcement, if only barely. For his part, Fred Wilson
had seen enough. The company’s mercurial patron warned Brian
and Fred that running through brick walls was well and good, but
not when it came to federal regulators like the US Secret Service and
the Financial Crimes Enforcement Network. Coinbase needed adult
supervision in the form of a compliance officer, whether the founders
wanted one or not.
And so Martine Niejadlik joined Coinbase in the fall of 2013 as hire
number four. A tell-it-to-you-straight New Yorker with a bushel of
ch03.indd 45 05/10/20 3:04 PM

frizzy hair, Martine was a veteran of an earlier generation of financial

startups, including PayPal, and she had helped develop the famous
credit metric known as the FICO score. Along with her real-world
experience, she also stirred the first strain of diversity into Coinbase’s
bro-centric culture: she was the first woman, the first parent, and
the first forty-something. Fred Wilson had personally persuaded
her to join, emphasizing how the bitcoin startup was on the path to
rocket-ship growth, and it needed Martine to keep it steady.
• • •
Adam White had not been on a rocket ship before, but he had been
on plenty of fighter jets. The onetime US Air Force commander had
carried out dozens of F-16 missions over Iraq and Afghanistan, and
despite his mild-mannered demeanor, he brought an insatiable inten-
sity to any task. After an initial rejection letter from Harvard Business
School, he slashed his sleeping schedule to four hours a night while
in the Air Force in order to prepare seventy-two versions of a second
application.
That did the trick. He got into Harvard but, as an early bitcoin
believer, he discovered to his dismay that no one leading the presti-
gious B-school had any time for cryptocurrency. “It was supposed to
be the West Point of capitalism, so I found it strange that the idea of
a private system of money didn’t go over well. I tried to write about
bitcoin for one of my economics papers, and my professor told me not
to,” he recalls.
Upon graduation, Adam followed the predictable path of other
business school graduates, doing a stint at Bain & Company, and then
as a product manager at a video game company. But his bitcoin fever
kept burning.
ch03.indd 46 05/10/20 3:04 PM

When he turned up at Coinbase, Fred and Brian—true to form—put

him through his paces with an elaborate logic riddle. This one involved
people stranded on an island who could leave only if they could guess
their own eye color based on a clue from a green-eyed guru. Adam,
realizing the problem turned on deductive reasoning, solved it, lead-
ing the Coinbase founders to invite him for a work trial—paid entirely
in bitcoin—that required him to sign up local merchants to accept bit-
coin payments. It was a tall order, given the digital currency’s shaky
status in the real world, but Adam was undaunted. With Fred Ehrsam’s
exhortations about “running through brick walls” ringing in his ears,
he sent three hundred cold-pitch emails, tracking the response rate
with a spreadsheet. It worked. At the end of his work trial, Adam had
persuaded an airline, a frozen yogurt shop, and a social media site to
plug their payment systems into Coinbase and accept bitcoin payments.
“You’re hired,” Fred told him, and turned him loose to sign up more
merchants. Adam thrived in the role, signing up ten $1 billion busi-
nesses for bitcoin within a year and relishing the workaholic culture.
“Coinbase was very hierarchical, like the military,” he recalled. “I idol-
ized Fred as a leader. He was the blend of an elite software developer
and a Goldman Sachs trader.”
Adam’s arrival in October of 2013 coincided with a surge of new cus-
tomers for Coinbase as the company’s month-over-month figures kept
on their magical trajectory up and to the right. Meanwhile, news of
bitcoin was spreading far beyond the tech-y corridors of San Francisco
as the mainstream press began to write serious stories about Satoshi’s
creation. Much of this had to do with the price of bitcoin, which
crossed above $100 in the summer of 2013 and kept on climbing. But it
also had to do with novelties like bitcoin ATM machines popping up in
coffee shops and a growing horde of art and merchandise that signified
to everyone a new tribe was in town.
ch03.indd 47 05/10/20 3:04 PM

The bitcoin buzz in the air also electrified the Coinbase crew’s
apartment-turned-office on Bluxome Street as a steady stream of bit-
coin pilgrims dropped by. These included people who would go on
to become some of the most famous figures in the crypto clique. The
venture capitalist Marc Andreessen came by, and so did Tyler and
Cameron Winklevoss, the Harvard rowers who took a large legal set-
tlement from Mark Zuckerberg over the founding of Facebook and
plowed it into a bitcoin fortune. A visionary and crypto zealot named
Balaji Srinivasan turned up. Craig and others thought he looked like
a cross between a drug dealer and a street person with his torn Nikes
and stained sweatpants, but they became transfixed. Balaji may have
looked like a hobo but he sounded like an Ivy League professor, deliv-
ering an impromptu lecture on the work of political economist Albert
Hirschman. A scrawny teenager named Vitalik Buterin, who would
soon invent the most important cryptocurrency after bitcoin, also
spent days puttering around the Coinbase office.
Not all visitors to Bluxome Street were so welcome. On several
occasions, irate Coinbase customers appeared at the door, demanding
explanations for whatever glitch had befallen their account. Olaf or
Craig would do their best to assure the customer their bitcoin were
safe and nudge them back outside onto the street. On another occa-
sion, a stalker appeared at the door, a young man who explained he
had been watching that “very good-looking guy”—Fred—and had
obtained the Coinbase address from a burrito delivery person. Would
they like to hire him? He, too, was coaxed back outside.
In late 2013, Coinbase also hired its first lawyer, Juan Suarez. A
boyish-looking twenty-five-year-old with deep-set eyes and a mop of
dark hair, Suarez had clerked for future Supreme Court Justice Neil
Gorsuch and was following the cookie-cutter career path lawyers
call Big Law. Bored out of his mind by long days reviewing subprime
ch03.indd 48 05/10/20 3:04 PM

mortgage documents, Suarez spent his nights lurking on Reddit

forums and reading about bitcoin. When he saw that Coinbase was
hiring, he recognized his deliverance. “I was writing this multidistrict
litigation bullshit over Countrywide mortgages, so I thought ‘screw it.’
I put together this half-assed slide deck on how I could help Coinbase.
Martine told me she had received many more-qualified applications
but liked my deck,” he recalls.
Together, Martine and Juan began to impose some order on
Coinbase’s cavalier approach to legal and financial filings. They also
commenced a series of diplomatic visits to the Secret Service, the
FBI, Homeland Security, and other powerful agencies, explaining
the potential of bitcoin and assuring them Coinbase wasn’t a money-
laundering front. Encountering unexpected allies like the prosecutor
Katie Haun, their message started to resonate, and Coinbase began to
acquire a faint halo of respectability.
Presiding over all of this like a pair of drill instructors stood Brian
and Fred. Hunkered in a command center on the upper floor of the
Bluxome apartment, the pair radiated workaholic energy. If Fred’s
mantra was “running through brick walls,” Brian’s was “headphones
on.” The Coinbase crew would see Brian’s bald head encased in giant
cans, a signal to stay away. “Brian had this ‘don’t fucking bother me’
vibe when the headphones were on. Don’t even walk past him when
he’s in the zone,” Juan recalls.
Coinbase’s cold and non-fuzzy culture would later lead Bloomberg
Businessweek to describe Brian and Fred as “Vulcan Swiss bankers . . .
do not try to make them laugh.” Meanwhile, the company’s already
arduous hiring culture—with its sink-or-swim work trials and Google-
style interview riddles—became more intense still with a practice
called “doing the thumbs.” This entailed everyone who had inter-
viewed a prospective hire meeting in a room and at once engaging
ch03.indd 49 05/10/20 3:04 PM

in a Gladiator-style display of up-or-down. A single thumbs-down

typically doomed a candidate.
For Juan, the Coinbase culture could be extreme, but it didn’t
faze him. “I thought it was fun. If you want to talk about a ‘cold and
Dickensian’ culture, try working in a big law firm,” he says.
Nonetheless, Fred and Brian’s imperious approach to managing began
to leave other Coinbase employees edgy and exhausted. Fred’s relentless
exhortation to run through brick walls, at first inspiring, became intimi-
dating, and the startup risked collapsing under its own intensity.
Then, in December of 2013, came Nathalie McGrath, a soulful
young woman with kind blue eyes and a tumble of brown hair.
Nathalie had cut her professional teeth running operations and man-
ning the front desk for the MBA program at Stanford University—a
place populated with the same hard-charging, bro-ish strivers she
found on Bluxome Street. At her Coinbase interview, Brian and Fred
promptly served up a crushing logic problem that involved a cruel
Pharaoh forcing his subjects to choose from a jar of black or white
marbles. The wrong choice meant death. When Nathalie asked them
why the Pharaoh was doing this in the first place—a question outside
the scope of the problem—an impatient Brian replied that “the slaves
are rebelling and we need to set an example.”
“Well, I would push the marbles aside and make the slaves more pro-
ductive,” Nathalie replied. Fred declared this to be bullshit. But Brian
liked the answer and decided such unconventional thinking should be
rewarded. Soon after Nathalie was hired. She and Juan Suarez came as
hires number six and seven.
Coinbase had everything a startup needed—money and mentors
and hard-driving coders—except for one thing. The company, like
so many in the Valley, lacked emotional intelligence. With Nathalie’s
arrival as chief of staff, that began to change.
ch03.indd 50 05/10/20 3:04 PM

Tasked with organizing Coinbase’s first retreat, Nathalie deftly

deflected Brian and Fred’s idea that they do a “hunt and gather” out-
ing that would require every employee to kill their own food. Instead,
Nathalie arranged a trip to Napa Valley and several days of team games
sandwiched between bouts of boozing and hot tubs.
The outing worked. Nathalie’s subtle ministrations smoothed over
the gruffest parts of the company, and the Coinbase crew began to
click like never before. Even the two Vulcan bankers expanded their
emotional depth—albeit often with each other. Years later, Fred would
recall how he and Brian took their bromance to a new level during a
trip to Oahu, where together they went over a set of thirty-six questions
presented in a New York Times article as a way to accelerate intimacy.
Meanwhile, the startup’s monthly numbers, ever up and to the right,
began to resemble another sacred Silicon Valley invocation—the hockey
stick. The phrase “hockey stick growth” implies a sudden lurch upward,
and this is what Coinbase had toward the end of 2013, as the company
rapidly approached a customer count of one million wallets. Fueling it
all was a staggering jump in the price of bitcoin, which burst past $200
in October, then $500 in November, and over $1,000 in December. The
first truly big bitcoin boom was in full swing. And Coinbase, which had
sweated to raise a $5 million Series A at the start of the year, now had
the top venture capitalists of Silicon Valley lining up to throw money at
them. So they took it. Days before 2013 came to an end, just over a year
since opening for business, Coinbase closed a $25 million Series B round,
by far the biggest-ever investment in crypto. It was time to celebrate.
• • •
“Bang!” “Bang!” The bullets tore through targets at a shooting range

in South San Francisco. Brian and the rest of the Coinbase crew yelped
ch03.indd 51 05/10/20 3:04 PM

with delight when their shots hit the mark, and with an exhilaration of
being at the top of the cryptocurrency world. Martine, the compliance
officer, stood firing guns alongside her Coinbase colleagues. There on
the shooting platform, she listened to the bark of the pistol reports
when suddenly, she felt a searing spot on her cheek. A hot shell casing
had whizzed out of a gun and singed her. Was this a sign?
ch03.indd 52 05/10/20 3:04 PM

4
Bust
T
he sun rose over the hills dotted with oak trees east of San
Francisco on a clear and chilly morning. It was New Year’s
Day 2014, a year that would bring the disgrace of comedian
Bill Cosby and the appointment of Janet Yellen as the first woman to
head the Federal Reserve. Overseas, the US was confronting the rise
of a terrorist group called ISIS, while at home, gay couples filed court
appeals for the right to marry. In Silicon Valley, tech investors made
their first investments in a mattress-in-a-box company called Casper
and a quirky work tool call Slack, while Forbes magazine would hail
a ride-hailing service called Uber as one of the hottest startups of the
year. And as Brian and the Coinbase crew shook off their New Year’s
hangovers, San Francisco still buzzed about bitcoin.
The digital currency had pulled back from its giddy high of $1,100 in
December, but still bounced around near $800—an astonishing devel-
opment given that one bitcoin had sold for $13 at the start of 2013.
Better yet, the regulatory cloud around bitcoin had started to lift after
ch04.indd 53 05/10/20 3:06 PM

a lawyer named Patrick Murck had testified before the US Senate in

November of that year about the benefits of a decentralized digital
currency. To the surprise of many, the senators expressed interest and
even encouragement about bitcoin. For Murck, who testified as gen-
eral counsel of a new group called the Bitcoin Foundation, the hear-
ing was the culmination of a year’s hard work. Murck and an oddball
assortment of other bitcoin advocates had launched the foundation as
a sort of crypto chamber of commerce, pushing to bestow an air of
respectability on Satoshi’s creation.
It was not just bitcoin flourishing. Other cryptocurrencies had
emerged with fan bases of their own and, like bitcoin, could be
exchanged for real-world money. These included Litecoin, the off-
shoot of bitcoin created by Coinbase’s Charlie Lee, but also off-the-wall
creations like Dogecoin—a novelty currency inspired by a feel-good
meme about a Shiba Inu dog, but which nonetheless became worth
tens of millions in real-world dollars. Meanwhile, a visionary pro-
grammer named Jed McCaleb, who’d founded the world’s biggest
crypto exchange, helped launch a versatile currency called Ripple
before hatching another one called Stellar. Today, Ripple and Stellar
are together worth over $10 billion.
Meanwhile, competition had come for Coinbase. Barry Silbert, the
company’s early investor, launched a company called Grayscale that
sold bitcoin in the form of shares in a trust, which allowed invest-
ment funds—whose bylaws forbade them from buying it directly—
to acquire exposure to bitcoin. That wasn’t all. Cameron and Tyler
Winklevoss, the twins who had parlayed their Facebook fortune
into a bitcoin hoard, had backed a startup called BitInstant. Like
Coinbase, BitInstant offered ordinary consumers an easy on-ramp to
the world of crypto as well as a service for merchants to accept bitcoin.
Unlike Coinbase’s cold, “Vulcan banker” Brian, its CEO was a gadfly
ch04.indd 54 05/10/20 3:06 PM

Bust 55
twenty-four-year-old with a propensity for hard partying and who sat

as a vice chair of the Bitcoin Foundation. And in late 2013, a group of
venture capitalists made a big bet on a company called Circle to chal-
lenge Coinbase, while Xapo—the service that stored bitcoin under a
mountain—launched an easy-to-buy cryptocurrency tool as well.
Even if Coinbase had more competitors than ever before, it hardly
mattered during the bitcoin bonanza of early 2014. A flood of first-time
bitcoin customers meant the pie was growing and there was enough
for everyone. For Coinbase, which took a cut of every purchase, the
rush of newbies also meant a surge of revenue. The monthly numbers
read way up and way to the right: a 7,000 percent annual increase in
customers. Meanwhile, Adam White, the indefatigable fighter jet vet-
eran, persuaded more and more merchants to accept bitcoin. And it
was no longer just obscure fro-yo vendors signing up. In a blitz of sales-
manship, White also persuaded a series of giants, including Overstock,
Expedia, and Dell, to try out cryptocurrency. Not long afterward, he
added to the coolness cachet of Coinbase by signing a contract for the
company to provide bitcoin services to Burning Man, the drug-fueled
techie bacchanalia that takes place in the Nevada desert every August.
All of the merchant sign-ups, combined with the roaring consumer
market, meant 2014 should have seen Coinbase post-growth results
resembling a hockey stick worthy of Wayne Gretzky.
It didn’t happen.
• • •
In early February, a young Frenchman named Mark Karpelès sat in a

Tokyo apartment with Tibanne, his orange-and-white tabby cat. He
was nervous. A social misfit, he had become famous in crypto circles
as MagicalTux, the online handle he used to run Mt. Gox, the biggest
ch04.indd 55 05/10/20 3:06 PM

bitcoin exchange in the world. He had not started Mt. Gox. That had
been the work of the coder Jed McCaleb, who had launched the site
to trade cards for the game Magic: The Gathering. Hence the name:
Mt. Gox stood for Magic the Gathering Online Exchange. But McCaleb
soon repurposed the site for users to swap bitcoin rather than cards,
before selling Mt. Gox to Karpelès in 2011. Karpelès, despite his awk-
wardness, built Mt. Gox into a colossus, accepting wire transfers from
across the world as his site became the preeminent destination for bit-
coin. He also became a director of the Bitcoin Foundation. By 2013, 70
percent of all bitcoin buying and selling took place on Mt. Gox. But on
this February day, Karpelès was nervous—and for a very good reason.
As he sat stroking his cat, a barrage of emails and Reddit messages
flared on his computer screen, all asking the same question: Where
is my money? The messages had been coming at him for days, each
wave angrier and more insistent than the last. Karpelès knew the
answer to their question. It was simple: the money was gone. And
the money was gone because hackers had burrowed into Mt. Gox’s
servers and drained them of over 740,000 bitcoin—a sum worth over
half a billion dollars at the time. The crisis reached a crescendo as a
customer named Kolin Burges turned up on the streets of Tokyo for
two weeks, holding a sign that read “Mt. Gox, Where Is Our Money?”
As panic mounted and prices plunged, Karpelès dithered. Roger Ver,
the libertarian known as Bitcoin Jesus, flew in on a Friday offering to
help Karpelès salvage the mess, but, to his dismay, Karpelès proposed
chilling out for the weekend and sorting out the mess on Monday.
Barry Silbert, the early Coinbase investor, at one point received a call
asking if he would like to buy Mt. Gox. He declined.
“I saw they were insolvent. I called the FBI,” recalls Silbert.
In another Hail Mary move, those working with Karpelès fran-
tically passed around a memo describing the disaster that had
ch04.indd 56 05/10/20 3:06 PM

Bust 57
befallen bitcoin and how it could be mitigated. But on February 24, a

prominent bitcoin entrepreneur named Ben Davenport leaked the
document to a former banker named Ryan Selkis, who had become an
influential crypto blogger under the name Two Bit Idiot. Selkis pub-
lished it and confirmed to the world Mt. Gox was toast and that many
devoted bitcoin holders had been wiped out. The boom was over.
In San Francisco, the Coinbase crew watched the disaster unfold
and collectively exhaled in relief, knowing they had made a smart
bet to avoid getting wrecked. Like many other bitcoin businesses,
Coinbase had relied on Mt. Gox as a source of bitcoin liquidity for day-
to-day transactions during most of its first year. The company would
run calculations to predict how many bitcoin it would need to satisfy
customer demand over a given period of time, obtain the bitcoin from
Mt. Gox and, thanks to Fred’s Goldman Sachs–born trading genius,
even set up hedges to profit on price swings on the pool of bitcoin.
The system worked for most of 2013 until, in Olaf’s words, “Mt. Gox
started getting weird.”
Charlie Lee also recalls a series of warning signs that suggested
the giant exchange run by the Frenchman and his cat was heading
for a Chernobyl-scale meltdown. “Mt. Gox credited $1 million to the
Coinbase account that didn’t belong to us. It was money created out of
thin air because Mt. Gox couldn’t read the bitcoin blockchain,” he says.
“Fred saw something was amiss and got Coinbase out in time.”
Not everyone was so fortunate. Just as a big bank’s collapse inflicts
collateral misery far and wide, the Mt. Gox debacle wiped out com-
panies that relied on the exchange for liquidity, as well as thousands
of individual investors. Meanwhile, the price of bitcoin tanked. By
early February, it had become clear that the giddy heights of $1,100 in
December had been a bubble. The bubble had popped. The collapse
of Mt. Gox knocked the price down to near $500, and this was just the
ch04.indd 57 05/10/20 3:06 PM

beginning of a long, painful slump. It would be years before a bitcoin

sold for $1,000 again.
As prices tumbled, so did bitcoin’s reputation. The digital cur-
rency had enjoyed a brief brush with respectability thanks to the
2013 Senate hearing and the work of the Bitcoin Foundation, which
had tried to carry on like an ordinary trade group. But by 2014, the
foundation was in disgrace and in disarray. Karpelès resigned as a
director in the wake of the Mt. Gox catastrophe, while the blogger
Selkis (aka Two Bit Idiot)—who had blown the whistle on the whole
thing—demanded that the men serving as the foundation’s president
and executive chairman quit, too. Selkis blasted the pair for failing to
warn the broader bitcoin world about Mt. Gox’s impending collapse
and accused them of colluding with Karpelès to protect their personal
stashes. Meanwhile, another face of the foundation had troubles of his
own. Charlie Shrem, the gadfly CEO of Coinbase rival BitInstant, had
blown off the advice of the Winklevoss twins to cut out the cocktails
and club life and focus on running his bitcoin business. A big part
of running such a business was staying on the right side of regula-
tors, but Shrem had ignored this until, returning from a trip to JFK
airport, DEA agents greeted him with criminal charges, including
money laundering. Shrem would plead guilty to lesser charges and
serve over a year in federal prison—just one of a growing number of
felons tied to bitcoin.
In May, the Foundation appointed others to beef up its depleted
ranks, including a former child star of Disney’s Mighty Ducks mov-
ies named Brock Pierce. The appointment set off a wave of resig-
nations from other members who were aghast at Pierce’s troubled
past, which included a lawsuit brought by former employees who
alleged that he had used drugs to coerce them into sex when they
were minors.
ch04.indd 58 05/10/20 3:06 PM

Bust 59
Founded as a bitcoin version of a chamber of commerce, by 2014 the

foundation looked much more like a fly-by-night gaggle of crooks and
con men. Whatever goodwill the group had built up had been squan-
dered several times over.
Worse, the antics of the bumbling Bitcoin Foundation paled next
to what serious criminals were doing with the currency. In late 2013,
the media reported the arrest of the Dread Pirate Roberts—the mas-
termind behind the global drug bazaar known as the Silk Road. In
a fit-for-Hollywood moment, disguised FBI agents tackled the Dread
Pirate—aka Ross Ulbricht—in a San Francisco library and, critically,
snatched away his laptop before he could close the cover and encrypt
all the data it contained. The laptop provided oodles of information
about Ulbricht’s sprawling criminal empire, including the keys to his
vast stashes of bitcoin—the currency that had made the Silk Road pos-
sible in the first place.
It also led to two more high-profile pelts for star prosecutor Katie
Haun. Since the time her boss had asked her to open the FNU LNU
file to prosecute bitcoin, Haun had become an expert in digital cur-
rency. Not only had she learned the ins and outs of private keys and
encryption, she had begun teaching investigators at other agencies,
including the IRS and the DEA, about how cryptocurrency worked.
Meanwhile, it turned out that two federal agents not only knew about
bitcoin, but had been treating it as a way to line their own pockets
during the investigation to bring down Silk Road. One of them, Secret
Service Special Agent Shaun Bridges, had robbed Silk Road accounts
to the tune of at least 1,500 bitcoin—worth over $800,000 at the
time—that belonged to the US government. And the DEA’s Carl Mark
Force IV did something much worse. Force not only stole from Silk
Road accounts but sold fake law enforcement tips to the Dread Pirate
Roberts while also blackmailing him. And, in a surreal low point, he
ch04.indd 59 05/10/20 3:06 PM

staged the murder of an informant—charging the Dread Pirate bit-

coin for the fake hit, and even sending him gory photographs meant
to show the informant’s painful death. The corrupt cops made sloppy
mistakes, however, such as communicating with the Dread Pirate on
their work computers and, in Bridge’s case, telling people—including
prosecutor Katie Haun—that he was the point person on all things
bitcoin for the US government. Haun made easy work of this mess and
would eventually help send Bridges and Force to prison—triggering
another round of headlines about bitcoin and crime. The dirty agents
would not be Haun’s last bitcoin-related prosecution. Soon afterward,
she would lead an investigation to take down BTC-e, an infamous
bitcoin exchange run by a shadowy Russian that served as a money-
laundering service for criminals around the world.
The news around bitcoin after the 2013 bubble collapsed was often
grim, but there were comic moments too. The most notable one came
in March 2014 when Newsweek magazine, which had briefly gone out
of business, returned to the newsstands with a bitcoin scoop to end all
scoops: it had found the identity of Satoshi. In a splashy cover story,
the magazine revealed that bitcoin’s creator had been hiding in plain
sight outside of Los Angeles, and that he was a sixty-four-year-old
Japanese-American man named Dorian Satoshi Nakamoto, who lived
with his mother. The story led to a swarm of reporters chasing Dorian
Nakamoto across the freeways of LA. The ensuing restaurant sit-down
with Nakamoto revealed the purported crypto creator did not know
the first thing about cryptocurrency. The next day, a long-dormant
message board account tied to the real Satoshi sent out a simple mes-
sage: “I am not Dorian Nakamoto.”
Newsweek’s credibility lay in tatters as everyone, except the magazine
itself, agreed the big bitcoin reveal was a bust. Meanwhile, a group of
longtime bitcoin boosters took pity on the hapless Dorian Nakamoto
ch04.indd 60 05/10/20 3:06 PM

Bust 61
and raised a collection of 67 bitcoin to smooth over his ordeal. Years

later, the older man would cash out the donations for hundreds of
thousands of dollars, becoming a bitcoin enthusiast himself—turning
up as an amiable curiosity at random crypto conferences. And like so
much else tied to bitcoin, his puzzled face has become a meme that
appears regularly on Twitter and on cryptocurrency message boards.
Nakamoto’s adventure brought a comic respite but, by mid-2014,
the outlook for bitcoin was bleak. It wasn’t just the reputational blows
that came with the presence of the Silk Road and its ongoing asso-
ciation with criminality. The bigger problem was that the original
promise of bitcoin as a revolutionary new payment method was falling
badly short.
While Coinbase and others had made it easier to acquire bitcoin, it
was still a headache to spend it in the real world. Even as more mer-
chants accepted the currency, it became obvious to many that it was
just a gimmick. Satoshi’s invention, it turned out, was a lousy way to
pay for things, in part because it could take ten minutes or more to
confirm a transaction had cleared. Worse, the price of bitcoin bounced
around so much that a consumer’s purchasing power might decline by
20 percent in the space of an afternoon. And even as diehards like Olaf
endeavored to live on it, ordinary consumers enjoyed an ever-easier
number of ways to pay for things—from the quick swipe or tap of a
credit card to a nifty new peer-to-peer app called Venmo. Why would
someone pay with this slow, sketchy thing called bitcoin?
And any hope people had of bitcoin as an inclusive, democratic form
of money was undercut by studies of those using it. Media reports
revealed that men accounted for 96 percent of the currency’s users—a
ratio that was bro-heavy even by Silicon Valley standards. It didn’t help
that some crypto events featured scantily clad women, representing
the worst of the tech industry’s “booth babe” culture.
ch04.indd 61 05/10/20 3:06 PM

And the price kept dropping. After a brief rally in the early
summer, by the fall of 2014, bitcoin fell to $400—and kept falling.
By 2015, the price was barely above $200—more than 80 percent off
its highs of late 2013.
For many bitcoin believers, including some at Coinbase, which now
counted nearly fifty employees, the mood was glum.
But not everyone felt this way. On New Year’s Eve of 2014, ten
months after the Mt. Gox collapse, Olaf stood outside a party in San
Francisco buying bitcoin on his phone. Ecstatic, he told his friends,
“Can you believe how cheap it is? It’s never going to be this price again.”
ch04.indd 62 05/10/20 3:06 PM

5
Hard Times
F
red and Brian’s philosophy of running through brick walls
had served the company well, inspiring employees to pull off
near-impossible feats in the name of growth. But like Face-
book, whose early motto was “move fast and break things,” Coinbase
would pay a price for its run-and-gun approach. Running through
brick walls is a killer tactic—when it works. When it doesn’t, you end
up on your ass—with a bloody nose.
Coinbase’s earlier bid to outwit Apple, for instance, had been clever.
It let the startup flout Apple’s rules by letting customers buy and sell
bitcoin directly in its app, all the while keeping the iPhone maker in
the dark by disabling the buy-sell feature in the city of Cupertino,
where the app was vetted. But it took Apple only a few months to
discover the ruse, and Coinbase was tossed unceremoniously from
the App Store.
Sometimes when Coinbase crashed through a brick wall, the
founders discovered there was nothing on the other side. That’s what
ch05.indd 63 05/10/20 3:07 PM

happened after Adam White, the former Air Force captain, made a
superhuman effort to sign up dozens of merchants to accept bitcoin—
including ten companies with over $1 billion in revenue. Brian and
Fred had believed the sign-ups would unlock a gold mine, letting
Coinbase take a cut whenever a retailer accepted a bitcoin payment. It
sounded grand in theory. In reality, it required a steady stream of cus-
tomers wishing to buy coffee, furniture, and everything else with bit-
coin. That stream was more like a trickle, and then even that dried up.
As would happen over and over in coming years, Coinbase’s attempt
to add a new line of business fell flat.
“The company wanted to be best at all things,” Craig Hammell, the
shy engineer who was Coinbase’s second employee, recalls. “But the
brokerage business was always the bread and butter.”
The struggle to find diverse business lines was hardly unique to
Coinbase. Other tech companies in the Valley—even the biggest—
still rely heavily on a core business for the bulk of their revenue, and
especially their profits. This includes Google and its parent company,
Alphabet, which dabbles in everything from driverless cars to human
biology. Most of these bets, though, are money-losing, and it’s still
search engine advertising that brings in most of the cash that powers
Google. Facebook, meanwhile, has failed repeatedly to bring shopping
to its platform, and its effort to crack the mobile phone market—in the
form of the short-lived Facebook phone—remains one of the compa-
ny’s spectacular flops. The point is that diverse money-making lines
are a splendid idea for a company but, as Coinbase was discovering, are
very hard to achieve in practice.
In 2015, as the bitcoin bust dragged on, Brian still saw blue skies.
It didn’t hurt that Coinbase had begun the year with a popping $75
million funding round, which brought the total raised since Brian’s
time at Y Combinator to $106 million. Among the investors were the
ch05.indd 64 05/10/20 3:07 PM

Hard Times 65
usual crowd of venture capitalists, but also a new set of faces from
Wall Street—a sign that the traditional world of finance, which had
mostly sneered at cryptocurrency, was starting to take bitcoin seri-
ously. Coinbase’s backers now included the likes of the New York Stock
Exchange, the banking giant USAA, and the former CEO of Citigroup,
Vikram Pandit.
Coinbase was also marching into more countries, including more
than two dozen in Europe as well as Canada and Singapore. And in a
critical move, the company launched a professional exchange. While
Coinbase’s original retail product let ordinary individuals buy and sell
bitcoin, the exchange was a turbocharged version that let big-time
traders swoop in and out of positions worth thousands or millions
of dollars. To mark the launch, Coinbase staff donned pajamas and
stayed up all night for the morning launch of the exchange, code-
named Moon Launch—a nod to the crypto world’s favorite phrase, “to
the moon,” which invokes a price run that makes everyone rich. The
exchange also promised a new line of business at a time when bitcoin
merchant payments had turned out to be a bust. The company’s cut,
in the form of commission, would be much lower than the 2 percent
or so paid by Coinbase retail investors—only 25 basis points, or 0.25
percent. But the trades would be much bigger: A hedge fund buying $1
million of bitcoin would pay Coinbase $2,500. If the exchange caught
on, it would mean Coinbase could claim institutional customers in
addition to its core base of retail bitcoin buyers.
• • •
A new infusion of investor cash and the launch of a professional

exchange was all well and good, but it didn’t outweigh the ugly real-
ity that the price of bitcoin remained in the toilet, and that trading
ch05.indd 65 05/10/20 3:07 PM

volumes had stagnated. Brian, meanwhile, needed to learn how to lead

in tough times—and too often, he was a slow learner. His shortcom-
ings were on display during a four-city tour from London to Helsinki
that called on him to drum up interest in bitcoin and Coinbase across
Europe. It was an uncomfortable experience for a man most at home
with his headphones on, face melded with screen, coding like a maniac.
Here, he was an introvert doing the job of an extrovert. Being a CEO
required selling, schmoozing, and media glad-handing, and Brian dis-
liked all of it. What he liked was building and putting his passion into
products.
“The product is never good enough. It often causes me physical
pain to think about the state of our product, especially when it’s slow,
buggy, or inconvenient. It’s an obsession,” Brian would later write in
one of his many blog posts. For an introverted CEO, writing rather
than speaking proved the best way to tell his company and his custom-
ers what he was thinking.
Normally Fred, the swashbuckling trader, would handle the out-
side world. But on this trip to Europe, Fred had been tied up with
urgent business in the United States, leaving Brian to lead the push
alone. As his train pulled into Paris ahead of his appearance at the
city’s new “Maison du Bitcoin,” Brian looked at the overcast skies and
felt his energy flag. As he would do more and more as the trip wore
on, he retreated to the place he liked best—his private world of “head-
phones on,” where nothing and nobody could disturb him. Going into
this inner world—while hardly ideal for drumming up publicity for
Coinbase—gave Brian his unusual ability to summon serenity even in
the most stressful of situations.
That didn’t mean others at Coinbase could do the same. In San
Francisco, the mood was growing tense. Coinbase now numbered
dozens of employees, and in April, the staff, along with Satoshi the
ch05.indd 66 05/10/20 3:07 PM

Hard Times 67
betta fish, finally left the cramped Bluxome Street apartment for a
real office on Market Street, the city’s main thoroughfare. New cor-
porate digs did little to dispel the gloom as the price of bitcoin fell
further and further. Only true bitcoin believers like Olaf and Craig
stayed unfazed. “If you looked at any other metric than the price of
bitcoin, it gave you a lot of faith and confidence,” Craig recalls of the
doldrums of 2014 and 2015.
Others’ faith was less sturdy. A third of Coinbase’s newer employees
quit the company in 2015, leading Nathalie to lobby Brian and Fred to
conduct a survey of workplace satisfaction. Seeing the results jolted
them: employees were anxious, and morale was sinking.
“Fuck morale,” Fred snarled in response to the survey. “If you don’t
believe in bitcoin and this company, you shouldn’t be fucking working
here.” (Years later, Fred, now fantastically wealthy, would look back
at the lean times and reflect, “There were a lot of unfortunate folks
who lost faith.”) But in 2015, Coinbase’s board didn’t see it Fred’s way.
Already concerned by the founders’ imperious management style—
including remarks by Brian like, “If you’re not blowing my mind while
talking to me, I don’t care”—the board reached for a familiar remedy:
consultants and coaches. Brian and Fred were hardly the first Silicon
Valley executives who needed to smooth out their rough edges, and
the company dug deep to train them.
It wasn’t that the founders lacked humanity. Longtime Coinbase
employees describe Brian and Fred as brusque and unfuzzy, but also
compassionate in critical moments. Adam, the Air Force pilot, recalls
their kindness as he struggled to work while his mother was losing
a battle to cancer. Craig, the shy workhorse, remembers the found-
ers going out of their way to celebrate his birthday. Nonetheless,
Brian and Fred’s day-to-day demeanor, their expectation that others
match their workaholic lifestyle, and their callous dismissal of things
ch05.indd 67 05/10/20 3:07 PM

like office morale were often brutal, and the Coinbase board was
determined to fix that.
Unfortunately, some of the remedies backfired. Brian glommed onto
a cultish management fad called “Conscious Leadership” that employees
described as a hybrid of New Ageism and a twelve-step recovery pro-
gram. They compared it, unkindly, to something out of the satirical TV
show Silicon Valley. In the name of fulfilling a program called “The 15
Commitments,” Conscious Leadership encouraged employees to engage
in odd language and rituals when confronted with conflicts large and
small. These involved approaching colleagues with the phrase “Can I
clear with you?” and then presenting a roster of grievances couched in lan-
guage like: “The facts are these . . .” “The story I told myself was this . . .”
“Voices were raised and you were angry! This triggers me.”
“The whole thing was a recipe for confusion and passive aggression.
It can be great for self-actualization, but in the workplace, it’s a terrible
tool,” says Nathalie, who more than once found herself crying in the
bathroom over the conflicts rippling through the company.
For Brian, though, Conscious Leadership was ideal. To his engi-
neer’s mind, it amounted to an equation for emotions, a way to reduce
feelings to a formula. In data-driven Silicon Valley, the mumbo jumbo
made perfect sense.
• • •
In 2015, the giddy days of $1,000 bitcoin were a distant memory, and
the press and the general public recalled crypto and blockchains as a
fad—if they thought of them at all. At Coinbase, the company could
take some comfort in its squeaky-clean reputation compared with the
rest of the crypto industry—but now a series of events meant even that
hung in the balance.
ch05.indd 68 05/10/20 3:07 PM

Hard Times 69
“Coinbase’s strategy was to be the white knight of crypto,” says the

venture capitalist Chris Dixon. That meant engaging in none of the
shady stuff that had given bitcoin a bad reputation elsewhere. In an
industry oozing with crooked players, Coinbase wanted to stand out
as a straight shooter. Looking back years later, the company’s first law-
yer, Juan Suarez, said the game plan for the company’s success was
straightforward. “A big strategy didn’t win the day for us,” he says.
“All we had to do was say, ‘Don’t get hacked, don’t break the law, and
maintain a banking relationship.’ ”
Even if the world saw it that way, Brian and Fred knew it wasn’t
exactly true. Coinbase had already been hacked once, though the
company had kept it under wraps. It also blew up a critical banking
relationship.
Silicon Valley Bank, which goes by SVB, is sui generis as far as
banks go. It’s built by and for the entrepreneurial machinations of
fast-moving tech startups, and its risk profile looks unlike that of any
other bank. It has provided financial lifeblood to tens of thousands
of startups. Much like Gringotts Wizarding Bank in the Harry Potter
series or the Iron Bank of Braavos in Game of Thrones, SVB is run by a
particular set of bankers with a code of their own. A startup has no rev-
enue yet? No problem. SVB is built for the needs of the Valley, taking
on risky startups other banks wouldn’t touch and operating within a
tight clique of founders, venture capitalists, and tech incubators.
Still, even with its Valley-centric worldview, SVB wasn’t particularly
enamored of Coinbase or its promise. It had taken a special nudge from
Fred Wilson of Union Square Ventures to get SVB to take its business.
From the bank’s perch, the problem wasn’t Brian or Coinbase’s busi-
ness plan—it was bitcoin. Like the emerging cannabis industry, bitcoin
faced perceptions of illegitimacy and genuine, unregulated volatility.
Mt. Gox had proven that. More than ever, bankers looked at bitcoin
ch05.indd 69 05/10/20 3:07 PM

companies like so many unexploded landmines. They operated in a

legal netherworld where one wrong move could see a company blow
up in a federal criminal investigation. Banks funding the ventures
could suffer the collateral damage in the form of massive fines. Better
to stay clear altogether.
Silicon Valley Bank had made an exception for Coinbase, in part
because of Fred Wilson’s endorsement and in part because the com-
pany had cast itself as just another tech company. “These are compa-
nies that are not software companies, but say they are,” says a former
Coinbase executive, explaining how the company persuaded SVB to
be its banker in the first place.
It had been a coup for Coinbase to get SVB as its bank, but that
was just step one. Now, it had to keep SVB happy. The bank had seen
its share of mercurial founders and high-risk business ventures, but
Coinbase was operating on the edges of a Bermuda triangle of finance,
tech, and regulation—meaning the stakes were far higher for the bank
than backing a Valley bro who builds collaboration software.
It’s fine to run through brick walls in software development and on
the business front, as Brian and Fred did; it’s less desirable (especially
to your investors) when you do it in the legal and regulatory envi-
ronments. For Martine Niejadlik, Coinbase’s compliance officer, this
approach induced ulcers. It fell to her to persuade the hard-charging
founders to adopt the tedious, time-consuming steps needed to stay
right with Uncle Sam. “It was their first reality check. You can’t just
transfer funds around the world without anti–money laundering con-
trols,” she recalls.
Brian and Fred did not accept the new oversight with grace. The
pair, whether they knew it or not, had taken on the truculent approach
of billionaire investor and entrepreneur Peter Thiel, who had helped
launch PayPal fifteen years earlier. Like Coinbase, PayPal was ahead
ch05.indd 70 05/10/20 3:07 PM

Hard Times 71
of its time and, in Thiel’s words, was in a race between tech and
politics. In such a race, lawyers and compliance officers only slowed
you down. When an executive at PayPal told him it was time to hire
a big legal team to guide them, Thiel—an attorney himself—shot
down the plan. “No, we’re not going to hire them,” Thiel recalls
telling the executive. “They’ll just tell us what we can’t do. So we have
to just go ahead and not hire the lawyers and just do it.”
Thiel’s approach during PayPal’s early days very much resembled
the “running through brick walls” ethos at Coinbase. But there was a
critical difference. As Thiel himself has noted, PayPal was built before
9/11 and the Patriot Act—when government scrutiny of banking was
much less stringent.
In theory, this meant Brian and Fred had to heed Martine but, in
practice, the outcome was a series of blowups, each playing out in
roughly the same way. Martine would discover some potentially dam-
aging choice that could spook regulators and would call for measures
to get Coinbase on the right side of US banking laws. Brian, who still
took his gut-checks from the chatter on Reddit forums, would push
back and ask if such steps amounted to a betrayal of bitcoin.
It didn’t help that Martine’s corner of the company—compliance—
was a cost center that didn’t create customers or products. She built
brick walls rather than running through them.
Martine couldn’t stop Brian and Fred from making a series of pub-
lic gaffes that began to dull Coinbase’s once-shiny halo. This included
them jumping the regulatory gun by announcing that Coinbase would
be offering a licensed exchange in numerous states—basically saying
their crypto business, which existed in a sort of legal netherworld,
would soon have the status of a regular old stock exchange or broker-
age. Martine’s stomach sank when news of Fred’s boast hit her phone
while she celebrated her birthday at Disneyland.
ch05.indd 71 05/10/20 3:07 PM

The fallout from Fred’s comments came fast as California’s power-

ful financial regulator, the Department of Business Oversight, issued a
public smackdown in the form of a “consumer alert” about Coinbase.
Officials in the state of New York piled on, telling the New York Times
that—contrary to Fred’s claims—the company had been operating
without a license.
Worse was soon to come. Fred had created a PowerPoint deck for
investors that highlighted four benefits of bitcoin, including the obvi-
ous ones like low transaction costs and a reduced risk of fraud. But
the first bullet on that list explained that bitcoin was “immune to
country-specific sanctions,” citing Russia as an example. This may
have been true—governments in many cases could not stop the flow of
bitcoin—but advertising this on a company slide amounted to saying,
“Our product can subvert US banking sanctions.”
It didn’t take long for someone to leak Fred’s deck to the press.
Conservative media outlet The Washington Free Beacon published the
presentation in February under a blaring headline of how Coinbase
was touting cryptocurrency as a tool to circumvent sanctions on Iran.
With a single bullet point, Fred had jerked Coinbase into geopolitics.
Silicon Valley Bank had seen enough. Its lawyers had been watch-
ing Coinbase closely, and, in the course of a semiannual risk review
in the spring of 2015, Coinbase was cut off. No more bank account,
no more lines of credit, no more help. For Coinbase, it was an unpa-
ralleled disaster, as operating a cryptocurrency service without a bank
would be like selling ice cream without a freezer. For one longtime
investor and adviser to Coinbase, the bank’s move was an unexpected
gut-punch, leaving him feeling angry and betrayed.
SVB extended one lifeline to Coinbase, giving the company a six-
month grace period to find another bank, which it was able to do,
but just barely. “Silicon Valley Bank cutting us off was an existential
ch05.indd 72 05/10/20 3:07 PM

Hard Times 73
moment for sure,” Olaf says, recalling days of shell shock and tumult
in the Coinbase office. It also led the long-running tension between
Martine and Brian to boil over. She was given an afternoon to pack her
stuff and be gone.
• • •
Coinbase had started 2015 ready for its rocket-ship ride to resume, but
by the end of the year, the company felt more like an old Chevy stuck
in neutral. Coinbase’s board members grew antsy and they pushed
Brian to pivot. The word pivot is another popular Silicon Valley term
and is short for “What we’re doing isn’t working, so let’s try something
else.” In some cases, it works out spectacularly. Slack, for instance,
was a failing video game site before pivoting to become a multibillion-
dollar office messaging platform while Airbnb started out trying to
offer housing for conferences. More often, however, a pivot is just one
last gasp before a startup collapses.
In the case of Coinbase, the board wanted Coinbase to pivot into
enterprise blockchain—a crypto flavor-of-the-month that saw compa-
nies like IBM and Microsoft offer up privatized versions of bitcoin’s
famous ledger technology. These amounted to a “members only”
blockchain, controlled by a handful of companies, that could create
a tamper-proof record of transactions without creating or using a
currency.
Brian flat-out refused. He had started Coinbase to spread Satoshi’s
vision of a new type of money run on a permission-free global ledger—
not to build corporate databases. If bitcoin was an unbridled stallion
galloping over a wild meadow, enterprise blockchain was a wooden
horse going up and down on a carousel. Better for Coinbase to fail,
Brian thought, than sign up for that.
ch05.indd 73 05/10/20 3:07 PM

Unfortunately, no amount of idealism would help Coinbase make

payroll. The company had already seen 35 percent of its engineers
grow disillusioned and quit in search of the next hot Silicon Valley
thing. And now, as 2015 drew to a close, the company would have to
cut some of those who were left. Brian and Fred had always managed
Coinbase’s finances to allow for a two-year cash cushion if things got
bad, and now that window was shrinking fast. In a grim meeting, they
realized they would run out of runway unless they cut 40 percent of
staff. Any other option would require a miracle. In the waning days
of 2015, Brian and Fred sat in the Coinbase tower on Market Street
drawing up a long list of candidates for layoff. This wouldn’t be mere
trimming but an emergency amputation to keep the company solvent.
But something gave them pause.
In late October, the price of bitcoin had broken $300 for the first
time that year, and in November, it hit $400 before swooning 25 per-
cent. Then in December, when it climbed again to nearly $500, Brian
and Fred realized the miracle they needed had arrived. Higher prices
meant higher commissions for Coinbase and more money in the bank.
Better yet, bitcoin’s latest run brought a spate of attention in the media
and a stampede of new customers for Coinbase. Brian and Fred could
delete the layoff list. Bitcoin was back, and the mood in the Coinbase
office grew giddy.
ch05.indd 74 05/10/20 3:07 PM

6
Civil War
T
he long-awaited rebound in bitcoin’s prices, which continued
into early 2016, brought delighted relief to Coinbase. But out-
side, in the broader world of cryptocurrency, something ugly
was brewing as the tribal factions who were the bedrock of bitcoin
turned on each other—and on Brian—like never before. The return
of prosperity should have been a cause for celebration, but instead it
accelerated a long-simmering conflict.
The source of the conflict was simple: what to do about a bitcoin
network that had clogged up. The number of users on the network
had grown exponentially, but the infrastructure to support them
had stayed the same. This was a problem because more users meant
more transactions—transactions that had to be recorded on a block
and get added to bitcoin’s blockchain to become official. And only so
many transactions—typically around two thousand—could fit onto
one block. The overflow had to be added to subsequent blocks, which
arrived every ten minutes, and this just created a bigger backlog. It was
ch06.indd 75 05/10/20 3:07 PM

like an ever-growing crowd pouring out of Yankee Stadium and trying

to fit into a single subway train.
In the case of Coinbase, the slowdown didn’t affect customers who
sent bitcoin to another Coinbase account—the site cleared those trans-
actions internally—but any payment to an outside party got stuck in
the overflow queue as both parties had to wait for it to appear on the
sluggish blockchain. This wasn’t a deal breaker for people buying bit-
coin as an investment. But for those using bitcoin to buy a cup of coffee,
this backlog meant it could take an hour or more for that purchase to
clear. Needless to say, only the most diehard crypto believers, like Olaf
at Coinbase, who lived on bitcoin for three years, would choose to pay
with bitcoin over swiping a credit card, or more recently, “Venmoing”
the money—or just handing the barista some cash. The plain truth
was that bitcoin was too slow and expensive to catch on with retailers
as a practical replacement for cash or credit cards.
Bitcoin insiders had talked for years about this flaw and how to
handle “scaling” a service to millions of users; a few of them had put
some solutions on the table. An obvious one, endorsed by Brian, was
to change bitcoin’s code in order to double the size of each block on the
blockchain from one megabyte to two, thereby doubling how many
transactions get logged at each update. Too many people waiting for
the train? Add double-decker cars.
Mathematically, it would have gone a long way to solving the back-
log, but one faction of bitcoin coders wasn’t having it. Known as Bitcoin
Core, they are the most influential of the many tribes in the cryptocur-
rency community since they maintain and expand Satoshi’s original
batch of code. These hundred or so developers are the closest thing bit-
coin has to a legislature. Generally, when they tweak the bitcoin code,
users accept the changes. Notable members include Pieter Wuille, a
tousled Belgian with a PhD in computer science, though Wuille and
ch06.indd 76 05/10/20 3:07 PM

Civil War 77
others like to maintain a low profile and operate using a behind-the-

scenes consensus to improve the code.
Bitcoin Core objected to bigger blocks because they presented a
potential threat to Satoshi’s vision for bitcoin—a vision that valued
individuals over institutions. In their view, two-megabyte blocks
would cost more to mine, thus those who had more to spend, in com-
puting power, would have a leg up. Typically, institutions would have
more resources than individuals.
It was a fair point, and the sort of technological spat that would
normally get hashed out in committees, op-eds, and PowerPoint pre-
sentations. But this was the world of bitcoin, and so it became fervent
and religious. The dispute between the big-blockers—those in favor
of 2MB blocks—and small-blockers—who opposed them—soon
devolved into an online version of salted-earth warfare.
The small-blockers were aggressive. They conspired to get their
rivals banned from social media forums where the matter was dis-
cussed. Regarding Coinbase as one of the most powerful big-blocker
forces, they launched denial-of-service attacks at its servers. They even
turned on one of their own by excommunicating Mike Hearn, a for-
mer Googler and ally of Satoshi who had been instrumental in build-
ing out the bitcoin network in its early days. After his expulsion, Hearn
described the situation as open civil war.
Laura Shin, a Forbes journalist who would go on to build an influ-
ential cryptocurrency podcasting series, wrote of the 2016 war over
block size: “Bitcoin Twitter has been a toxic stew of name-calling,
trolling, bullying, blocking and threats, with some altercations span-
ning months, with replies numbering in the hundreds. No tweet or bit-
coin Talk comment made by anyone is too old to dredge up and hold
against them, no quote from Satoshi Nakamoto too out of context (or
fictional) to be used to bolster one’s argument.”
ch06.indd 77 05/10/20 3:07 PM

Brian was a popular—and easy—target. Ideological bitcoin believers

had long lambasted him as a sellout for creating Coinbase in the first
place—a company that, in their view, should not exist since it didn’t
give users control over private keys for their wallets, but instead pro-
vided a centralized management service. Now that he had become an
advocate for big-blockers, zealots had another reason to attack him,
and a reason to dredge up their vitriol from the past over centralization.
“A lot of people thought this guy didn’t know what he was talking
about,” says Samson Mow, an executive with the crypto consultancy
Blockstream, an ally of the small-blocker Bitcoin Core crowd. “If you
look at history, Brian has fallen on his sword again and again to get
bigger blocks and failed.”
Mow’s criticism was civil, if barely. Brian faced far cruder criticisms
on social media and on Reddit, a site he read religiously. Unlike most
of Silicon Valley, he did not keep up with Techmeme or TechCrunch,
two websites that served up industry news and gossip. Brian preferred
the hurly-burly of Reddit and Hacker News, sites that encouraged vis-
itors to share headlines and yammer on about their favorite topics,
including cryptocurrency. Since the start of Coinbase, Brian and Fred
had been eager participants in these debates—explaining and defend-
ing the company’s decisions and chatting with fans and critics alike.
But in 2016, amid the debate over block size, discussions took a darker
turn. One popular blockchain forum on Reddit censored Brian and
anyone else who supported Coinbase, while anonymous trolls directed
hacking attacks at its websites and even death threats at the company’s
executives.
This was extreme, though safety concerns were nothing new
at Coinbase, going back to the days at Bluxome Street when creeps
and vagrants would loiter outside. In 2014, the company had hired a
bearded tower of a man named Ryan McGeenan, who had served as
ch06.indd 78 05/10/20 3:07 PM

Civil War 79
a security director at Facebook. McGeenan, known at Coinbase as

Magoo, served as a bodyguard for Brian and also kept watch over the
online threats.
The nature of cryptocurrency meant the entire community was rife
with criminals and, as bitcoin grew, so did criminal enterprises within
its world. Stories of robbery and kidnapping became more common.
Magoo’s successor at Coinbase, Philip Martin, was understandably par-
anoid. “There’s innovation in the kidnapping industry. The chances of
someone knowing crypto, Coinbase, and being willing to use violence
goes up every year,” says Martin.
Like many security workers, Martin is a former military man—
but also a computer geek who enlisted in counterintelligence after
the recruiter promised he would get to play with high-tech software.
“Those were damn lies. There were no computers,” Martin snorts.
Nonetheless, over tours in Africa, Latin America, and Iraq, he even-
tually got to hone his antihacking skills. At Coinbase, he contin-
ued to fight hackers, including those from the money-starved North
Korean military, where soldiers turned to bitcoin robbery to support
themselves.
To thwart the thieves, Martin developed elaborate security schemes
to store Coinbase’s crypto reserves. He won’t share details for obvious
reasons. What is known, though, is the system involves a select group
of authorized individuals to assemble and then obtain digital keys
wrapped in metal boxes that deflect internet signals. What’s more, the
keys for accessing bitcoin are scattered across multiple secret locations.
“Our philosophy is ‘require conspiracies,’ ” Martin explains, meaning
unauthorized access to Coinbase’s crypto reserves could arise only
through an improbable plot involving multiple people.
But despite all the precautions, violent and uninformed individuals
are what Martin fears the most. “I’m most worried about people who
ch06.indd 79 05/10/20 3:07 PM

know a little bit about crypto but not enough to know there’s no room
at Coinbase where we keep it,” he says.
Brian faced the rising tide of security threats with calm stoicism. At
the height of the fight between big-blockers and small-blockers, when
his company was being hacked and he was receiving death threats—
during what other people were calling a civil war—he described the
dispute as bitcoin’s equivalent of an election process. But his patience
was wearing thin.
At a garish Club Med nightclub in Port St. Lucie, Florida, spotlights
swirled and a DJ cranked bad techno music. Inside, Brian sat wearing
his customary uniform—jeans and a tight-fitting T-shirt—along with
Charlie Lee. The two had come for the Satoshi Roundtable, an annual
gathering of dozens of the most influential players in bitcoin. This
year’s roundtable, in theory at least, had a high-minded purpose: End
the civil war. Work out the differences between the big-blockers and
small-blockers for the greater good. In reality, it was a bro-fest with
multiple nerdy crypto cliques.
A YouTube video from the roundtable captures hours of drunken
braying by two self-appointed hosts who conducted faux interviews
with equally sloshed participants. It was the worst caricatures of
the bitcoin world come to life. Everyone appears awkward and self-
important, and the gathering is almost entirely male and mostly white.
Brian declined to be interviewed by the hosts. Miffed, they lashed out
at him with a cocktail of childish barbs laced with homophobia. “He
looks a bit like a penis,” they said on their livestream. “He’s a beautiful
man if you’re into penises.” And so on.
Brian and Charlie had come to the roundtable in hopes of finding
a good-faith solution to bitcoin’s intractable scaling problem, but they
left feeling hopeless. “Some of the [small-blockers] show very poor
communication skills or a lack of maturity,” wrote Brian in a blog post
ch06.indd 80 05/10/20 3:07 PM

Civil War 81
after the event. “Being high-IQ is not enough for a team to succeed.
You need to make reasonable trade-offs, collaborate, be welcoming,
communicate, and be easy to work with.”
This was typical Brian, cerebral and unemotional. The blog
reflected his habit of setting out his thoughts in writing, where he was
most comfortable thinking through ideas (unlike most executives, he
did not rely on PR people to write his blog posts). He believed it let him
communicate with employees and the public with minimum ambigu-
ity. Unfortunately, the Bitcoin Core crowd didn’t care for measured
missives, and the vitriol continued unabated on Twitter and Reddit.
“You with your high IQ! You’re not being mature and are also not
communicating well. You’re a central planner and a systemic risk to
bitcoin,” wrote one Redditor. Another piped up to call Brian’s mea-
sured essay “retarded.” Others joked it was the product of Asperger’s,
and another group floated conspiracies that Brian was paying indi-
viduals to write positive posts. And so it went in the fever swamps of
bitcoin social media.
• • •
Shortly after the Satoshi Roundtable debacle, Brian and Charlie

embarked on a secret trip to Beijing. Appealing to the Bitcoin Core
crowd had proved hopeless, so they hoped to turn to another influen-
tial faction to make the case for bigger blocks: Chinese miners.
China had arrived late to the bitcoin scene but, by 2015, had come
to dominate mining operations. Deploying massive server farms and
cheap labor, Chinese miners used their outsized computing power to
win the lion’s share of new bitcoin added to the blockchain every ten
minutes. This gave them wealth and influence and a big say over the
evolving architecture of bitcoin.
ch06.indd 81 05/10/20 3:07 PM

A shadowy entrepreneur named Jihan Wu led the Chinese mining

faction. He and his associates had drawn on cheap supplies of Chinese
coal—often greasing local officials to get it—to power their computer
operations and to create massive mining pools. Wu’s company also
sold computers built with custom chips designed to solve bitcoin’s
ever-harder algorithms. Wu’s empire was a potent economic force and
also had political power to sway the block debate. On the outside at
least, they appeared to be on the fence.
The debate took place in an upscale hotel room. It included key fig-
ures from the Chinese bitcoin economy, including Charlie’s brother
Bobby Lee, as well as Gavin Andresen, a Massachusetts developer who
had worked with Satoshi to build out bitcoin’s code in the early days.
Brian made his case before the room—poorly, it turns out.
“People in China aren’t the type to sit in a room with many people
and have an open and vigorous debate,” said one of the twenty or so
people at the Beijing meeting. “Brian and the other Westerners were
all having this open debate while the Chinese were in listening mode.
The way in China is to form agreements in small groups and then
listen.”
Brian’s speech came across as overbearing and patronizing. Coin-
base was on its way to conquering the US crypto market, but the
Chinese entrepreneurs in the room had built bigger exchanges than
his, and many had run major bitcoin mining operations to boot.
“They’re in a much more competitive market,” said one person in the
room. “China, it’s cutthroat, man. A whole other level.” And yet Brian
was giving them a lecture on how bitcoin should be run. Brian had
underestimated—not for the last time, it turned out—the savvy and
the clout of Asia’s top cryptocurrency players.
Brian and Charlie’s secret diplomatic overture to China was a bust.
Wu and the other miners continued to side with Bitcoin Core and the
ch06.indd 82 05/10/20 3:07 PM

Civil War 83
small-blockers, and so Coinbase’s push for 2MB blocks fizzled out. All
Brian had earned for his trouble was frustration and an earful from the
trolls on social media.
• • •
The bitter block-size fight of early 2016 never would be resolved.

Processing times on bitcoin’s blockchain would become even more
sluggish—eventually, it would take more than a day to record some
transactions. The dream of bitcoin as a popular payment tool was
all but dead. But at the same time, a surprise lurked beneath the day-
to-day drama over block size: bitcoin’s price was bouncing back, and
cryptocurrency was flourishing like never before.
As it turned out, the bitcoin evangelists had been right.
Cryptocurrency was changing the world, just not the way people had
thought it would. In the case of bitcoin, Satoshi’s creation had failed to
upend central banks and the credit card industry, but it had emerged
as a bona fide rival to gold.
Just as “gold bugs” hoard the precious yellow metal as a hedge
against the collapse of government, people called “hodlers” were
hoarding bitcoins for the same reason. The word hodlers derives
from a drunken bitcoin investor chatting on a message board who
errantly wrote, “I AM HODLING” rather than “I am holding.”
Soon, the term became an essential word in the crypto vocabulary
as intrinsic to the dialect as “Lambo” for Lamborghini and “rekt”
for obliterated.
In the midst of all this, the various bitcoin tribes took their hands off
each other’s throats. The civil war hadn’t ended, per se, but a détente
settled in as cryptos turned their attention to the “gold rush” and get-
ting rich. No sense fighting over transaction times if you’re a hodler
ch06.indd 83 05/10/20 3:07 PM

who’s just going to amass a fortune. Hodlers can wait a day for the
ledger to update.
• • •
Even more important than bitcoin’s bounce back, though, was the
appearance of a new digital currency called Ethereum. The idea for
Ethereum had been set out in a Satoshi-like white paper in late 2013, a
year and a half after Brian had first walked into Y Combinator to build
Coinbase. And while the big-blockers and small-blockers of bitcoin
traded death threats and invective during 2015, a sunny and unified
community of Ethereum backers would share the new currency with
the public. Ethereum also enjoyed a special advantage over bitcoin.
It had an acknowledged leader in the form of its wunderkind creator
who would become the most famous figure in cryptocurrency after
Satoshi.
ch06.indd 84 05/10/20 3:07 PM

PA R T T WO
From Boom
to Bubble
to Bust
Part II.indd 85 05/10/20 3:13 PM

Part II.indd 86 05/10/20 3:13 PM
7
Enter Ethereum
V
italik Buterin is soft-spoken, pale, and practically skeletal.
He likes to wear “My Little Pony”–style T-shirts. A child
of Russian émigrés, he grew up in the Toronto suburbs
and, even as a tiny boy, knew he was different from other children.
Infatuated with numbers, Vitalik had a favorite toy as a small child: it
was called Microsoft Excel. In an early photo, a pint-size Vitalik can be
seen standing on a chair, gleefully tapping figures into a spreadsheet.
As a teenager, he was eccentric. He wore mismatched Hello Kitty
socks and ate lemons, including the rinds. At the urging of his lib-
ertarian father, Dmitry, he took an interest in the cryptocurrency
called bitcoin. He soon became absorbed. While still in high school,
he launched an online news site called Bitcoin Magazine as a side hus-
tle, persuading cryptocurrency fans to pay for his lucid essays about
digital money and cryptography. Upon finishing high school, Vitalik
used the proceeds to travel the world and talk to others with big ideas
about bitcoin and how to improve it. He hit Amsterdam, Tel Aviv, and
ch07.indd 87 05/10/20 3:08 PM

88 From Boom to Bubble to Bust
bitcoin’s ground zero, San Francisco, where, like many others, he spent
a short stint hanging out at Coinbase’s Bluxome Street office. He met
Charlie Lee, who, recognizing a fellow math genius, invested $10,000
in Vitalik’s magazine. During his travels, Vitalik also taught himself
to speak Mandarin.
The people he met on his world tour reinforced Vitalik’s growing
belief there could be a better bitcoin. Like most, he recognized both
the elegance and the limitations of Satoshi’s creation. The most obvi-
ous limitation was its failure to scale. Even after the civil war over
block size, the bitcoin network was still choking on too many transac-
tions crammed into too few blocks.
Bitcoin also lacked versatility. The ledger could record transactions
and inscribe short messages but could not be programmed to carry
out more complicated tasks. Bitcoin’s quirky code also presented prob-
lems. For a developer to properly get under the hood of bitcoin, he or
she needed to learn the computer science equivalent of Ancient Greek
or Latin, so complicated was Satoshi’s creation.
Chatter in crypto circles said it was time for a Blockchain 2.0—
something that could address bitcoin’s shortcomings and also push the
technology to new frontiers. In 2013, five years after Satoshi published
his white paper, Blockchain 2.0 would arrive. Its delivery would come
from the mind of a now nineteen-year-old Vitalik, whose own nine-
page paper outlined a new blockchain called Ethereum.
Vitalik is soft-spoken and friendly in person and, despite his unusual
appearance, no stranger than your average theater geek. But he is a
god in the world of crypto. Crypto nerds revere him as “our alien over-
lord” and “a genius alien who had arrived on this planet to save the
world from centralized powers.”
At base, Ethereum offers the same thing as bitcoin—digital money
and an immutable record. But it also overcomes bitcoin’s limitations.
ch07.indd 88 05/10/20 3:08 PM

Enter Ethereum 89
It’s faster and allows for “smart contracts,” a powerful new type of
computing that takes place right on the blockchain.
Smart contracts work like this: Imagine you and I want to place a
wager on tomorrow’s baseball game. We could put our wager on the
Ethereum blockchain in the form of a smart contract. To determine
the outcome of the wager, the smart contract needs to consult a neu-
tral and reliable third party to confirm who won the game. In the ana-
log era, such a third-party authority would have been the newspaper
or a sports-loving friend. In the world of smart contracts, the authority
is a neutral online source known as an oracle, and, in our example,
could be a website like ESPN or Major League Baseball. In practice,
the Ethereum smart contract would consult one of these sites once the
game had ended and, as a final step, pay out the wager accordingly.
Thanks to Ethereum, a blockchain could be about much more
than digital currency. It was now also a one-stop shop where people
could sign contracts over anything from sports wagers to investment
agreements to data storage. And instead of lawyers, it was computers
that took care of executing the contracts. In this sense, it served as a
platform much like what Apple provides developers so they can build
apps for its iOS operating system. Ethereum acted just like a crypto
operating layer—recording any piece of critical information to its
blockchain—and allowing others to build smart contract projects on
top of it. And unlike bitcoin, Ethereum offered an easy-to-learn pro-
gramming language, called Solidity, for anyone who wanted to build
applications.
The arrival of smart contracts was a coup for the crypto commu-
nity—proving that blockchain technology was about much more than
a novelty currency—but also came with some staggering real-world
implications. Ethereum had the potential to remake any number of
financial and legal activities involving contracts, allowing individuals
ch07.indd 89 05/10/20 3:08 PM

to rely on the blockchain for secure, fast, scalable agreements. Big

companies soon sat up and took notice, building their own applica-
tions on top of Ethereum. IBM used a version of Ethereum to track
customers’ identities while Walmart used the blockchain to track pork
shipments from China to the United States. Banks experimented with
a private version of blockchain to move money back and forth. Even
state governments got into the act as Vermont tested putting land titles
on a blockchain. The possibilities were endless.
For Vitalik, the flurry of corporate interest was an unintended—
and unwelcome—development. For him, the point of Ethereum was
not to help big companies make money but rather to disrupt those
companies by offering their services on decentralized networks. For
instance, rather than storing files on Dropbox or Google, consum-
ers could rely on a network of computers around the world to store
them instead, using Ethereum’s smart contracts to track everything.
Instead of relying on Fidelity or Vanguard, investors could create an
automated service on Ethereum to invest and pay out funds accord-
ing to the terms of a smart contract. In Vitalik’s view, Ethereum
was not just a new technology but a way to reallocate global power
structures.
“Ultimately power is a zero-sum game,” he told Wired magazine
“And if you talk about empowering the little guy, as much as you want
to couch it in flowery terminology that makes it sound fluffy and
good, you are necessarily disempowering the big guy. And, personally,
I say ‘Screw the big guy.’ They have enough money already.”
This wasn’t just the stuff of computer nerd fantasies. Shortly after
the Ethereum network was up and running, a group of people got
together and put $150 million into an investment platform called
the DAO. It stood for Decentralized Autonomous Organization, and
it entailed turning their money over to a smart contract that would
ch07.indd 90 05/10/20 3:08 PM

Enter Ethereum 91
invest in projects based on a formula. The formula took account of

how many DAO participants voted for a given project, but the votes—
as well as the participants—were anonymous. The entire operation
sat as an application on top of Ethereum, and the blockchain would
record who owned what and pay out any profits. The project was soon
up and running, and computers, informed by the terms of the smart
contract, called the shots. Screw the big guy.
Then disaster struck. In June of 2016, two months after the DAO
went live, hackers discovered a bug in the program that let them
hijack the investment fund and divert part of it to themselves. Within
minutes, DAO investors were out $50 million, and under the law
of the smart contract, there was no way to recover it. Trusting the
machine implicitly creates great efficiency and great possibility, but it
dismisses the value of human social arrangements—a common mis-
take in the tech-utopian world of Silicon Valley where entrepreneurs,
in the name of disruption, often fail to account for the harm they can
cause for humanity. Facebook connected the world but also under-
mined democratic elections. YouTube built a massive broadcast sys-
tem anyone can use but opened a Pandora’s box of lies and conspiracy
theories. Similarly, the DAO episode managed to demonstrate both
the incredible power and the dark side of Vitalik’s technology.
There was one radical way to rescue the DAO investors: Go back
in time. The ledger was unchangeable but, if everyone on the ledger
agreed, it could be updated to scotch the hacker’s heist. That measure
required everyone running the Ethereum blockchain to introduce an
update that would create a new set of blocks that erased the hackers’
ill-gotten gains and returned them to the DAO investors. It was the
blockchain equivalent of a constitutional amendment—one that not
just changed the law of the land, but also overwrote history so that, in
effect, the old law had never existed.
ch07.indd 91 05/10/20 3:08 PM

The situation presented a major dilemma for Vitalik, who was torn
between saving the DAO—one of the most famous and important early
experiments on Ethereum—and preserving the integrity of the block-
chain. Ultimately, he agreed to exercise his enormous influence and
persuade those running the Ethereum network to rewrite the block-
chain, saving the investors. On July 20, 2016, the Ethereum network
carried out a “hard fork”—essentially backing the train up to a transfer
point, flipping the lever, and sending all the cars down the other tracks.
Most followed Vitalik’s lead and recognized the new version of the
Ethereum blockchain, but some refused to acknowledge the new order
and, staying with the train example, kept on traveling down the orig-
inal set of tracks. The holdouts argued that code is law, ledger updates
are incontrovertible, and no matter the consequences, a human inter-
vention could not be justified. Spurning the hard fork, the splinter
group continued to build on the original blockchain, calling it—and
the digital currency associated with it—Ethereum Classic. Today,
Ethereum and Ethereum Classic operate as separate realms, two ver-
sions of what was once one reality. Both are going strong. While the
former is forty times more valuable—Ethereum was worth more than
$45 billion in mid-2020—both are adding new blocks to their respec-
tive chains every fifteen seconds or so.
The DAO debacle briefly damaged Ethereum’s credibility, but did
little to halt its steady rise as the first serious challenger to bitcoin. The
buzz over Vitalik’s creation came from the power of smart contracts,
but Ethereum had a currency of its own called ether, which was mined
and traded just like bitcoin. And in a clever piece of design, anyone
wishing to run a smart contract had to spend a small sum of ether—
known as gas—to make it work. This meant it was not just speculators
investing in Ethereum, but many software developers who had to pay
for it as part of their day-to-day business operations. Ethereum had
ch07.indd 92 05/10/20 3:08 PM

Enter Ethereum 93
become akin to a hot piece of real estate where anyone who wanted to
run a store had to pay a small tax.
The price began to shoot up like crazy. At the outset of 2016,
Ethereum sold for 95 cents and by June the price hit $18. If bitcoin was
digital gold, Ethereum was digital silver. Meanwhile, venture capital-
ists, including Coinbase board member Chris Dixon, had begun to take
notice and rave about the potential of Ethereum to change the world.
It was like the original 2013 bitcoin mania all over again but this time
it was about something much bigger than digital money—Ethereum
was a way to change business, the internet, and society itself.
At Coinbase HQ on Market Street, the rise of Ethereum caused
excitement—and agitation. Everyone in crypto was buzzing about it,
but Brian and others had doubts. They wondered if Ethereum might
flame out. Since bitcoin had launched in 2009, a parade of crypto-
currencies had come along, but only bitcoin had shown real staying
power. Not only did bitcoin have the status of being first, it had a
global network of backers committed to owning it long term. What’s
more, bitcoin was battle-tested. Hackers had tried for years to find a
weakness in its code to steal funds but never succeeded—they had
robbed exchanges and individual crypto owners but had never found
a way to tamper with bitcoin’s all-important ledger. Other cryptocur-
rencies had been hacked and hijacked. Ethereum wasn’t only hacked,
but its ledger was tampered with on purpose. What’s more, buying and
selling bitcoin had always been Coinbase’s bread and butter—straying
from the company’s core mission to deal in a still-unproven alternative
could bite them in the ass.
Brian’s partner Fred Ehrsam didn’t see it that way. A trip to Shang-
hai had convinced him that Ethereum and smart contracts were the
future. Ethereum had momentum. It had technology that bitcoin lacked.
And unlike bitcoin, Ethereum insiders weren’t consumed by civil war.
ch07.indd 93 05/10/20 3:08 PM

“Ethereum’s core development team is healthy while bitcoin’s is

dysfunctional,” he would write in a blog post, contrasting Vitalik’s take-
charge ability to the leaderless and toxic state of bitcoin in the wake of
the block-size debate. Fred had a point. The shenanigans at the Satoshi
Roundtable underscored how “dysfunctional” was the perfect word to
describe the clique of high priests overseeing bitcoin’s code. And there
was no doubt that Ethereum was on a roll as young developers flocked
to the new blockchain and whole communities sprang up—including
ConsenSys, a Brooklyn-based software foundry—to build around it.
Even if Fred was simply stating the obvious, it didn’t mean bitcoin
loyalists were above shooting the messenger. Fred’s public proclama-
tions about Ethereum triggered the wrath of legions of Twitter and
Reddit users, who called him a sellout (again!) and worse—the title of
one post in a bitcoin forum denounced Fred as a “Goldman Sachs shill
and dirtbag” and other commentators gleefully piled on.
“People hated me because they regard bitcoin in a zero-sum way,”
recalls Fred. This thinking was stupid, he felt. Throwing support
behind Ethereum did not mean betraying bitcoin. The rise of other
blockchains meant new opportunities, but bitcoin, even if it was in a
rocky phase, still ruled in terms of pedigree and prestige. The crypto
universe was expanding, and there would be space for many block-
chain projects.
But some people at Coinbase—including Brian—still had to be per-
suaded. Fred grew antsy as he watched other crypto exchanges add
Ethereum while Coinbase dithered. If Coinbase blew off Ethereum, it
could be a strategic mistake like those taught in business classes—for
example, when Microsoft CEO Steve Ballmer dismissed the arrival of
the iPhone. In 2007, a laughing Ballmer infamously predicted Apple
would sell none of its new $500 phones while saying Microsoft, safe
in its Windows fortress, would control the mobile market. Ballmer’s
ch07.indd 94 05/10/20 3:08 PM

Enter Ethereum 95
hubris stranded his company for a decade in the tech wilderness. Fred
didn’t want Coinbase to make a similar mistake.
The debate boiled over during a crowded meeting in the Coinbase
office high above San Francisco. Fred embarked on an epic forty-
five-minute rant in front of Brian and many longtime employees. The
company, he bellowed, had to get on with building Ethereum. Ever
the athlete and the alpha male, Fred paced back and forth barking at
his colleagues, invoking his favorite phrase, “We’re going to do this!
We’re going to build this! We’re going to run through brick walls!”
Fred’s restless dynamism carried the day. This came as an immense
relief to Olaf, who had watched the rise of Ethereum for months and
repeatedly pleaded for Coinbase to add it. Now, the company had
finally acted. Ethereum would be a major milestone.
But Olaf would not be a part of it.
• • •
As Coinbase had grown, so had his frustration. The unusual young

man from Minnesota had felt at home when the company was a small
startup, pulling together for a common cause in a ramshackle office—
in some ways, a vibe that wasn’t so different from Holden Village,
the utopian former logging camp commune he’d left in the Pacific
Northwest. But Coinbase had since become bigger and more bureau-
cratic, which he detested.
Now, as the head of Coinbase’s risk management team, Olaf’s day-
to-day job meant leading dozens of people. This role bored him, and
he hated managing people. His mind was swimming with much big-
ger ideas. The emergence of Ethereum had fascinated him, and so did
a host of other cryptocurrency projects that pushed the possibility of
smart contracts and other new forms of blockchain technology. It was
ch07.indd 95 05/10/20 3:08 PM

during this time he hit on what he’d do next. He would launch what
even a year before would have sounded inconceivable: a crypto hedge
fund to manage hundreds of millions of dollars on behalf of investors.
Olaf even had a name: Polychain Capital. And he looked the part—if
there was such a thing as a “look” for a crypto hedge fund manager.
Traditional hedgies wear suspenders and bespoke suits, but Olaf wore
T-shirts or bright tracksuits and styled his blond mane in a baroque
feathered coif.
Olaf had to break the news to Brian and Fred. He invited his long-
time bosses and two old friends to a 7 p.m. meeting. Sensing what
was up, the pair turned their gaze on Olaf: “Just tell us.” He did. Brian
didn’t want to lose Coinbase’s first employee and even drafted a let-
ter imploring him to stay before finally accepting that Olaf was deter-
mined to ride the next crypto wave on his own. He wished him well.
Olaf was the first of Coinbase’s early days core team to head out the
door. He would not be the last.
• • •
In late May of 2016, Coinbase finally pulled the trigger on announcing

it would add Ethereum as a second currency to the professional traders’
exchange it had launched the previous year. To mark the moment, the
company rebranded the exchange as GDAX, short for Global Digital
Asset Exchange. Two months later, Coinbase announced that retail
customers would be able to buy and sell Ethereum.
The GDAX launch was cause for celebration at Coinbase, but
one with a twinge of “better late than never.” During the time the
company had deliberated over whether to launch Ethereum, other
US exchanges went ahead and just did it. One was Kraken, another
San Francisco–based crypto shop run by a fractious, long-haired
ch07.indd 96 05/10/20 3:08 PM

Enter Ethereum 97
libertarian named Jesse Powell. In 2015, Kraken had not only offered
Ethereum trading but introduced other trading features like mar-
gin trading and dark pools (which enabled large buy-and-sell offers
in secret), while Coinbase leadership remained preoccupied with the
block-size wars. The Winklevoss twins were Ethereum players, too.
The pair had learned from their disastrous dealings with BitInstant,
whose gadfly CEO had landed in prison. This time, they built a by-the-
books crypto exchange called Gemini. Borrowing from the Coinbase
playbook, the twins marketed Gemini as a buttoned-up Wall Street
business that stayed on the right side of regulators. The new exchange
quickly found traction and, like Kraken, offered Ethereum well before
Coinbase.
Brian’s insight about an open secret—that ordinary people needed
an easy way to buy bitcoin—had paved the way for Coinbase’s mas-
sive early success. It let the company exploit a first-mover advantage
to become the go-to service for retail customers to buy bitcoin. Now,
as the cryptocurrency world barreled into a new era of Ethereum and
institutional investors, Coinbase found itself in an unfamiliar position:
late and needing to catch up.
ch07.indd 97 05/10/20 3:08 PM

ch07.indd 98 05/10/20 3:08 PM
8
Wall Street
Comes Calling
B
itcoin first blossomed in Silicon Valley, and it’s easy to see why.
Only the Valley had the critical mass of libertarian types with
tech chops who would embrace something as far-fetched as
a global, decentralized system of digital money. The Valley’s business
culture linking generations of inventors is also perfect for nurturing
something like bitcoin. Since the 1930s, this special strip of California
has produced entrepreneurs whose work has in turn inspired other
entrepreneurs to push technology forward. These include a young
Steve Jobs who, when asked why he spent so much time hanging
around the semiconductor pioneers of the 1960s, spoke reverently of
their magic. “[I] wanted to smell that second wonderful era of the val-
ley, the semiconductor companies leading into the computer. You can’t
really understand what is going on now unless you understand what
came before,” the Apple founder told the historian Leslie Berlin.
Bitcoin must also be understood by what came before and, in
particular, a group of technologists known as cypherpunks. (The
ch08.indd 99 05/10/20 3:08 PM

word is a portmanteau of cipher—meaning coded messages—and

cyberpunk, the sci-fi genre that combines, as one observer put it,
“high tech and low life.” Cyberpunk has long been associated with
hacker culture.) In 1992, a group of Silicon Valley cypherpunks reg-
ularly met at the office of John Gilmore, a software activist and
cofounder of the Electronic Frontier Foundation—the web’s ver-
sion of the American Civil Liberties Union—to talk about how to
make the internet more secure. Their discussions continued onto
online discussion boards, where cypherpunks chatted about how
to extend the internet ideals of security and anonymity to money.
By the time bitcoin launched in 2009, there was a homegrown com-
munity to support it and build businesses, including Coinbase.
The cypherpunks are to Brian and Fred what the semiconductor
pioneers were to Jobs. “I don’t think Coinbase would have worked
outside of Silicon Valley. It wasn’t an accident I met Fred here or
Charlie Lee at Google. I went to Silicon Valley because that’s where
the next generation of talent is,” Brian says.
But for all Silicon Valley has to offer idealistic young inventors—
culture, innovation, talent, and history—it still lacked one thing: deep
reserves of capital and financial infrastructure required to bring inven-
tions like bitcoin into the mainstream. The real seat of money for the
United States—and for the world—remains where it has been for more
than a century: Wall Street.
That half-mile of road in Lower Manhattan—famously described
as a “street that begins with a graveyard and ends in a river”—and
the blocks around it are home to a collection of skyscrapers that con-
trol the keys to trillions of dollars of investment capital: hedge funds,
pension funds, private equity firms, family offices. Even in 2016, seven
years after bitcoin launched, very little of that capital had flowed into
the cryptocurrency economy.
ch08.indd 100 05/10/20 3:08 PM

Wall Street Comes Calling 101
Sure, crypto was f lourishing in the contained community of

advocates and believers, but Brian and others believed that a true
breakout would arrive only when banks and other giant financial insti-
tutions took it seriously. These institutions were always on the hunt
for new and exotic investments to juice their clients’ portfolios. They
put money in inventive hedging strategies, emerging market funds,
and unusual commodity bets. If the Wall Street establishment could
be persuaded to diversify its bets a little further and reallocate even
1 percent of that wealth into crypto, prices would go through the roof,
vast reserves of capital would be invested in its growth, and the indus-
try would soar.
Coinbase had made modest inroads. Since the launch of its GDAX
exchange, professional traders had flocked to the platform to buy and
sell bitcoin and Ethereum. These included wealthy day traders and,
increasingly, a new species of hedge funders seeking the promise of
high yields in the crypto markets. But these were at best knights and
bishops on the chess board of finance, and Brian wanted the kings and
queens of Wall Street. He decided to send an emissary to New York to
force the issue.
• • •
Adam White had seen a lot of things in the Air Force and at Harvard
Business School. And since joining Coinbase as employee number five,
he had risen to run the GDAX exchange, which was turning into a
cash machine for the company. He felt ready for a new challenge and
figured he could handle anything the business world could throw at
him. Brian threw Cantor Fitzgerald at him.
The famous firm embodied every stereotype of Wall Street’s clubby
culture. Working at Cantor Fitzgerald meant wearing suspenders
ch08.indd 101 05/10/20 3:08 PM

and three-piece suits. It meant spending hours over expensive steak

dinners and fine scotch, braying about how much money you made.
Some of the firm’s escapades read like sordid Hollywood plotlines.
Its former London office was pilloried in an infamous 2008 Spectator
magazine tell-all by a twenty-three-year-old female associate, who
dished ugly details about Cantor’s culture of unbridled boozing and
skirt-chasing. The account describes her male colleagues calling
her “Airbags” because of her breasts and guzzling £800 bottles of
wine over lunch. A decade later, another woman in the firm’s New
York office would publicly blast the frat-boy culture she endured—
including a boss who told her to “be respectful” when she complained
of a colleague who shit in her Bernie Sanders coffee mug.
None of this, though, seemed to impair Cantor Fitzgerald’s reputa-
tion as an A-list banking and brokerage firm for many of the world’s
wealthiest and most sophisticated companies. The Federal Reserve
Bank of New York has designated it as one of a handful of firms to act
as a market maker for federal securities, which means acting as Uncle
Sam’s bond broker.
And it was now Adam’s job to sell Cantor Fitzgerald on the benefits
of crypto and doing business with Coinbase, which would be a feather
in the startup’s cap and go a long way toward legitimizing an indus-
try. He met reps from the firm on 59th Street in a tower overlooking
Central Park. Cantor Fitzgerald’s headquarters had long been located
at the top of the World Trade Center’s North Tower until a Boeing 767
jet struck the building five floors below them on September 11, 2001.
The firm lost 658 employees—two-thirds of its New York workforce—
including the brother of CEO Howard Lutnick. Defiantly, Lutnick
brought the firm’s trading markets back online the next week, saving
the company and eventually paying out benefits to relatives of employ-
ees killed in the attack.
ch08.indd 102 05/10/20 3:08 PM

Now, Lutnick stood at the head of a phalanx of Cantor Fitzgerald

staff who had come to meet Adam. Adam did not meet phalanx with
phalanx. He brought the friendly, self-effacing, and easygoing dispo-
sition of a native Californian and little more. Lutnick quickly noticed
Adam wore no tie and arrived with no retinue. And then he saw his
business card: General Manager.
In Silicon Valley, titles—like clothes—are often informal, sometimes
creative, like “Digital Prophet” or “Innovation Sherpa.” Many startups
treat titles like a rack of hoodies—pull one off the rack, try it on, try
another. Find one you’re comfortable with. Old-line finance firms, on the
other hand, where high achievers earned nicknames like “Wolf of Wall
Street” and “Human Piranha,” treat titles as critical badges of power and
status. Ranks like “executive managing director” and “senior managing
director” matter. They send important signals about who is worth invest-
ing time in, who is serious, and who can be ignored. Lutnick scoffed at
the idea that Coinbase would send a “general manager”—whatever that
was—to waste his time. Didn’t they know who he was?
“So I sat down with this big, sharp-elbowed financial company, try-
ing to work a deal,” Adam recalls. “There must have been a dozen of
them and there was just me. Then the CEO laughs at me and goes,
‘Hey, GM, are you going to make my coffee?’ I came out to New York
and got my ass handed to me by old-school traders.”
Adam’s mission had failed. Coinbase’s campaign to crack the heart
of Wall Street would have to wait another day. Meanwhile, other bank-
ers were similarly dismissive of cryptocurrency. The most famous
figure in American banking—JPMorgan Chase CEO Jamie Dimon—
made clear what he thought of cryptocurrency, flatly telling the press
that bitcoin would not survive.
But even as the lords of Wall Street sneered at cryptocurrency, not
all their soldiers were so skeptical. At Coinbase, a growing pile of job
ch08.indd 103 05/10/20 3:08 PM

applicants listed New York firms as their current employer. At Dimon’s

own firm, in a high-profile defection, senior executive Blythe Masters
left to run a blockchain startup called Digital Asset. Masters was
already renowned on Wall Street for inventing credit default swaps,
the contracts Warren Buffett correctly labeled as “time bombs,” which
could (and did) set off a financial crisis. Now, she would become the
face of a faction in the crypto world known as “blockchain, not bitcoin.”
It was inevitable that as bitcoin grew, people without the same
agenda as the libertarian types in the Valley would find useful apps for
blockchain’s ledger technology, and that’s what was happening. “Block-
chain, not bitcoin” meant you were part of the group that wanted to
use the technology bitcoin had pioneered without the radical decentral-
ized system that let anyone in the world be part of it—a members-only
system that produced a tamper-proof common ledger similar to the
bitcoin one. For banks and big companies, “blockchain, not bitcoin”
promised all of the innovative parts of Satoshi Nakamoto’s creation
minus the controversy, amateurish oversight, and sketchy figures.
In addition to Digital Asset, a group of former bankers with a pen-
chant for fine suits and first-class airfare launched R3, a consortium
of dozens of banks, including Goldman Sachs and JP Morgan who
declared bitcoin irrelevant and said their blockchain software, which
was closed and proprietary—unlike bitcoin—would supersede it. IBM,
meanwhile, built a blockchain used by shipping firms to track cargo
and by food producers to track pork and lettuce shipments.
For the bitcoin believers and advocates, this was heretical, and dubi-
ous—like punk rockers observing a record label trying to co-opt and
re-create their culture for profit. Not only did it go against their core
beliefs, they knew it wouldn’t work.
“I was always railing against it because it was complete bullshit,”
says Fred. Critics alleged “blockchain, not bitcoin” was a marketing
ch08.indd 104 05/10/20 3:08 PM

stunt and that the underlying product amounted to no more than a

glorified database shared among friends. The benefit of hindsight sug-
gests they were right. In less than two years, the big-name banks that
had signed on to R3’s grand consortium project had all pulled out, and
interest in its proprietary blockchain has shriveled. Masters’s Digital
Asset hasn’t fared any better, and Masters herself resigned with little
to show for the once-vaunted project that had attracted more than
$100 million from investors. On Wall Street, it would become clear by
2017 that “blockchain, not bitcoin” was a flop. The phrase died a quiet
death.
Even if the “blockchain, not bitcoin” experiments fizzled, they still
served as a stepping-stone for a growing number of people in the tra-
ditional finance world to discover crypto. It demystified the tech. And
a few firms like Circle and the Winklevoss twins’ Gemini, which did
trade in bitcoin right there in New York, made the case that Coinbase
and other Silicon Valley firms would have no monopoly on the emerg-
ing industry. Circle, Gemini, and a handful of other firms were real
crypto players but with some East Coast flavor. They did not engage in
antics like pajamas at work or all-night hackathons but still lured hun-
dreds of traders and engineers away from traditional Wall Street jobs.
For those migrating to crypto, the appeal of ditching Wall Street
was about something more than just money—even as the price of bit-
coin and Ethereum kept climbing. It was about lifestyle. Like bitcoin
itself, a career in crypto promised an escape from authority and the
buttoned-up banking world.
Jeff Dorman, a broad-shouldered trader with intense eyes and reced-
ing hair, remembers his days grinding it out in the trading trenches of
Lehman Brothers and Merrill Lynch before he joined the crypto asset
management firm Arca. “I came up in this Full Metal Jacket kind of
environment,” he says, referencing Stanley Kubrik’s brutal depiction of
ch08.indd 105 05/10/20 3:08 PM

Marine Corp boot camp in the Vietnam War era. “All the things you read
about investment banking are true. I’d stay up till 3 in the morning to
make sure a PowerPoint was perfect—as if it was so important that the
outcome of a deal would come down to a typo in a PowerPoint slide.”
The crypto business, by contrast, meant less rigor and fewer rules.
As crypto tech seeped into finance, so did its culture. East Coast
firms weren’t going full Valley culture, but the Valley’s DNA was in
the firms. “When you’re trading in the traditional industry five days
a week, you have all these things you have to finish before market
close,” says Dorman. “The 24/7 nature of crypto means a different
pace. You have to train yourself to chill out.”
Likewise, finance culture was seeping into cryptocurrency. As the
price of bitcoin and Ethereum soared in 2016, more traders began to
see cryptocurrencies as a commodity just like wheat or oil or sugar.
This, in turn, set off a clamor of activity in Chicago—home to the
country’s commodities markets—as firms rushed to design futures
and options contracts that would let traders bet on price swings. And
the action wasn’t just in bitcoin and Ethereum. On loosely regulated
overseas exchanges, traders speculated on a galaxy of other crypto-
currencies that began to double and triple in price. Litecoin fans, for
instance, likened the currency to bitcoin’s little brother and pointed
out that its network had been up and running before Ethereum’s.
XRP was a versatile currency launched by the founder of the infa-
mous Mt. Gox exchange, and the company supporting it, Ripple, had
evolved into a full-blown financial firm that pitched XRP to banks as
a way to move money across borders. Other currencies offered no
rhyme or reason for their existence or even any assurance they could
not be hacked or manipulated by unscrupulous insiders. For many
traders, it didn’t matter. A bull market was barreling forward as the
price of every type of cryptocurrency kept climbing.
ch08.indd 106 05/10/20 3:08 PM

Business schools took notice, finally. Only a few years earlier,

Coinbase’s Adam White had pleaded with his professors at Harvard
Business School to allow him to write about bitcoin. The school had
refused. Now, impatient students formed crypto clubs on their own.
Harvard and other top MBA programs began to introduce courses in
blockchain and bitcoin, prepping the pipeline to the upper echelons of
banks and corporate America for careers in cryptocurrency.
At Cornell University, computer science professor Emin Gün Sirer
helped found the Initiative for Cryptocurrencies and Contracts, a sort
of crypto think tank with partner schools in Berkeley, London, and
Switzerland. Stanford Law School announced its first class in crypto-
currency and cybercrime. Its professor? None other than Katie Haun,
who four years earlier had been asked to prosecute bitcoin and was
now one of the country’s leading crypto authorities.
The media’s coverage of crypto also started to go mainstream.
While the tech press reported on Bitcoin, financial media mostly
ignored it—save for the occasional headline that dismissed it alto-
gether, as when the Washington Post warned in late 2014, “Bitcoin’s
Financial Network Is Doomed,” or Yahoo Finance declared the same
year “This Could be the End of the Bitcoin Era.” By 2016, outlets
like Bloomberg and the Wall Street Journal assigned business reporters
to cover crypto. Books like The Age of Cryptocurrency and Blockchain
Revolution further increased the ledger technology’s credibility.
The transformation wasn’t instant. Bitcoin’s outlaw origins kept
poking through. Hedge funds and universities were exploring the
promise of bitcoin, sure, but the reality was that Satoshi’s currency
continued to provide the best anonymous marketplace for extortion
schemes and drug sales. Silk Road had been shut down, but a new
online bazaar called AlphaBay sprung up on the dark web to take its
place as a clearinghouse for criminal activity. And it let customers
ch08.indd 107 05/10/20 3:08 PM

pay with bitcoin and a new species of cryptocurrency called Monero,

which was designed specifically to scramble the record of transactions
in a way that made it extremely difficult to connect transactions to
any individual’s account—making it ideal to thwart law enforcement.
The other longtime strike against crypto—besides popularity with
criminals—was that it could be hacked, and that was still true. In
August of 2016 thieves broke into one of the world’s largest exchanges,
a shadowy Hong Kong outfit called Bitfinex, and stole more than
$73 million worth of customers’ bitcoins. The exchange responded by
imposing a 36 percent haircut on all of its clients—literally confiscat-
ing more than a third of their money to make up for the loss. The
Bitfinex debacle was the biggest hack since Mt. Gox and caused the
price of bitcoin to tumble, briefly.
At Coinbase, Brian was not fazed by the Bitfinex hack. He knew
that it represented an opportunity. He saw more and more people
starting to embrace crypto, and he sensed crypto was about to get
bigger. Much bigger.
ch08.indd 108 05/10/20 3:08 PM

9
Brian Has a
Master Plan
B
rian breathed a sigh of satisfaction as he clicked on
“publish” and his blog post went live. It was September of
2016, a month after the Bitfinex hack, and he was wearing
a plain black T-shirt. Like other Silicon Valley CEOs, he had taken
on a distinct sartorial style as a type of self-branding. Brian’s style
wasn’t as conspicuous as Mark Zuckerberg’s hoodie or Steve Jobs’s
turtleneck—an affect later copied by Twitter CEO Jack Dorsey and
disgraced Theranos founder Elizabeth Holmes. Instead, Brian took
to donning a simple T-shirt—usually black, sometimes white—for
speeches and public appearances. It was a nod to simplicity and
focus.
Since founding Coinbase, Brian had kept his blog as a chronicle of
product announcements, hiring milestones, and other signs of prog-
ress. This blog post was different. It was broader and more ambitious.
Unsubtly titled “The Coinbase Secret Master Plan,” it set out Brian’s
sweeping vision for the future of cryptocurrency.
ch09.indd 109 05/10/20 3:07 PM

Crypto was like the internet, he explained and, like the internet,
it would have a four-step development. The initial two steps, which
would bring crypto to one million and then to ten million people, were
well under way. The first had been the creation of new blockchain pro-
tocols like bitcoin and Ethereum to create and distribute money. Next
came services to trade and store crypto. The third phase in crypto’s
development, Brian said, would be software allowing people to inter-
act more directly with blockchain technology—the equivalent of how
the arrival of browsers like Netscape and Explorer let anybody discover
the internet. The fourth and final step, Brian predicted, would come
in the form of blockchain apps that let people do things like borrow,
lend, and invest without relying on a bank. Step four, he wrote, would
mark the inauguration of Finance 2.0 and bring one billion people into
the emerging crypto universe. If this was the future, then Coinbase’s
master plan was to lay stepping-stones to Finance 2.0 while investing
in other companies doing the same.
The prose in the blog reflected Brian—both technocratic and vision-
ary. “At Coinbase we are passionate about creating an open financial
system for the world. By open we mean not controlled by any one
country or company (just like the internet). We think this is the high-
est leverage way to bring about more economic freedom, innovation,
efficiency, and equality of opportunity in the world,” he wrote.
The master plan made perfect sense to Brian, even if it didn’t make
any sense to most people, including many in the traditional financial
world. Crypto had made inroads into a few corners of Wall Street and
could be traded along with other commodities, but the idea of a billion
people using crypto seemed far-fetched to everyone who hadn’t been
steeped in bitcoin for years. But in true Silicon Valley fashion, Brian
thought it best to think big, and he had Coinbase’s board behind him.
However, first he would have to inspire Coinbase’s own employees.
ch09.indd 110 05/10/20 3:07 PM

Brian Has a Master Plan 111
Giant and far-flung business visions are usually associated with

Valley and tech CEOs who have outsize personalities. Steve Jobs is the
archetype. Even as the late Apple CEO introduced some of the most
profoundly disruptive technology the world has ever seen, he nourished
a cult of personality with his distinct appearance and a stage presence
worthy of P. T. Barnum. Elon Musk, who runs both the electric car com-
pany Tesla and the rocket maker SpaceX, likes to share extravagant plans
for living on Mars and building high-speed tunnels between US cities. In
person and online, Musk is combative and outrageous—picking fights
with the SEC on Twitter and smoking weed during live radio inter-
views. At least part of this is a calculated attempt to build up the Musk
mystique. Amazon’s Jeff Bezos envisions people living in space colonies.
Being of the Valley, it would not be unusual for Brian to think big
and think big publicly. But Brian was nothing like Jobs or Musk or
Bezos. He was a self-described introvert CEO. Every early Coinbase
employee describes Brian as “awkward.” Several point, in particu-
lar, to his first attempt at delivering an inspirational speech during a
company retreat in Napa Valley—summing it up as “painful” and “oh
my God.” One employee said, “The joke was always that he’s on the
[autism] spectrum somewhere,” before adding thoughtfully, “but with
Silicon Valley, fuck, I think 80 percent of the founders here are a little
bit odd when it comes to social skills.”
Brian had enough self-awareness to try and learn. That wasn’t diffi-
cult. Since he was a teenager, he had been possessed by a pathological
desire for self-improvement. If there was something he didn’t under-
stand, he read about it until he did. If he met someone who knew more
than he did, he asked them questions. One time, upon receiving a
performance evaluation from an outside consultant, he emailed it to
everyone at Coinbase, asking them to weigh in, too. For Brian, leading
was just another skill he would have to learn.
ch09.indd 111 05/10/20 3:07 PM

At the urging of Coinbase’s board, Brian and Fred had invested

heavily in Silicon Valley’s best coaches, and these efforts began to show
results, albeit with early hiccups like the infatuation with Conscious
Leadership. The coaches sanded off some of the rough edges that had
led Bloomberg Businessweek to describe the pair as humorless “Vulcan
bankers.” The work of office manager Nathalie McGrath to build a
more human office culture, with costume events and karaoke nights,
had also helped make Brian more approachable.
Nevertheless, Brian not only acknowledged he was an introvert, but
came to embrace it. Like Jobs or Musk or Bezos, Brian had a sweep-
ing vision—bring crypto to one billion people and disrupt the multi-
trillion-dollar finance industry. Unlike them, he couldn’t try to carry
out that vision through sheer force of personality. “I didn’t really know
exactly what a CEO was,” he says. “I thought maybe you had to be a
military general, like barking orders to people. You shouldn’t try to be
something you’re not. Being fake is the worst kind of leadership.”
Brian had learned another lesson: being introverted wasn’t the same
as being weak. Since the beginning, he had fought time and again to
exert total control over Coinbase, whether this meant nudging out his
Y Combinator partner or dictating terms to the startup’s angel inves-
tors. And as Coinbase grew bigger, he turned to a new tactic to ensure
he would keep that control.
In Silicon Valley, executives like Mark Zuckerberg have discovered a
way to ensure they are not just chief executives, but kings of the com-
panies they found. Google’s founders, Larry Page and Sergey Brin, used
the same trick to stay in control, even as they distributed more and
more of the company’s stock. The secret for staying in power involved
creating a new class of shares with super voting rights. Ordinarily, one
share of a company’s stock comes with an equivalent degree of voting
power. If the company in question has created one hundred shares,
ch09.indd 112 05/10/20 3:07 PM

the owner holding 1 percent of the firm’s assets gets one vote out of a
hundred. Super voting shares bust the math: an individual who owns
such stock might get ten votes for every share, ensuring that he or she
can outvote ordinary investors who own a much bigger proportion
of the company. In a variation of the scheme, a company might issue
new shares with no voting power at all, thus increasing the power of
extant voting shares. This lets some investors partake in the company’s
fortune but with no say in how it’s run. No matter the specifics, the
outcome is the same: founders obtain a hammerlock on critical issues
such as board composition, product strategy, or anything else that
affects the direction of the company.
This is what Brian did as Coinbase grew. As the company raised
a $75 million Series C and then a $100 million Series D investment
round—key milestones on the path to taking a company public—it
handed out millions of new shares, but also created a new class of
shares for Brian that would guarantee he could outvote those inves-
tors and anyone else. Like Zuckerberg and the Google founders, Brian
had an iron grip on Coinbase for now and for the foreseeable future.
By the time he posted his visionary blog post, Brian had the power he
needed and was learning to lead a company that was growing faster
than he anticipated.
• • •
A key test of Brian’s leadership came as competition to lure profes-

sional traders heated up. While Coinbase’s bread and butter had
always been retail investors and hobbyists, its professional exchange,
GDAX, had set out to capture the market for wealthy traders—called
“whales”—and the growing number of hedge funds and other Wall
Street players dipping their toes into the crypto world.
ch09.indd 113 05/10/20 3:07 PM

An early version of GDAX launched in 2015 and, after it added

Ethereum, the exchange took off. To track its progress, Coinbase
placed giant monitors around the office showing GDAX’s market
share compared with other exchanges. The company was not num-
ber one. That distinction belonged to Bitfinex, the Hong Kong–based
exchange that had endured a series of hacking scandals—including
the one in 2016 that saw it lose $72 million in bitcoin to thieves and
then impose a 36 percent haircut on of all its customers’ holdings to
make up for the loss. Despite its general sketchiness—no one was
quite sure who controlled it—Bitfinex still enjoyed a global base of
customers who liked its fast-and-loose approach to financial regula-
tion, which allowed them to get richer quicker. Coinbase couldn’t—
wouldn’t—compete with that. Since the beginning, the company
had tried to do right by regulators and, on GDAX, it catered to
customers who cared about compliance. Targeting compliance-
conscious Americans and traders in other countries with tight bank-
ing laws, GDAX began to build market share and soon pushed past
a San Francisco rival, Kraken. But then the graphs on the giant
office monitors started to move in the wrong direction—down.
GDAX’s growth stagnated in mid-2016, surrendering some of its
market share to rivals like Bitfinex and other renegade exchanges,
which had wooed customers with low prices and more types of crypto
to trade.
More crucially, Coinbase and GDAX had a new and serious compet-
itor: the Winklevoss twins.
Cameron and Tyler Winklevoss first gained fame via Aaron
Sorkin’s acclaimed 2010 film The Social Network, which focuses
on betrayal and intrigue surrounding the founding of Facebook.
The movie depicts the twins, played by Armie Hammer, as jocks
outwitted by a scheming Mark Zuckerberg, who dubs them
ch09.indd 114 05/10/20 3:07 PM

“the Winklevii.” While the film painted Zuckerberg as unsympa-

thetic, it also left a lasting impression of the Winklevoss twins as
lummoxes—an impression they did little to dispel by trading on
their movie fame to appear in a moronic pistachio commercial that
took a shot at Zuckerberg.
In reality, the twins are little like their popular caricatures. While
their physical stature is striking—as Cameron’s character snarls in the
movie, “I’m six-foot-five, 220, and there’s two of me”—their accom-
plishments go beyond their rowing careers at Harvard and the Beijing
Olympics. Far from being silver-spoon brats, the twins were hard-
working students who, while still in high school, translated Latin
works of St. Augustine and other early scholars with their father. In
person, they are different from each other—Cameron is more serious
and hard-charging while Tyler is more jovial—but both are thoughtful
and well-spoken. One thing The Social Network did get right, though, is
their driving ambition.
In the battle over Facebook, the twins won a settlement after their
lawyers obtained a series of damning messages from Zuckerberg—
including one where he gloated how he would “fuck them . . . proba-
bly in the ear.” Notwithstanding the ear-fucking, Cameron and Tyler
made out very well, obtaining a $65 million payout in 2008, the bulk
of which they took in Facebook stock. That ballooned to over $500
million a few years later. Around this time, they struck gold again.
As their biographer Ben Mezrich writes of their decision to take the
Zuckerberg payout in stock, “For the [allegedly] foolish, batshit-crazy
twins, this proved to be one of the greatest business decisions of all
time—topped only, perhaps, by their choice to invest $11 million of
that settlement in bitcoin in 2013.”
Cameron and Tyler’s next business decision—to back the disso-
lute Charlie Shrem and his BitInstant project—was less auspicious.
ch09.indd 115 05/10/20 3:07 PM

BitInstant, which offered bitcoin buying and merchant services, got

crushed by Coinbase, and Shrem went to jail for breaking money-
laundering laws. The twins, though, rebounded. They sought a
rematch with Coinbase with the launch of Gemini, their squeaky-
clean exchange aimed at professional traders. And in the early rounds
of this fight, they won decisively.
“Gemini came out of stealth [in late 2015] and we watched them on
the office monitors creep up every week and then surpass us,” recalls
Adam White, who led Coinbase’s pro trading exchange GDAX. This
was a double blow. Not only was Coinbase’s new cash machine fal-
tering but it was losing to a competitor that likewise styled itself as
a “white knight of crypto”—a place for compliance-minded investors
who needed an exchange that stayed on the right side of regulators.
The flagging exchange situation was a crisis that needed leadership.
Brian stepped in.
In an urgent email, he summoned Adam White, other GDAX exec-
utives, and other key people from across Coinbase—from legal, from
marketing, and from design. “Fix this,” he told them at a tense lunch,
“and fix it now.” The Brian who appeared at the lunch was unlike the
leader his staff had seen before—direct and authoritative. Barking
orders like a general may not have been his style but, on this occasion,
Brian mustered a military-style persona, directing the different silos of
Coinbase to work together like never before.
“Winning the exchange space is fundamental; it’s foundational,”
he said. What he meant was that if Coinbase couldn’t hold its own
against the likes of Gemini, they could forget about the rest of Brian’s
master plan.
The all-hands intervention worked. Services like GDAX are, at the
end of the day, products, and products don’t succeed if they don’t have
support from the nonproduct people in a company. By shoving the
ch09.indd 116 05/10/20 3:07 PM

exchange to the top of everyone’s agenda at Coinbase, Brian brought

the exchange back from disaster. The graphs on the office monitors
took on their old appearance as GDAX regained market share, while
Gemini shriveled. For the second time in three years, the Winklevoss
twins lost to Coinbase.
• • •
By 2017, Coinbase had grown to hundreds of employees, and Brian

was learning to lead them all. He was still an introvert but no lon-
ger one who retreated into the private world of his headphones for
twelve hours at a time. But even with dozens of direct reports, and less
self-imposed seclusion, Brian grew lonelier in the role.
The departure of Olaf, Brian’s good friend, was followed by oth-
ers. Charlie Lee, the company’s fifth employee, had a new home and
a family who had grown tired of his long hours at Coinbase. Charlie
also owned a hoard of Litecoin. He had created the lighter version of
bitcoin while at Google in 2011, and the digital currency had since
become worth billions, its value trailing only bitcoin and Ethereum.
Litecoin’s value would soar still further, Charlie suspected, if more
people could buy it. And the best way to make that happen would be
to sell it on Coinbase.
A popular story in crypto circles tells of Charlie secretly building
Litecoin capacity into Coinbase’s code and, late one night, pushing the
code live with no warning, only to be fired the next day. It’s a good
story, but it’s not true. A programming feat like adding Litecoin sup-
port to Coinbase would take a much longer time to build and numer-
ous hours to launch. It can’t be done overnight. Also, Coinbase uses
what employees call an “eye of Sauron” to ensure no one can unilater-
ally mess with its code without tripping alarms.
ch09.indd 117 05/10/20 3:07 PM

Coinbase did launch Litecoin in the spring of 2017—with Brian’s

full approval—and the price shot up 25 percent. The press pronounced
the bounce was due to the “Coinbase effect,” a term that would cre-
ate publicity, and trouble, for the company in the future. Two months
later, Charlie announced he was leaving Coinbase.
• • •
Charlie’s departure meant the loss of another longtime and trusted

employee, but a much bigger blow for Brian had come months earlier.
Fred had left.
Since his epic rant that pushed Coinbase to adopt Ethereum, Fred
had grown restless. He was cofounder of the company, but Brian was
in charge. While the pair had found an equilibrium early on—Brian
ran product, and Fred took care of the business side—Coinbase could
no longer contain both their ambitions. Fred wanted to call all the
shots, but that wasn’t going to happen at Coinbase. Sensing the begin-
nings of an unprecedented bull run for crypto, he decided to strike out
on his own to build apps and launch a hedge fund. “I enjoyed being a
spirit leader at Coinbase,” he recalls, adding that since leaving, he and
Brian have become better friends than ever.
The formal goodbye came during a Friday morning meeting in
front of all the employees, many of whom were shaken by the news.
Fred spoke reverently of his time at Coinbase and his optimism about
the future of cryptocurrency. “What I wanted most was for the com-
pany to do well. I had hired everyone who was there. It’s like leaving
your family in a way,” he recalls.
And then the tough and unsentimental money man—the one who
had exhorted the company to charge through brick walls—did some-
thing he hadn’t done in many years. He started to cry.
ch09.indd 118 05/10/20 3:07 PM

Brian had published his “Secret Master Plan” in September of 2016.

But as his ambitions swelled, the following months placed more on his
shoulders than ever before, and he now had few trusted friends to help.
And as the beginnings of an impending crypto mania began to swirl,
Coinbase began to face a new set of problems. Not least of which was
the US government.
ch09.indd 119 05/10/20 3:07 PM

ch09.indd 120 05/10/20 3:07 PM
10
Uncle Sam
Comes Calling
O
n November 9, 2016, Washington, DC, woke to gloomy rain
and the news that a political outsider, Donald J. Trump,
would be the next president of the United States. Financial
markets shuddered; futures contracts for major stock indexes traded
5 percent lower, and the price of oil fell. Gold, traditionally a haven in
times of turbulence, ticked up. So did bitcoin, which rose 3 percent on
news of Trump’s election. For bitcoin boosters, that small price jump
would be the only good news about cryptocurrency to come out of
Washington for the next three years.
On the other side of the country, David Utzke, a decorated spe-
cial forces veteran based in California, was creating trouble for bit-
coin. After serving overseas with the US Army and Navy, Utzke had
sought a new way to serve his country when he got home. He found
it with another fearsome organization: the Internal Revenue Service.
Now forty-something, with perfect teeth and rigid posture, Utzke was
scouring the globe for tax cheats.
ch10.indd 121 05/10/20 3:07 PM

Many people regard the IRS as an agency of gnomish bean

counters who spend all day hunkered over tax returns. Fewer know
that the agency also outfits a formidable law enforcement division that
employs people like Utzke—accountants with badges and guns—who
train at the same school as agents from the FBI and the DEA.
The IRS was one of the agencies that had quickly grasped the crimi-
nal potential of cryptocurrency. One of its special agents, Gary Alford,
helped break open the federal investigation into the Silk Road crime
bazaar. Alford has a strange habit—he always reads documents three
times—but this idiosyncrasy paid off when, on one of his triple read-
ings, he recognized a connection between a Gmail address and the
Dread Pirate Roberts, the anonymous mastermind of the Silk Road.
Alford’s discovery led the Justice Department to identify and convict
Ross Ulbricht, aka the Dread Pirate.
Alford’s colleague Utzke had foreseen the rise of digital money
way back in the 1980s and chose a novel concentration of studies in
college—economics, forensic accounting, and computer science—in
anticipation of something like bitcoin arriving one day. At the IRS, as
the crypto markets picked up steam in early 2016, he embarked on an
investigation of crypto tax evasion. This entailed an electronic search
of all IRS returns between 2013 and 2015 to determine how many
included a Form 8949—used to declare capital gains. Utzke then fil-
tered those millions of filings to identify anyone who reported “prop-
erty likely related to bitcoin.” He found only 802 such filings. That was
the number of Americans who had reported gains or losses related to
bitcoin the previous year.
That word property was key. In 2014, the IRS issued a statement
designating cryptocurrencies like bitcoin as property, not currency.
Owning bitcoin was just like owning a house or shares of Apple stock.
If the price went up and the owner sold her shares, she would pay Uncle
ch10.indd 122 05/10/20 3:07 PM

Uncle Sam Comes Calling 123
Sam under capital gains rules—typically about 10 percent of the profit.

If the owner held onto the property for less than a year before selling it,
it would be classified as a short-term gain and the resulting tax would
be higher. Bitcoin’s legal status as property also meant that using it to
buy anything, even a cup of coffee, could trigger a tax obligation. For
someone like Olaf, who lived on bitcoin for several years, a strict inter-
pretation of the IRS rules would result in an unending tax nightmare.
Utzke looked at his findings again. That number, 802, was shock-
ingly small given that millions of US citizens reportedly owned bit-
coin wallets and, according to his calculations, there had been over
$10 billion in bitcoin transactions in 2015 alone. The more he looked
into who was using bitcoin, the more sure he was that digital currency
was a vector for tax evasion.
Utzke decided to squeeze a tax cheat who was already facing crim-
inal charges to tell him more about bitcoin. This person had evaded
taxes by using shell companies to funnel money into foreign brokerage
accounts, and then back to the United States via withdrawals at ATMs.
The tax dodger told Utzke this scheme had become a bother and that
he found bitcoin provided an easier way to duck the IRS. Instead of
sloshing money through different companies and accounts, he con-
verted the cash into bitcoin, then bought cars, boats, and other items
he could flip for dollars.
Utzke also discovered other bitcoin buyers who used less blatant but
equally illegal ways to cheat. These included two companies whose
accounts treated bitcoin purchases as technology expenses so as to
classify them as tax deductions—the equivalent of trying to write off
the purchase of gold bars or Euro notes as a business expense. When
confronted, these two companies would be in for a world of hurt. And
so would Coinbase. Utzke discovered, unsurprisingly, that the two
organizations had bought their bitcoin through Coinbase.
ch10.indd 123 05/10/20 3:07 PM

Coinbase, unlike most bitcoin sellers, had something the IRS wanted
very much and few others in the bitcoin world had: a detailed profile of
every one of its customers, including their name, home address, date
of birth, and much more. These records would make it easy for the IRS
to compare a list of Coinbase customers who had sold bitcoin against
the agency’s own records to see who had failed to pay taxes.
From the outset, Brian had set out to make Coinbase the law-
abiding good guy amid an industry rife with scams and scoundrels.
Board member Chris Dixon had even taken to calling Coinbase “the
white knight of crypto.” Now, ironically, the white knight’s decision
to comply with “know your customer” laws had made it easy pickings
for the IRS’s first major investigation into cryptocurrency—even as
the more renegade exchanges, which operated in secrecy and skirted
banking laws, avoided scrutiny.
Utzke’s investigation produced a subpoena that landed at Coinbase
in late 2016 like a grenade. Company lawyers showed it to Fred shortly
before he left Coinbase. Normally unflappable, Fred groaned, “Oh
shit, this is serious.” There was no running through a brick wall built
by the IRS. They brought the letter to Brian.
The subpoena was a nightmare they’d have had a hard time imag-
ining but for the fact they were looking right at it. The IRS wasn’t
after the account information of a few tax cheats it had been tracking.
It wanted the identity of every Coinbase customer who had sold bit-
coin—more than five hundred thousand of them—and every atten-
dant piece of personally identifying information about them, including
any email they might have sent to Coinbase as well as all power of
attorney letters they executed with Coinbase. This was shaping up to
be the Spanish Inquisition of tax investigations.
The subpoena meant hell two times over for Coinbase. First,
the burden of rounding up and printing the details of half a million
ch10.indd 124 05/10/20 3:07 PM

customer records to send to the IRS would require Coinbase staff to

burn hundreds—possibly thousands—of hours on paperwork rather
than building out the company’s crypto services.
The second hell was the reputational scorching Coinbase would
likely have to endure. From the start, Coinbase’s notion of centralizing
keys and accounts had been problematic for the bitcoin purists, who
viewed the tech as antiestablishment, anonymous, and a way to break
power structures. Many of them had blamed Coinbase for betraying
bitcoin’s libertarian values. Those values called on individuals to trust
no central authority and rely instead on cryptographic private keys to
guard their stashes. Their knock on Coinbase came in the form of a
taunt—“not your keys, not your coins”—a dig at the company’s prac-
tice of storing its customers’ bitcoin for them. Now, if the government
scooped up five hundred thousand Coinbase customer accounts, it
would prove the critics right. Coinbase would be despised for selling
out its users’ privacy. Given the vitriol, including death threats, hurled
at the company during the block-size debates, it was hard to fathom
how Coinbase would come through this.
Faced with crushing heaps of paperwork and a PR catastrophe,
Brian did the only thing he thought he could do. He said no to the IRS.
In a blog post, Brian said the likes of Citibank or PayPal or Charles
Schwab would never go along with such a request from the IRS—and
there was no way Coinbase would either. Bracing for millions in legal
bills, the company filed to quash the subpoena as illegal and invasive.
“Asking for detailed transaction information on so many people,
simply for using digital currency, is a violation of their privacy, and
is not the best way for us to accomplish our mutual objective,” Brian
wrote.
A two-year legal battle yielded some wins. Coinbase persuaded a
judge to winnow down—though not quash—the subpoena. In the
ch10.indd 125 05/10/20 3:07 PM

end, the IRS won the right to obtain limited records on more than
thirteen thousand of Coinbase’s biggest customers—those who had
done over $20,000 in business or conducted more than two hundred
transactions in a year. Coinbase also provided 1099-K forms to large
customers, a practice that mirrored what brokerages like Fidelity have
long done. Neither Coinbase nor its customers were particularly happy
with this outcome, but there was a silver lining: the legal fight would
help bring Coinbase and other crypto companies closer to the world of
mainstream financial institutions.
• • •
While the IRS had declared bitcoin was property, officials at the
SEC were deliberating over whether it was technically a security, a
tradeable financial asset. Meanwhile, at the Treasury Department,
the Financial Crimes Enforcement Network treated it as a currency.
And yet another agency, the CFTC (Commodity Futures Trading
Commission), said bitcoin was a commodity, which would mean it
was a good or a service. These technicalities could be mind-numbing,
but they also meant a legal minefield for the emerging crypto industry.
Ironically, in the course of trying to classify and put checks on bit-
coin, the US government also become one of the biggest owners of
it. As a result of the Silk Road takedown, the FBI had seized around
150,000 bitcoin from the site’s mastermind and then sold them off for
millions of dollars in a series of auctions run by the US Marshals Ser-
vice. Meanwhile, the Bureau of Alcohol, Tobacco, Firearms and
Explosives, the Drug Enforcement Agency, the Secret Service, and
others began confiscating crypto in the course of their investigations.
Some of the bitcoin ended up in the hands of the Marshals, while other
stashes simply went missing. The US government couldn’t keep track
ch10.indd 126 05/10/20 3:07 PM

of its own bitcoin—even as it was creating a regulatory ordeal for

everyone else who touched the currency.
And that was just the feds. State regulators wanted a say too. The
New York Department of Financial Services, jealously guarding its
role as watchdog of Wall Street, dumped another load of paperwork on
the crypto sector in the form of licensure. Any company that wanted
to deal crypto in the Empire State would have to obtain a so-called Bit
License—a process that cost over $100,000 and could take years to com-
plete. This bureaucratic hellhole stank of revolving-door politics. The
powerful official who created the license, Benjamin Lawsky, soon quit
the Department of Financial Services and created a consultancy that
specialized in—what else?—helping firms navigate crypto regulation.
For bitcoin ideologues, Lawsky’s stunt simply reaffirmed their belief
about the tyrannical nature of government. “New York is that abusive,
controlling ex you broke up with three years ago, but they keep stalking
you,” snarled Jesse Powell, the libertarian CEO of the Kraken exchange.
Another influential figure in bitcoin, Erik Voorhees, was even less
impressed. Voorhees had developed one of the first bitcoin applica-
tions, a gambling game called Satoshi Dice, and ran a company called
ShapeShift that let customers exchange one type of crypto for another.
Even by libertarian standards, Voorhees was a radical. His political
passions included the Free State movement, a campaign to persuade
tens of thousands of people to move to New Hampshire. Their influx
into that low-population state, the Free Staters hoped, would allow
them to create a stronghold for antigovernment zealots. Many in the
movement also promoted bitcoin as a way to subvert the state’s control
over the money supply. Voorhees watched what was unfolding in New
York with dismay. “Bit License is officially law in New York today,” he
tweeted. “Shed a tear for freedom, capitalism and innovation. Then
comply, citizen.”
ch10.indd 127 05/10/20 3:07 PM

Not everyone in crypto circles shared Voorhees’s views, of course.

Many others, including Brian, hoped thoughtful, careful regulation
could bring stability to the crypto markets and help it become even
more mainstream.
Unfortunately, the emerging US regulatory regime for cryptocur-
rency was not providing stability, but instead wrapping it in red tape.
Multiple agencies were still arguing over whether this stuff was money
or property or a commodity like frozen orange juice. Rules began to
multiply from state to state. Navigating the knots of red tape was mak-
ing markets less stable and slowing crypto’s legitimacy.
Meanwhile, other countries were carving out safe harbors from the
US regulatory storms where crypto firms could operate under relative
calm. The state of Zug in Switzerland, for instance, created a “Crypto
Valley” where firms could experiment with new business models
without stepping into a regulatory bear trap. American entrepreneurs
and investors began to warn that a generation of crypto innovation
could decamp to foreign shores if the United States didn’t dispel its
regulatory haze.
Blame could not be put entirely at the feet of the regulators. The IRS
and other agencies were simply using the tools they had—and nearly
all those tools had been created before bitcoin existed. The regulators
were trying to stuff crypto, a new technology, into old legal boxes
designed for an earlier era of finance. The situation wasn’t much dif-
ferent from when cars began appearing on American roads. Lacking
laws to regulate automobiles, governments in the early twentieth cen-
tury did their best by adapting rules designed for horses and carriages.
In the long run, of course, this proved impractical, and new laws were
required to regulate cars.
Coinbase has many of the same backers as Airbnb, Uber, and other
Silicon Valley companies that built their business on what some call
ch10.indd 128 05/10/20 3:07 PM

“regulatory arbitrage”—exploiting regulatory loopholes while also

unleashing feel-good PR that includes fluffy phrases like “the sharing
economy.” The strategy had worked well for those other startups, letting
them grow big enough to fight every court battle and curry favor with
politicians. But Brian knew that for the crypto industry to catch a break,
it would need new laws. And that meant going to Congress to help law-
makers make good ones. It was time for Brian to go to Washington.
• • •
While Wall Street and the Valley are very different places—as Adam
White found out when he met with Cantor Fitzgerald—they do share
a zest for free markets and cosmopolitan culture that makes them odd-
ball distant cousins. The Valley and Washington, on the other hand,
are about as closely related as a hamster to a hippopotamus. Most
people in the Capitol regard the Valley with hostility and suspicion,
while most California tech geeks possess a nearly physical aversion to
the politics and lobbying that permeate DC (though tech giants like
Google and Facebook eventually become adept at the lobbying game
themselves).
The Coinbase crew had already made several forays into Washington
over the years in an effort to win over lawmakers to the potential of
crypto. What they encountered did little to improve their opinion.
Juan Suarez, the company’s longtime lawyer, had tried and failed to
educate lawmakers about cryptocurrency. “I tried to explain bitcoin to
people in DC, but all they would do was ask about Olaf’s eccentric blog
posts from three years earlier,” he said, referring to rambling essays
written by his former colleague.
Brian had little time for DC-style politics. What was the point of
engaging with pols when, in his view, he could use Coinbase to bring
ch10.indd 129 05/10/20 3:07 PM

economic freedom to a billion people? One exception, however, was

his hometown congresswoman, the powerful Speaker of the House
and Democratic leader Nancy Pelosi. During a meeting in her San
Francisco office, she did not raise her liberal priorities, but instead
piled on the charm, telling Brian how much she respected and admired
entrepreneurs. Brian could handle someone like Pelosi on Coinbase’s
home turf on the West Coast. It was the city of Washington, DC—
populated with partisans inflamed by narrow issues and often igno-
rant of tech—he could do without.
Regardless of Brian’s ease with Pelosi, the IRS investigation and the
gathering regulatory storm meant Coinbase had to double down on
its political efforts. Brian hired Mike Lempres, a political fixer who
had served as associate attorney general of the Justice Department
in the 1990s and had worked with President Donald Trump’s future
Attorney General William Barr as well as Robert Mueller, who would
lead a high-profile investigation into Russian interference in American
elections. A fifth-generation son of San Francisco, Lempres has a fluff
of white hair around a growing bald spot, but he still projects youth
and vigor. At Coinbase, he drew a tough assignment: sell Brian on
Washington, DC. After all, if the company wanted to notch a political
win for cryptocurrency, sending its CEO as an emissary could be key
to its strategy. “I told him, ‘Brian, I hope you like it.’ I want you to be
here at least twice a year,” said Lempres, adding ruefully, “he didn’t
like it.”
Their joint visit stirred little in Brian besides a strong urge to go back
to California. The city’s heat and humidity were oppressive. The DC
schmoozing culture annoyed him. He liked people who built things
rather than just bloviated about them. This included the US senators
he met. One of them, a stalwart of the Democrats, he declared to his
Coinbase colleagues, was a “complete and total ass.”
ch10.indd 130 05/10/20 3:07 PM

About the only thing he liked about DC was the underground train
that whisks members of Congress between different places on Capitol
Hill. Other than that, the trip was a bust. Lempres’s hopes of impart-
ing to Brian the ways of Washington went nowhere. On their way
back, Lempres recalls, “Brian wanted to solve the whole problem with
the SEC on our return flight. He thought it was time to go back to
first principles and rethink the whole agency. The thing is that there’s
a hundred years of SEC law out there, and they’re not about to change
it for him.”
With or without Brian, policy would be made. Slowly, glacially,
Washington grappled with cryptocurrency, lumbering toward a plan.
Meanwhile, the thriving world of crypto investors was not going to
wait for the feds. As Congress dithered, one of the most outrageous
financial bubbles in modern history was swelling faster than a new
celebrity’s ego.
ch10.indd 131 05/10/20 3:07 PM

ch10.indd 132 05/10/20 3:07 PM
11
Initial Coin
Insanity
O
n June 25, 2017, news raced around social media that
Ethereum creator Vitalik Buterin had died in a car crash.
Speculators panicked. Prices fell 20 percent, lopping $4 billion
off Ethereum’s value in hours.
The next day, a tweet from Vitalik himself went viral. The tweet
showed a photo of him, very much alive, holding up a piece of paper
with the number of a newly mined block in the Ethereum block-
chain and a figure, known as a hash, that had just unlocked the block.
Vitalik’s tweet was the blockchain equivalent of a hostage holding up a
daily newspaper as proof that he was alive. The picture proved Vitalik
was not dead. The price of Ethereum bounced back up.
The car wreck story was a hoax perpetrated by trolls on the web-
site 4chan, either to manipulate the market or simply to pull off
a ghoulish prank. Either way, the stunt demonstrated how critical
Vitalik—the strange, spectral genius who had created Ethereum—
was to the currency’s success and the success of crypto in general.
ch11.indd 133 05/10/20 3:09 PM

It also underscored how Ethereum had taken center stage, over

bitcoin, in the 2017 crypto boom.
Early in the year, the price of Ethereum was $13. By summer, its value
had increased thirtyfold and was nudging $400. And the big run-up
was just beginning. Meanwhile, thanks in large part to Ethereum,
dozens and then hundreds of other cryptocurrencies began to take off.
• • •
Ethereum, you may recall, was Vitalik’s smart contract machine that
had emerged as bitcoin’s main rival in the blockchain world. But it also
served as the most popular platform for building other cryptocurrency
projects. Suppose someone wanted to offer file storage or sports bet-
ting on a blockchain? One option would be to build a blockchain spe-
cifically for that purpose. A much easier option, though, would be to
use smart contracts to build that service on top of Ethereum. In the
emerging crypto industry, Ethereum was like a new type of internet,
and these new third-party projects—like file sharing or sports bet-
ting—were the websites that ran on top of it.
Ethereum is different than the internet in one crucial way, though.
The services that sit on top of it require a special digital token to
operate. Using the internet analogy, it’s as if each site on the web
required visitors to acquire and spend a unique currency in order to
access the site.
Another way to think of Ethereum is as an amusement park.
Ethereum owns the park and lets others build and manage the rides.
The apps for sports betting and file storage and so on are the rides.
If you want to get on the betting roller coaster, you first have to buy
and then cash in a roller coaster token. The file storage carousel like-
wise requires a file storage token. Ethereum helps the ride owners
ch11.indd 134 05/10/20 3:09 PM

Initial Coin Insanity 135
by minting their tokens. In return, the game owners pay Ethereum

a small commission every time someone cashes in a token to get on a
ride. Customers who come to the park can go on any ride they want,
and go on multiple rides, but there is no all-access wristband: they
must pay for each ride with that ride’s special token, acquired at the
Ethereum counter.
A quirk of this amusement park, however, is that most of the rides
haven’t been built yet, but customers still buy tokens for future rides.
Using Ethereum, buyers acquired tokens in the hope that those tokens
would one day be used for a blockchain service. In reality, the ride
they buy into may or may not get built. But while they wait, they can
always try and flip their tokens to someone else who wanted to bet on
a ride getting built. And that’s what most people did. Speculation pure
and simple.
Every day in 2017, someone on the internet announced a new token
project. And every day, people raced to buy the tokens. The projects
spanned the lurid, including SpankChain, which promised a way to
pay porn actors directly, to the far-fetched such as ASTRCoin, whose
tokens purportedly served as claims on various asteroids. The phe-
nomenon gained the name “the ICO.” Instead of an IPO, or initial
public offering, this was an “initial coin offering.” The ICO could last
a few days or a few weeks, and it involved sending funds—typically
in Ethereum or bitcoin—to a project’s online wallet and waiting to
receive tokens in exchange.
Never in history has there been an easier way to raise more money
from more people with such little effort. The number and size of the
ICOs defied logic. Staggering sums changed hands every day. A com-
pany called Filecoin, which promised to build a blockchain storage
network, raised $205 million. An outfit called Bancor, which touted
an online supercurrency, raised $153 million worth of Ethereum in
ch11.indd 135 05/10/20 3:09 PM

just three hours, while one called Brave—a new web browser—raised
$35 million in thirty seconds. The flow of cash reached a crescendo
with a service called EOS. Billing itself as a rival to Ethereum itself,
EOS raised a staggering $4.2 billion with the marketing help of Brock
Pierce, a former child star in Disney’s Mighty Ducks movies, who had
reinvented himself as a crypto gadfly.
Until 2017, the only companies that could raise that kind of capital
were white-hot startups like Uber or Airbnb—“unicorns” in Silicon
Valley slang. Sure, many claimed the likes of Uber were overvalued,
but no one could deny what these startups did have: a proven busi-
ness idea, millions of customers, and billions in revenue. Many of the
ICO companies, by contrast, had none of these things. Millions were
invested in small teams of developers with a white paper outlining
their idea and nothing else. For their supporters, that was enough.
After all, bitcoin and Ethereum had been born from nine-page white
papers, and those projects were now worth billions. Why wouldn’t
these ICO projects produce the same result?
More than a few financial watchers who’d seen bubbles before
pointed out that it was insane to throw hundreds of millions of dollars
at these pop-up blockchain ventures. The Financial Times’ influential
Alphaville column spewed snark at ICOs and “crypto bros,” warning it
would all end in tears. But such doomsday prophecies from the finan-
cial establishment made little impression inside the bubble of Silicon
Valley, where the tech elite were buzzing about an essay published by
one of their own.
Titled “Thoughts on Tokens,” the essay explained how ICO-style
fundraising would help democratize finance and throw open the
door to investments from around the globe: no longer would start-
ups have to depend on a clique of venture capitalists to get off the
ground. The high priests of Silicon Valley would soon be competing
ch11.indd 136 05/10/20 3:09 PM

with a global base of token buyers to invest in new companies. The

essay’s author was Balaji Srinivasan—the same Balaji Srinivasan who
had turned up at Coinbase three years before looking like a hobo/
drug dealer with Ivy League ideas, and who was now a partner at
the VC firm Andreessen Horowitz. “Thoughts on Tokens” zipped
from inbox to inbox among the clubby world of Valley investors,
triggering a rush of FOMO. Before long, the venture capital world
began pouring money into an emerging crypto industry already
awash in cash.
For the VCs, bets on crypto were a hedge of sorts. If Balaji was right,
the forthcoming token economy was poised to upend the Valley’s
longtime role as kingmaker of the startup scene. Better then to try
and get an inside track on the emerging industry that could make
Sand Hill Road—the famous strip of Palo Alto and Menlo Park that
houses the most prestigious venture capital offices—irrelevant.
Americans were glomming onto the growing crypto mania but it
was nothing compared to what was happening across the Pacific. In
South Korea, investing in crypto became as common as buying mutual
funds, and by late 2017, one-third of the country’s workers owned
some sort of digital currency. A great number came from the coun-
try’s lower-income strata—they called themselves “dirt spoons”—and
saw owning crypto as a once-in-a-lifetime shot at subverting what
they saw as a rigged class system. Korean television fanned the flames,
producing spectacles like a game show where contestants competed
to launch a new coin. In Japan, meanwhile, it was not just the young
rushing to buy cryptocurrency. On the streets of Tokyo, retail stores
sprang up to offer an easy way for seniors and others uneasy with tech-
nology to buy crypto. The stores removed the mystery of keys and
wallets and blockchains, and instead allowed customers to walk up
to a counter and purchase digital coins in the same way they would
ch11.indd 137 05/10/20 3:09 PM

a bowl of noodles—a kind of brick-and-mortar version of Coinbase’s

user-friendly strategy.
By mid-2017, crypto stalwarts like bitcoin, Ethereum, and Litecoin
were joined by a galaxy of new tokens that had flooded into the mar-
ket through ICOs, with names like Qash or QuarkChain. No matter
how obscure, nearly all promised they would be the next bitcoin—or
at least something like it. In the case of Dentacoin, whose ICO raised
$1.1 million, the project promised to be the crypto of choice for dentists.
And in a market where crypto coins of all stripes kept soaring higher
and higher, why not take a flyer on a brand-new ICO before the rest of
the market bid up the price? Each day, it seemed, another obscure coin
enjoyed a 100 percent pop, which in turn inspired yet another ICO.
The crypto media called this flood of new currencies “altcoins”—as
in, alternatives to bitcoin. Longtime bitcoin believers had their own
name for the tokens: “shitcoins.” Shitcoin critics claimed the new
tokens were spun up on shaky technology and then flogged in fly-by-
night marketing schemes.
It was during this craze, at an exclusive investor conference in New
York, that JPMorgan Chase CEO Jamie Dimon, likely horrified by the
rampant speculation, tore into cryptocurrency, including bitcoin. He
ranted that he would fire any employee trading bitcoin on the grounds
of stupidity. Cryptocurrency wouldn’t end well, he warned. “It’s a
fraud,” he added for good measure. “Worse than tulip bulbs.”
The market cared about neither Dimon’s words nor the shitcoin
critics. Prices kept climbing, and the ICOs kept multiplying. On
Capitol Hill, Federal Reserve Chairman Janet Yellen testified before
Congress—only to be photobombed by a prankster holding up a yel-
low legal pad with “Buy Bitcoin” scrawled across it. The image of Yellen
looking stern as “Buy Bitcoin” floated like a thought bubble beside her
head became another meme for the crypto community to flog. For
ch11.indd 138 05/10/20 3:09 PM

his troubles, the prankster—known as bitcoin Sign Guy—earned six

bitcoin in donations, or about $25,000.
By June, the price of bitcoin had tripled from the start of the year to
reach an all-time high of $3,000, while Ethereum was up thirtyfold to
$380. Many longtime crypto holders, who were now worth millions or
tens of millions of dollars, cashed in portions of their hoard to invest
in the new digital currencies on the market. Meanwhile, those who
became staggeringly rich from an ICO often plowed their windfall
into other ICOs, pumping still more money into the crypto craze.
A rising tide was lifting all boats, including Coinbase, which was
signing up millions of new customers—whether it had the capacity to
serve them or not.
• • •
In that June of 2016, life was good for Coinbase employees. The San
Francisco weather was fine, and the ballooning value of their crypto
and stock options felt finer still. Then on the morning of June 22, the
bottom fell out. Employees stared at their screens in disbelief, then
panic, then despair. A whale, bloated with the proceeds from a recent
ICO, abruptly dumped millions of dollars’ worth of Ethereum onto
the company’s GDAX exchange platform, causing the price to tum-
ble. That caused others to sell, lowering the prices again and so on.
Ethereum was in freefall. Its price on GDAX dropped from $320 to
below $300 and then fell off a cliff, hurtling down to $13 and, for a brief
moment, crashing to 10 cents.
It was a textbook example of a flash crash. A similar event had hap-
pened in 2010 on traditional exchanges when a London trader created
fake trades to suggest an impending sell-off, triggering thirty minutes
of chaos on US stock markets. The trader’s antics fooled others in the
ch11.indd 139 05/10/20 3:09 PM

market—most notably those who had put automatic “sell” orders in

place in the event stocks fell below a certain price. These machine-
triggered sell-offs led other machines to join the stampede to sell,
regardless of the price and whether the sale was rational. Venerable
companies like Procter & Gamble and Accenture briefly traded for
mere pennies. The crash came to a halt when stock exchanges put a
stop to all trading and then canceled transactions that had transpired
during the machine-driven free-for-all.
The 2010 flash crash led major exchanges to adopt a system called
circuit breakers, which automatically pause trading in the case of
unusual, logic-defying fluctuations. Seven years later, no such system
existed at Coinbase. Ironically, the company had carried out a tabletop
simulation of a flash crash earlier that month, but no one had thought
to install circuit breakers.
Adam White, who oversaw GDAX during the flash crash debacle,
puts the blame on himself but also on amateurs in over their heads.
These were so-called retail traders, who used GDAX’s powerful
platform to trade for their own accounts, as opposed to professional
traders who traded on behalf of institutions for a living. “These retail
guys can’t protect themselves,” White recalls. “It’s like you give them
a machine gun and find out they can’t handle it.”
It wasn’t just retail investors who got burned with automated sell
orders. So did many Coinbase employees who had set their GDAX
accounts to sell Ethereum if it dipped below a certain price—and then
watched in dismay as their automated sell order liquidated their posi-
tion for a few dollars. Morale at the office plummeted in response to
customer anger over the crash and to the financial wipeout that befell
many on staff.
Two days later, Brian announced Coinbase would honor the trades
that took place during the flash crash, while also reimbursing anyone
ch11.indd 140 05/10/20 3:09 PM

who lost money from the haywire sell-offs—something of a lose-lose

for Coinbase. This preserved goodwill among Coinbase customers on
both sides of the ledger (and staff who thought they had lost it all). But
the gesture cost Coinbase $20 million and later triggered an investiga-
tion from the CFTC.
The flash crash proved to be an expensive education for Coinbase,
though the company was hardly alone in learning painful lessons
during these months of crypto mania. Ordinary people were getting
burned too, and unlike Coinbase’s losses from the flash crash, their
misfortune wasn’t the result of honest mistakes. The boom had given
birth to crypto predators who unleashed a series of brazen scams to
part the greedy and the gullible from their money.
• • •
“Bitcoooonnnnnect!” the voice boomed from the stage. “Hey, hey,

hey! Whassup? Bitcooooonnnnnect!”
The speaker, a trim, bald Latino man named Carlos Matos, beamed
broadly. On the stage behind him, grinning hucksters clapped as
Matos prowled back and forth, fronting a blue background and a large
“Bitconnect” sign. Then he howled again.
“Bitcooooonnnnnect!” Matos bellowed to more cheers. Then the
pitch: he recounted how he had used Bitconnect to turn $40,000 into
$120,000 and would soon turn that into much, much more.
Matos had made his investment through a website that encouraged
customers to trade in bitcoin and receive a new cryptocurrency—
called Bitconnect—which they could lend out in order to receive
returns as high as 40 percent a month. Customers could obtain even
higher returns if they signed up other clients for Bitconnect. Crypto
details aside, Bitconnect was an old-fashioned Ponzi scheme.
ch11.indd 141 05/10/20 3:09 PM

It worked for a while. Bitconnect tokens reached an all-time high

in late 2017 of $450, but the value collapsed when the company shut
down months later amid an FBI investigation. Today, its millions
of tokens are worth nothing. The thousands of people who bought
Bitconnect tokens, which briefly sat as the twentieth-most-popular
cryptocurrency, lost every dollar. The only remaining value is Matos’s
“Bitcooooonnnnnect!” yodel, which became an internet meme and
fodder for Last Week Tonight, John Oliver’s late-night comedy takedown
of current events.
Bitconnect investors weren’t the only victims of crypto swindles.
Others got fleeced by ICO exit scams, whose perpetrators did not even
put up the pretext of running a company. Instead, they marketed the
promise of a new cryptocurrency but stayed around only long enough
to collect the ICO proceeds. After that, they vanished into the mists of
the internet.
The scams were just so easy. All it took to spin up an ICO was a
website and a white paper. In the most egregious examples, scam-
mers would simply copy and paste technical jargon from other
white papers and slap on a new title. Some websites dressed up the
hustle with an ICO countdown clock, a marketing slogan, and biog-
raphies of the ICO team. The team profile was often fictitious, of
course. More than a few ICO sites listed Ethereum founder Vitalik
Buterin—who had nothing to do with the projects—as an execu-
tive or adviser.
Scammers with hacking skills found an even quicker way to profit
from ICOs: hijack them. They’d quietly take control of an ICO’s web-
site and then, on the day when the fundraising commenced, change
the payment address of the wallet designated to collect the bitcoin and
Ethereum. The real ICO team could only watch in horror as the inves-
tors’ funds got diverted into the hands of the hackers.
ch11.indd 142 05/10/20 3:09 PM

Coinbase, too, had to contend with hackers draining customer

accounts. While the company had hardened its network against intrud-
ers, it could do little about customers who gave up control of their
account passwords. Typically, this occurred as a result of phishing
attacks on a client’s Gmail account—similar to the one Russia directed
at the Democratic political operative John Podesta prior to the 2016 elec-
tion. Once a Coinbase customer’s Gmail account was compromised,
the hackers could ask to reset their password and steal their crypto.
Like banks and other sites, Coinbase required two-factor authenti-
cation—customers had to enter a code delivered to their phone before
changing a password. Hackers found a way to get around this obstacle,
however, by bribing employees at cell phone companies like AT&T. In
exchange for a few dollars, a corrupt (or sometimes naive) employee
would agree to change the SIM card associated with a customer’s
account. This would allow the hacker to intercept the authentication
code that Coinbase sent out and burgle the customer’s account. The
scheme sounds elaborate, but it became so common in the crypto
world it acquired a name—SIM-swapping—and would result in class
action lawsuits against the phone carriers.
Other crooks targeted social media—a critical part of crypto
culture—which became rife with criminal schemes. On Twitter,
scammers created profiles with the faces of Brian and Vitalik, and
announced they were giving away bitcoin and Ethereum in special
promotions. To receive the windfall, the targeted Twitter user was
told to send a small amount of cryptocurrency first—funds that
would, of course, be promptly pocketed by the scammer. Twitter
would eventually shut down the impersonator accounts, and the
scammers would simply open new ones. The problem became so
pervasive that Vitalik changed his Twitter name to “Vitalik Not
Giving Away Ethereum Buterin.”
ch11.indd 143 05/10/20 3:09 PM

On Telegram, the messaging app hugely popular with the crypto

community, crooks organized conspiracies to manipulate the mar-
ket. One Telegram group known as “the Big Pump” would pick a
little-known altcoin and agree to buy it en masse. The influx of buyer
interest, they hoped, would cause a stir in the market and lead naive
outsiders to run in and buy the coin too, causing its value to soar.
The Telegram insiders would then sell off their positions, completing
the crypto version of a classic investment scam, the pump and dump.
But those who joined the groups in hopes of a quick payout weren’t
actually in on the scheme. They were its victims. The organizers of
groups like the Big Pump had already bought positions in the coin
to be pumped, leaving the would-be conspirators to serve as patsies
who would buy the coin at an inflated price. The crypto industry
was so awash with dumb money that scammers were preying on
scammers.
Crypto mania was out of control. The only thing that could have
inflated it further was celebrity endorsements. And those came soon
enough. On July 27, the boxer Floyd “Money” Mayweather posted an
Instagram photo of himself on an airplane with a suitcase brimming
with cash. “I’m gonna make a $hit t$on of money on August 2nd on the
Stox.com ICO,” he captioned it.
Few in the world of sports or even in crypto circles had heard of
Stox, which purported to offer a blockchain-based way to make predic-
tions on horse racing and other events. The company’s obscure origins
and half-baked business plan didn’t deter the celebrity boxer who, in
a follow-up Instagram post, told the world, “You can call me Floyd
Crypto Mayweather from now on.”
Soon after, the heiress Paris Hilton tweeted about her eager antic-
ipation to participate in the launch of a token called Lydian that,
ch11.indd 144 05/10/20 3:09 PM

in a perfect storm of buzzwords, promised to “deliver artificial

intelligence marketing on a blockchain.”
• • •
In Washington, DC, the Securities and Exchange Commission

watched all the events of 2017 unfold with surprise and alarm. The
blatant scams—and there were plenty of them—were bad, but so was
the very premise of Initial Coin Offerings. After all, US law makes it
illegal to sell securities to ordinary people without registering with
the SEC—a process that’s supposed to make companies follow rules
related to accounting and transparency. Yet these ICOs appeared to be
doing just that: selling securities. The promoters might call them coins
and use a lot of blockchain lingo, but what they were selling looked
for all the world like shares of stock or other securities.
Brian may have wanted to reimagine the SEC but what was happen-
ing with ICOs in some ways proved the value of what the SEC did on
a day-to-day basis. Without its oversight, you get Bitconnect. You get
pump-and-dumps. You get bribery, phishing, and SIM-swapping.
And the scale of it was staggering.
The trade publication CoinDesk reported that ICOs had pulled in
$729 million in token sales in the second quarter of 2017 alone. That
was more than triple the amount venture capitalists—the traditional
financial engine of the startup word—had invested during the same
period. And the ICO craze showed no sign of slowing.
In late July, the SEC broke its silence and issued a report concern-
ing the DAO project—the autonomous investment service that had
launched in 2016 and famously got hacked, triggering a rollback of the
Ethereum blockchain. The hack had roiled the Ethereum world, but
ch11.indd 145 05/10/20 3:09 PM

for the SEC, what mattered was that the DAO had begun as an ICO,
issuing tokens to investors. And those tokens, said the SEC, amounted
to a security sale.
The DAO report made clear that the SEC had at last arrived on the
crypto scene. But it also amounted to no more than a warning shot.
The SEC acknowledged that it had issued no rules about cryptocur-
rencies, so the organizers of the DAO had not technically broken
the law. Thus, the agency would use the DAO episode to put other
would-be token sellers on notice: The SEC would treat future ICOs as
illegal unless the organizers first registered the coins with the agency.
This should have cooled the crypto fever sweeping the United States.
It did not. A few months after the news came out, bitcoin hit another
all-time high, near $5,000. Ethereum also soared, and so did the hun-
dreds of altcoins riding in their wake. Brazen crypto promoters went
forward with initial coin offerings all the same. The SEC is regarded
as the powerful policeman of the financial markets. But during the
crypto craze of 2017, the agency was caught off guard by the scale of
the mania and came across as a mall cop pleading with a mob of riot-
ing teens to settle down.
By the second half of 2017, crypto fever had burst into the main-
stream. The business network CNBC started producing breathless
reports on a daily basis about how to buy bitcoin. Fly-by-night PR
agencies popped up, offering to promote new token sales via “ICO in a
box” packages. And cunning lawyers conjured up a legal arrangement
called a SAFT—short for Simple Agreement for Future Tokens—that
they promised could circumvent the SEC’s recent declaration that
ICOs amounted to security sales.
Meanwhile, the sight of Lamborghinis became more common
in crypto hubs like New York and San Francisco. The luxury car—
already a brazen declaration of wealth—had become a talisman in
ch11.indd 146 05/10/20 3:09 PM

the crypto community that revered the phrase “When Lambo? When
Lambo?” as shorthand for “When are my tokens going through the
roof?” Thanks to crypto prices that had shot up tenfold or more,
the answer to “When Lambo?” became “Now Lambo” for dozens of
young men who became stupid rich. Lamborghini posted more than a
10 percent year-over-year increase in sales.
A final dose of fuel for the crypto craze came with the launch of
a spin-off from Bitcoin called Bitcoin Cash. The arrival of Bitcoin
Cash came as unfinished business stemming from the long-running
civil war over bitcoin block size that began back in 2015. A faction of
Chinese miners, unhappy with bitcoin’s ongoing congestion problem,
had pushed through a plan to launch a new version of the currency
with bigger blocks.
The launch of Bitcoin Cash meant engineering a hard fork—a radical
software update like the one Ethereum had undergone a year before—
that would lead to the creation of two rival blockchains. Though the
fork was unpopular with the majority of longtime bitcoin believers,
the big-block dissidents had enough influence to direct a critical mass
of miners to work on their rival currency.
The upshot was that when Bitcoin Cash arrived on the scene, it
sprang from nowhere to become the fourth-most-valuable cryptocur-
rency, worth billions. It also meant that anyone who held bitcoin prior
to the split received an equal amount of the new currency as a pure
windfall. It was like handing out a large cash dividend to stock owners
in the midst of an improbable bull run. Many who received Bitcoin
Cash sold it and plowed the proceeds right back into other parts of the
overheated market.
Crypto prices, already tethered to little in the way of real-world
value, kept climbing. And investors kept buying. The crypto spree of
2017 made the stock buying of the 1990s dot-com boom—famously
ch11.indd 147 05/10/20 3:09 PM

described by then Federal Reserve Chair Alan Greenspan as “irrational

exuberance”—look relatively sane.
It fell to Olaf, who was riding high at his crypto hedge fund since
leaving Coinbase, to put an exclamation point on the era. He graced
the cover of Forbes magazine, his shaggy blond mane set against a suit
coat. In the photo, tossing coins casually, he fixes his elfish stare on
the camera. Underneath, big block letters pronounce: “The Craziest
Bubble Ever.”
ch11.indd 148 05/10/20 3:09 PM

12
Coinbase Crackup
N
athalie’s finger hovered over the “send” button. As Coin-
base’s longtime HR maven, she had written the email weeks
earlier, and desperately hoped it would stay in her draft
folder forever. But the bomb threat Coinbase had received that morn-
ing was more chilling and more credible than any of the previous ones.
She stared at the ominous all-caps email telling the entire staff to flee
the building but stay calm. Should she hit send? She had to decide.
As she sat at her desk in Coinbase’s spacious open office high above
San Francisco, Nathalie wondered just when the company had changed.
Since joining the company as chief of staff at the ramshackle Bluxome
Street apartment three years ago, she had risen to director and was
on her way to becoming a vice president. The title was good, and the
money was better. Yet she missed the early days when Coinbase felt
less corporate and she could lead activities—hot-tub parties in Napa
or fire-spinning classes in the city—with Brian and Olaf and a small
crew who felt like family. Security mattered less back then, too. On
ch12.indd 149 05/10/20 3:10 PM

Bluxome Street, you had to deal with the odd kook knocking at the
door. Now, Coinbase was hiring former FBI agents and drafting emails
to deal with emergency evacuations.
Nathalie wasn’t the only one on edge. Philip Martin, the security
director, saw it as his job to be paranoid, and these days that wasn’t
hard. “We had these weird packages that kept arriving at our P.O.
box,” he recalls. Meanwhile, the bomb threats and other violent mes-
sages became near-weekly events. One recent incident had caused a
squad of SFPD officers to swarm Market Street outside the Coinbase
building. It turned out to be a false alarm but only added to the grow-
ing sense of unease within the company.
In response to this latest threat, Nathalie conferred again with the
security team. She moved the email back to her drafts folder. A bomb
threat was a real risk, but so was spreading panic through the work-
place. She prayed she had made the right decision.
There were other things to worry about too. Mike Lempres, the
company’s political fixer and a longtime Justice Department vet-
eran, worried what would happen if organized crime set its sights on
Coinbase. Control Risks, a security consulting firm, had recorded an
average of two crypto-related kidnappings every quarter, with crimi-
nals choosing targets based on public reports of their wealth. “These
guys’ ignorance is an issue,” says Lempres. “They think if they kidnap
Brian, he’ll give them bitcoin. Silicon Valley is really ill-suited to deal
with old-school thugs like the Russian or Italian mafias.”
Martin also worried that the growing publicity surrounding bit-
coin, and therefore Coinbase, would attract crooks plotting physical
robbery. That’s one reason why, by 2017, Brian and other top crypto
executives rarely appeared in public without a retinue of bodyguards.
They also became well versed in emergency tactics, such as using code
words in the case of kidnapping or violence.
ch12.indd 150 05/10/20 3:10 PM

Coinbase Crackup 151
On top of these security concerns, the company faced threats from its
own customers. The bull market of 2017 had put a strain on Coinbase’s
capacities, leading to technical meltdowns like the June flash crash and
to a growing backlog of support tickets. Customers seethed in emails
and especially on online forums like Reddit, accusing the company
of conspiratorial plots to steal their crypto. That wasn’t the case, of
course. Coinbase was simply swamped and couldn’t keep up with the
massive increase in transaction volume and flood of new customers.
Like a brave dog paddling against a too-powerful current, Coinbase
employees worked nights and weekends to keep the site running and
clear the backlog. But the chaos unleashed by crypto mania just kept
growing. And then came December.
• • •
On New Year’s Day 2017, investors had cheered bitcoin’s long-awaited

return to $1,000. Eleven months later, the currency smashed through
the $10,000 mark. Some of Wall Street’s finest thinkers offered elegant
technical explanations for the incredible gain. Quants at Goldman
Sachs employed something called the Elliott Wave Theory to sug-
gest that the run-up represented an “impulse wave pattern” typical
of mass market psychology. A financial technician named J. C. Parets
said the upswing mirrored the Fibonacci sequence, a famous math-
ematical pattern that occurs in seashells, pine cones, and other ele-
ments of the natural world. Others called it a speculative mania. Or
simply a bubble.
A week into December, bitcoin broke $16,000, fueled in part by mas-
sive trading on exchanges in Seoul and Tokyo. In the United States,
taxi drivers and personal trainers joined hedge funds and day traders
in bidding up the price still higher.
ch12.indd 151 05/10/20 3:10 PM

The frenzy also fueled an eye-popping run on Ethereum, which

brushed $1,000 by December, and XRP, which had begun the year
worth half a penny and now sold for $3. Altcoins, shitcoins, anything
plausibly related to blockchain soared in value. As for Litecoin, Charlie
Lee’s creation had popped after it was listed on Coinbase that summer,
and by mid-December it cracked $350—up from $4 at the start of the
year. In a moment of exquisite timing, Lee sold off his entire hoard
right near the all-time high, reaping $20 million from his invention.
As prices climbed and climbed, Brian published a blog post in early
December titled “Please Invest Responsibly” that dryly warned cus-
tomers of the volatility associated with cryptocurrency investing. The
market paid no heed whatsoever. Prices kept climbing.
Brian’s call for responsible crypto investing wasn’t just ineffective—
it was hypocritical. Coinbase, after all, offered a service that made
irresponsible investing easy: buying crypto with credit cards. While
it was rash to invest in a market that screamed “bubble,” it was down-
right reckless to put the purchases on a Visa or Mastercard. Brian may
have been worried about what he was witnessing, but he wasn’t above
collecting a 4 percent service charge to people paying for their invest-
ments on high-interest plastic. JPMorgan Chase, Bank of America, and
others that issued the credit cards became alarmed and would within
weeks ban their use for crypto purchases—a sure sign that many
buying crypto on credit were in tight financial straits.
The December insanity spurred other unintended and absurd con-
sequences. The long-running civil war over bitcoin’s block size had
never been resolved, meaning only one megabyte’s worth of transac-
tions could be stuffed into every block, and a new block could still only
be added to the blockchain every ten minutes. Now, as the number of
users on the bitcoin network swelled by millions every week, what had
been a minor nuisance swelled into an epic backlog. Take any choke
ch12.indd 152 05/10/20 3:10 PM

point that’s already heavily congested—say New York City’s Lincoln

Tunnel or the 405 in Los Angeles—and then add fifty times the traffic.
That’s what happened to bitcoin’s blockchain. Its network ground to
a virtual halt. This meant the only way to ensure a transaction made
it onto the blockchain within a reasonable amount of time was to pay
the bitcoin miners who maintained the ledger. With a captive, des-
perate customer base, those miners began demanding colossal premi-
ums. Run-of-the-mill transactions became staggeringly expensive. On
December 8, for example, a man named Kristian Freeman tweeted in
dismay that sending $25 in bitcoin to a friend had triggered a $16 fee.
Forty percent of his $41 transaction went to a service charge. Sure, a
bitcoin user could refuse and offer a lowball fee. But this would mean
waiting days for a transaction to clear—if it cleared at all.
• • •
Paradoxically, this moment of bitcoin’s biggest success, when it burst

into the mainstream like never before, also showcased its biggest
failure. Satoshi’s vision had promised a new and democratic form of
internet-based money that could be used with few fees or constraints.
The reality of bitcoin in December 2017, however, was a bloated and
dysfunctional network that made Western Union wire transfers look
cheap and efficient. Underscoring how impractical bitcoin had become,
a major crypto conference in Miami that December declared it would
not accept bitcoin as payment for entry.
By the time bitcoin crossed $15,000 in early December, the network
was hopelessly clogged and transfer fees were astronomical. These
facts did nothing to quell demand. The price continued to rise as much
as $1,000 a day as frantic speculators bought more and more bitcoin.
Everyone wanted to cash in, including companies that had nothing to
ch12.indd 153 05/10/20 3:10 PM

do with crypto. An obscure beverage company called Long Island Iced

Tea Corp. changed its name to the Long Blockchain Corp. The pivot
boosted its share price 200 percent—and later, it brought an insider
trading investigation from the SEC and a delisting from NASDAQ.
On December 17, the currency brushed against the unfathomable
high point of $20,000. A single bitcoin was now worth the same as a
pound of gold. On CNBC, the network had given over half of its air-
time to the mania, sweeping aside staid coverage of stocks and bonds
in favor of bringing on crypto pundits who of course predicted bitcoin
would soar even higher.
• • •
Half the world, it seemed, was getting into crypto. And for many of
those people, their first stop was Coinbase. In February 2014, the com-
pany counted one million customers and now, just under four years
later, it had twenty million. On most days that December, more than
one hundred thousand people signed up for their first Coinbase wallet.
Inside the company’s Market Street headquarters, Adam White recalls
employees high-fiving as Coinbase notched a day with $4 billion worth
of transactions. They whooped over reported daily revenue numbers.
Meanwhile, Coinbase became the most downloaded app in iPhone’s App
Store, a moment that was particularly sweet given how, not so long ago,
Apple had turfed the company out of its App Store for offering crypto
trading. Now Coinbase was more popular than Facebook or Twitter.
Coinbase was making waves with venture capitalists. It was also
making money—lots of it. The company was processing millions
of transactions of bitcoin, Ethereum, and Litecoin, and it took a cut
of each one. The company’s margins were huge. While Coinbase
had to spend a lot on engineers, the actual cost of performing a
ch12.indd 154 05/10/20 3:10 PM

transaction—moving digital dust in and out of customers’ wallets—

was almost zero. When a customer bought $100 of bitcoin, Coinbase
could charge $2.99, and that was effectively pure profit.
“The first time I met him, Brian said, ‘I want to build a billion-dollar
business,’” recalls Katie Haun, the former prosecutor turned Stanford
crypto professor, who had recently joined the Coinbase board. Now, Brian
had achieved that goal. The December surge in sign-ups meant Coinbase
would book more than $1 billion in revenue in 2017 while, months earlier,
it had taken its place as a unicorn—a startup valued at more than a billion
dollars. And Coinbase wasn’t just any unicorn—a leak from board mem-
ber Barry Schuler months later revealed it was worth $8 billion, making
it one of the ten most valuable startups in the country. What Uber was to
ride-hailing and what Airbnb was to home rentals, Coinbase was to crypto.
For Brian, all of this was vindication for the open secret he’d seized
on at Y Combinator six years before. He had recognized that many
more people would buy bitcoin if given an easy way to do it, and the
success of Coinbase had proved him right. And now he had also real-
ized a long-burning ambition—an ambition that had inflamed the tech
visionaries who put their stamp on his hometown of San Jose and the
famous valley that stretches north of it.
As the price of bitcoin reached its all-time high, Brian’s company
had become a money-printing machine. The machine, however, had
been overheating for a while. And amid the massive influx of custom-
ers during December, the money machine threatened to explode and
take out Coinbase with it.
• • •
“We were all good software engineers, but none of us knew infrastruc-
ture,” says Coinbase’s second employee, Craig Hammell, explaining how
ch12.indd 155 05/10/20 3:10 PM

the company had been built the Silicon Valley way—quickly and with
whatever tools could help it add customers in a hurry. These included
tools startups know well, like MongoDB to manage data and Heroku for
apps. Such tools are fine for scaling a startup but not for processing mil-
lions of sensitive transactions. Coinbase was using West Coast coding
to do the crypto equivalent of East Coast banking. Scaling up a dating
app is one thing. Managing millions of people’s money is another. “This
type of engineering was tough stuff. Things like MongoDB were OK for
prototyping but not for a major financial operation,” says Charlie Lee.
In building Coinbase, it was as if Brian and the other engineers
had constructed a finely designed California beach house and then
plunked it down on the coast of Maine during a nor’easter. That house
wouldn’t survive a battering from the howling wind and snow. The
owners would rue the fact they hadn’t used better building materials
as the house shook and creaked and, eventually, cracked. This was
the state of Coinbase’s website in December 2017. Juan Suarez, the
company’s longtime lawyer, recalls flying to Pittsburgh for a family
Christmas visit only to land and receive an urgent message from Brian
to turn around immediately: “The feeling was like, ‘Oh shit.’ It’s like
we were on this bluff overlooking the ocean all by ourselves and all the
crosswinds in the world were bearing down on us.”
Prior to December, customer trades had been getting delayed as
parts of the website began to buckle. The influx of millions of new
users in the days before Christmas, however, crashed the site, and it
stayed down for hours at a time. Client orders ended up in technical
purgatory. Angry users fumed on Reddit and Twitter.
Banking partners who took their deposits contributed to some
of Coinbase’s technical snafus. Its biggest European partner, an
Estonian bank called LHV, did not use APIs (application programming
interfaces)—a standard way for computers to communicate with each
ch12.indd 156 05/10/20 3:10 PM

other—but instead required Coinbase to manually upload transactions

in a spreadsheet. Coinbase engineers wrote scripts to automatically fill
the spreadsheets, only to discover they could upload just fifty items at
a time. It was like trying to do calculus on an abacus.
Wherever the fault lay, disgruntled customers and ideological foes
took out their frustrations on Coinbase, directing waves of malicious
traffic at its website to knock it offline.
Underscoring the technical misery was a leadership vacuum. Even
as the company’s business volume more than quadrupled, its execu-
tive ranks thinned. Fred’s leaving in January deprived Coinbase of the
military-style efficiency he had helped create in its early days, while
Olaf’s departure meant the loss of its chief internal diplomat. Olaf
had the unusual quality—especially in ego-driven Silicon Valley—of
being liked by absolutely everyone with whom he worked, a quality
that made him invaluable in spotting problems and smoothing over
office conflicts. By November, as trading volumes began to surge,
Brian had only two longtime executives—Adam White and the gen-
eral manager of Coinbase’s consumer division, Dan Romero—to help
him avert a total meltdown. The lack of an executive suite, and the
company’s mounting customer service problems, did not go unnoticed
by Coinbase’s board, who began receiving emails from friends com-
plaining about the disorder at the company.
Chris Dixon and other members of the board came up with what they
hoped was a solution. Just as the eccentric Google founders had once
needed what Silicon Valley calls “adult supervision”—and received it in
the form of a veteran CEO, Eric Schmidt—the Coinbase board sent help
in the form of Asiff Hirji, a veteran banking and telecom executive who
had since taken a post at VC titan Andreessen Horowitz.
Hirji arrived in November during the speculative mania and just
before the December insanity as Coinbase’s first chief operating officer.
ch12.indd 157 05/10/20 3:10 PM

It was like starting a new job in the midst of a five-alarm fire. “They
couldn’t cope with the scale,” he says. “The company had grown
40 times over that year. We didn’t know how much cash we had on
hand, plus or minus $200 million, which is ridiculous.”
Hirji was also aghast at Coinbase’s financial infrastructure. He had
seen his share of firms blow up as a result of relying on unconven-
tional trading software and, when he first looked under the hood of
Coinbase, he feared it would suffer the same fate. But in the trading
frenzy of December, any major fixes would have to wait—it would be
like trying to swap out a fighter jet’s engine midair. All Coinbase could
do was hold on and hope.
• • •
A growing number of customers, however, were out of patience. More

and more orders were getting delayed or vanishing—a maddening
experience when the price of bitcoin was swinging by thousands of
dollars in a day. Customers were stuck wondering if their order had
been fulfilled at the rate of $16,000 or $19,000 per bitcoin, or if it had
been fulfilled at all. Anger bred conspiracy theories; some believed
Coinbase’s technical problems were just a ruse to steal their money—
and they vowed revenge for this imagined crime. “We had these peo-
ple saying, ‘We’re going to come to your office and blow it up and
shoot everyone,’” Nathalie recalls.
Linda Xie, a longtime Coinbase product manager, shudders when
she recalls anti-Coinbase zealots on Reddit posting sinister photos of
employees and the company’s office. Their fury would boil over not
only online but also on the streets of San Francisco. Soon, she stopped
disclosing her identity at crypto meetups in the city, fed up with being
accosted by random strangers angry at Coinbase. It took a toll.
ch12.indd 158 05/10/20 3:10 PM

“I was surprised how much it affected the leadership team,” says

Linda. It made me realize how human people were—they were read-
ing all the Reddit comments and taking it to heart, being saddened by
what they read. People thought Coinbase was a black hole and that no
one was listening.”
Coinbase’s ham-handed approach to customer service didn’t help.
Even in the early days, the company had not been adept at addressing
complaints—its first approach had involved Olaf fending off thousands
of emails by writing an automated program in which a fictitious per-
son, Roger, would respond to them. Years later, when Brian finally
recognized the company needed a director of customer support, he
didn’t turn to a newly minted MBA or a retail veteran. He turned to
Reddit, using an online quiz to recruit candidates to fill the position.
The new director was, in Nathalie’s words, “a lovely human who likes
to be introverted.” Hardly ideal for customer service. Additional members
of the customer support team were added primarily because they loved
bitcoin—a suitable quality for an online crypto company, of course, but
not a quality necessarily helpful in calming legions of furious customers.
Typically, when situations reach crisis levels like this, Valley start-
ups turn to PR firms that specialize in both the tech world and crisis
communications to help fix, or at least contain, the problem. Brian,
however, found media relations to be a waste of time and energy, pre-
ferring to focus on engineering matters. But as media demands became
more insistent during 2017, he deputized a Coinbase engineer, David
Farmer, to deal with it. Farmer, who knew nothing about communica-
tions, loathed the task and could only grit his teeth in annoyance as an
avalanche of reporters’ emails demanded to know why the company
appeared to be melting down.
On December 19, Bitcoin Cash—the bitcoin spin-off with the big-
ger blocks—became available for Coinbase customers to buy and sell.
ch12.indd 159 05/10/20 3:10 PM

The new offering went haywire almost instantly as prices unexpect-

edly soared, in part because of a flood of “buy” orders. It turns out
that many customers had ordered buys to be made no matter what
the price was when it became available. Only four hours after launch-
ing Bitcoin Cash, Coinbase had to halt trading to sort out the mess—
creating even more angry customers. Others had noticed an unusual
price spike in Bitcoin Cash that had occurred hours before Coinbase
announced trading for the currency. It was easy for conspiracy-minded
fanatics to connect the dots. At the least, the activity looked suspicious
and fanned further rage on social media. A typical tweet:
I don’t care how you slice it, this is INSIDER TRADING! Someone
with alot of bitcoin knew @coinbase would add bitcoin Cash BCH
and took one BIG chunk of profit from [it]. Whoever you are you
are your making crypto look like Wall Street. Shame on you.
In response to the uproar, Brian declared Coinbase had a zero-

tolerance policy for trading on inside information and announced an
internal investigation. The company would find no evidence of wrong-
doing. But behind the scenes, Coinbase executives quietly vaporized a
channel on Slack—the company’s internal messaging system—called
“Trading Strategies,” in which employees swapped ideas about how to
make money from crypto trading.
In 2018, angry shareholders filed a class action lawsuit over the
Bitcoin Cash debacle. The following year, a federal judge would declare
Coinbase should stand trial for negligence.
• • •
By December 31, just two weeks after bitcoin touched the sun at
$20,000, all cryptocurrencies were in a flat spin. Bitcoin had plunged
ch12.indd 160 05/10/20 3:10 PM

35 percent from its all-time high, and most expected it to continue its
corrective plummet. A drop in trading volume had eased the prob-
lem of exorbitant transfer fees, though transactions remained slow and
expensive. And Coinbase was still drowning in a morass of technical
problems and customer rage.
As a short, gloomy day in San Francisco drew to a close, Brian made
a new attempt to address the crises that had battered Coinbase. He
went to the place he knew and where he felt at home: Reddit. His
post began: “Coinbase CEO here—our support is very backed up. . . .
Someone will respond to your support request, although it may take
some time. Your coins are not ‘lost.’ Apologies for the delay, it is defi-
nitely not the experience we want to be providing to our customers.”
ch12.indd 161 05/10/20 3:10 PM

ch12.indd 162 05/10/20 3:10 PM
PA R T T H R E E
From Crypto
Winter to
the Crypto
Future
Part III.indd 163 05/10/20 3:12 PM

Part III.indd 164 05/10/20 3:12 PM
13
Hangover
“The telephone blasted Peter Fallow awake inside an egg with the shell
peeled away and only the membranous sac holding it intact. Ah! The
membranous sac was his head, and the right side of his head was on the
pillow, and the yolk was as heavy as mercury, and it rolled like mercury,
and it was pressing down on his right temple and his right eye and his
right ear. If he tried to get up to answer the telephone, the yolk, the
mercury, the poisoned mass, would shift and roll and rupture the sac,
and his brains would fall out.”
—Tom Wolfe, The Bonfire of the Vanities
W
olfe’s account has been cited as the greatest hangover in
fiction. It’s also a good analogy for the cryptocurrency
industry at the start of 2018. The market was in free fall
as bitcoin lost half its value, sinking below $10,000 by February, and
the state of altcoins was even worse. But for a few months, big inves-
tors could pretend the bubble had not popped—they could pray, like
Wolfe’s hangover subject, that there was no rupture and that all the
money would not leak away.
ch13.indd 165 05/10/20 3:10 PM

166 From Crypto Winter to the Crypto Future
It was harder for small-time investors to nurture such illusions.

Most were people who came to crypto late in the game—buying bit-
coin on a credit card for $15,000 or $18,000 or plowing savings into a
shitcoin ICO. They could only watch in despair as prices kept plung-
ing. By April, bitcoin fell below $7,000 and kept falling. Many other
digital currencies, backed only by a white paper and lofty promises,
were down 90 percent or more and would never recover. Buyers of
exotic tokens like Emercoin or XEM suffered the same fate as those
who bought Dutch tulip futures in the seventeenth century or stock
in the South Sea Company in the eighteenth. Like these unlucky
Europeans of yore, the crypto buyers were victims of a modern-day
speculative bubble, without even the flowers to show for it. They had
traded cash for digital dust.
In 2017, the media offered numerous accounts of ordinary individu-
als who had ridden the crypto wave to windfalls. Now, the stories took
a sadder turn. The New York Times told of the hard lessons learned by
an Englishman who had thrown his savings of $23,000 into altcoins
and now held only $4,000. On Reddit, the stories were darker. One
user told a discussion board how his wife had left him after he dumped
all of their money into Tron, a once-hyped altcoin that hit a high of
23 cents but now trades for a penny. Other Reddit readers consoled
each other with assurances that the market would bounce back or, in
some cases, shared the numbers of suicide prevention hotlines. In Asia,
which had been ground zero for crypto mania, the misery was partic-
ularly widespread. In one widely shared news story, a Korean mother
in the city of Busan recounted how her twenty-year-old son took his
life after months of trading cryptocurrencies.
Even as amateur and small-time crypto buyers reeled, others greeted
2018 as if the 2017 party remained in full swing. The mercurial investor
Peter Thiel revealed his Founder’s Fund had taken a $20 million position
ch13.indd 166 05/10/20 3:10 PM

Hangover 167
in bitcoin. Venture capitalists disclosed deals they had hatched at the

height of the mania, including a $75 million investment by billionaire
Tim Draper’s fund into Ledger, a company that makes crypto storage
devices. ICOs had not gone completely out of style—the messaging app
Telegram declared it would raise $500 million by selling its own tokens.
And in a Hail Mary gambit, the CEO of Kodak—the once-proud camera
maker from upstate New York—announced it would back KodakCoin,
a half-baked scheme to manage photographs on the blockchain.
The cultural excesses of crypto mania would linger well after the
bubble had popped. At Consensus, the crypto industry’s annual trade
show, Lamborghini owners parked conspicuously on Manhattan’s
Sixth Avenue to kick off the event. Inside, fly-by-night companies
crowded airless hallways in the hopes of finding the dumb money that
had sloshed around so freely just months before. Meanwhile, sixteen
hundred miles away, a gaggle of wealthy twenty-something men had
descended upon Puerto Rico. Their arrival came as residents of the
island struggled to rebuild from the devastation wreaked by Hurricane
Maria, but the young millionaires—some of them were billionaires—
had another priority: creating “Puertopia.” This was to be a new type
of city where people paid only with cryptocurrency and laws were
written on a blockchain. For the new arrivals, Puertopia invoked a par-
adise. For everyone else, it meant “crypto bros looking for a tax haven.”
The plan would unravel less than two years later when the island’s cor-
rupt governor, a supporter of the scheme, resigned in disgrace.
Even as its economic foundation crumbled in early 2018, crypto
continued to garner attention in the media and popular culture.
This included a profile of Vitalik Buterin in “Lunch with the FT”—the
Financial Times column where typical subjects included the likes of Jeff
Bezos, Angela Merkel, and Angelina Jolie. In the profile, the Ethereum
founder recounts a recent tête-à-tête he had with Russian President
ch13.indd 167 05/10/20 3:10 PM

Vladimir Putin about crypto and laments the greed that engulfed
many ICOs. “There’s projects that never had a soul, that are just like,
‘ra-ra, price go up. Lambo, vrromm, buybuybuy now’!” exclaimed
Buterin, whose eccentricity had only grown with his Ethereum fame.
By the spring of 2018, Hollywood scriptwriters had glommed onto
the fading days of crypto mania as well. In the show Billions, the main
character Bobby Axelrod, who is reportedly based on real-life hedge
fund billionaire Steve Cohen, turns to cryptocurrency to thwart SEC
trading restrictions. “One million dollars straight in crypto, in chilly
storage,” Bobby says, proffering a USB storage device to a minion.
A few days later, HBO’s tech parody, Silicon Valley, would likewise
air an episode that uses cryptocurrency as a central plot point. The
episode depicts a main character, Bertram Gilfoyle, plunging forward
with a plan to mine and distribute “Pied Piper Coins”—tokens named
for his company—through an ICO. Pied Piper Coin would earn a place
in crypto lore, but it would not be the most famous fictional coin to
launch in 2018. Days after the Pied Piper episode, the crypto world
buzzed with news of another ICO called “HoweyCoin.” The coin’s
website purported to offer a new type of crypto that could be used for
travel or bought and sold as an investment. And in true ICO fashion,
the HoweyCoin website included an offer for investors to receive dis-
counted coins if they purchased early.
HoweyCoin, however, turned out to be a clever prank played by
the Securities and Exchange Commission to call attention to the per-
ils of ICOs. The name “Howey” was a tongue-in-cheek reference to a
Supreme Court case about the sale of securities, and anyone gullible
enough to try and purchase HoweyCoins would be redirected to an
SEC page that warned about sketchy investments.
It’s not every day that a federal regulator trolls an entire industry, so
the HoweyCoin episode earned the SEC plenty of publicity. The fake
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Hangover 169
Howey site even included an endorsement from a famous boxer—a

not-so-subtle riff on Floyd “Crypto” Mayweather’s vow the previous
year to “make a shit-ton of money” on an ICO.
The SEC, it turned out, had a sense of humor, but that didn’t mean
there was anything funny about the wave of enforcement the agency
was unleashing on the crypto industry. Like a slumbering grizzly bear
poked again and again, the SEC was at last awake and ready to mete
out punishments.
In January, SEC Chairman Jay Clayton sent chills down the spines
of many in the crypto industry with a speech to an annual gathering of
securities lawyers. The chairman called the behavior of certain attor-
neys involved in ICOs “disturbing,” and scolded them for enabling the
hucksters. “There are ICOs where the lawyers involved appear to be,
on the one hand, assisting promoters in structuring offerings of prod-
ucts that have many of the key features of a securities offering, but call
it an ‘ICO,’ which sounds pretty close to an ‘IPO.’ On the other hand,
those lawyers claim the products are not securities, and the promoters
proceed without compliance with the securities laws,” scolded Clayton.
Translation: You guys are supposed to advise your clients not to sell this
crap—not help them unload it.
The SEC had tried to telegraph this message in July 2017 with its
warning that the ICO project known as the DAO had dealt in unli-
censed securities. But few in the crypto world knew or cared about the
SEC’s salvo. Not long after the July warning, a clever lawyer named
Marco Santori had unveiled a document called the SAFT (short for
Simple Agreement for Future Tokens). The SAFT was a riff on a famil-
iar startup investment contract known as SAFE (Simple Agreement for
Future Equity)—and this SAFT version promised a safe and legal path
to holding an ICO. Thanks to the SAFT, it looked like the ICO party
could go on.
ch13.indd 169 05/10/20 3:10 PM

Santori’s aggressive approach to crypto lawyering had already

earned him a plum position at Cooley, a prominent Silicon Valley law
firm that has long come up with creative ways to accommodate the
tech industry. In the dot-com boom, for instance, Cooley became one
of the first firms to accept equity from startups instead of cash retain-
ers. It’s no surprise, then, that Santori and his magical SAFT agreement
appeared to be a perfect fit for the firm—until the SEC Chairman’s
fateful speech about lawyers abetting the sale of unlicensed securities.
Shortly after the speech, Santori’s short stint at Cooley came to an
abrupt end.
The reputation of ICOs, meanwhile, dimmed further. At the Wall
Street Journal, investigative reporters had pored over the documents for
more than fourteen hundred ICOs and uncovered some grim findings:
271 of them had red flags, such as plagiarized filings or fake executive
profiles that showed pictures cribbed from stock photo sites. Plenty
of people had warned that the ICO economy was rife with scams, but
now there was a growing pile of evidence.
The Wall Street Journal report appeared as San Franciscans and
New Yorkers alike basked in the glorious days of late spring. But in
crypto circles, they were calling this period of time “crypto winter.”
The phrase sprang from the lips of depressed investors and ricocheted
around social media. As crypto prices continued to slide ever down-
ward, it became clear the chill of crypto winter would not yield to a
spring for a long time to come.
• • •
A burst of investment in crypto in early 2018, such as Peter Thiel’s

$20 million bet, convinced some that the bubble hadn’t burst, but by
May it became clear that the good times were over. Retail investors
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Hangover 171
who had made smaller bets on crypto felt the pain first; the big play-
ers came next. Masayoshi Son, the founder of Japanese conglomerate
SoftBank, had also bought at the top of the bitcoin market only to take
a drubbing to the tune of $130 million when he sold off his position
months later. Goldman Sachs, the investment bank whose aversion to
tech had led Fred Ehrsam to quit in frustration, had finally, it appeared,
come around to bitcoin. After a series of press leaks teasing the news,
Goldman revealed that it was creating a desk to trade cryptocurrency
and, as if to underscore the edginess of the gambit, appointed a smirk-
ing thirty-eight-year-old with a man-bun to head the desk. The gambit,
however, was short-lived. The bank quietly pulled the plug months
later.
Crypto’s moment in the mainstream had passed. Whatever toes
had been dipped in the pool were withdrawn. Once again, the big-
gest names of the financial establishment wanted no part of it. As
if to underscore the point, Warren Buffett explained to investors in
May that bitcoin was “probably rat poison squared,” while his long-
time consigliere, Charlie Munger, likened cryptocurrency trading to
“dementia.” (Buffett’s opinion was no doubt reinforced two years later
when a cryptocurrency CEO won an auction to attend the Oracle of
Omaha’s annual charity lunch, but then canceled amid reports he was
being investigated by the Chinese government.)
The fallout from crypto winter spread to unlikely places. On the
sweeping plains of Rockdale, Texas, town leaders had extended their
finest southern hospitality to woo the crypto-mining giant Bitmain to
set up shop. The arrival of Bitmain brought the promise of hundreds of
well-paying jobs to a place that had been hard hit by the closing of an
Alcoa coal plant. To clinch the deal, Rockdale’s political leaders ginned
up a ten-year tax abatement plan for the firm and feted Bitmain execu-
tives at banquets with beer and Texas barbecue.
ch13.indd 171 05/10/20 3:10 PM

“We’ll feed and water you,” drawled the county judge to their
would-be crypto saviors. But the Texans’ high hopes came crashing
down as crypto prices kept falling, and Bitmain concluded its mining
venture would not pan out.
As 2018 dragged to a close, the smart-money set began to get
wiped out too. Hedge funds, which months earlier had splashed onto
the financial scene, began to close their doors. By year’s end, more
than three dozen crypto funds would shut for good, while one of
the most prominent funds—billionaire Mike Novogratz’s Galaxy
Digital—would post an eye-popping loss of $272 million for the year.
Even Olaf, who enjoyed prophet status in many corners of the crypto
world, couldn’t escape the mounting malaise. An unflattering pro-
file appeared in the Wall Street Journal, portraying Olaf as a dilettante
weirdo and his Polychain Capital fund as floundering in losses and
legal trouble. The profile showed Olaf looking defiant in front of a
bookshelf that displayed two copies of Infinite Jest.
• • •
On Market Street, Brian and Coinbase also endured crypto winter.

A total collapse in prices—bitcoin would tumble a full 85 percent to
just over $3,000 by December of 2018—delivered a gut-punch to the
company’s income. Despite its long-running quest to find new reve-
nue streams, Coinbase still lived very much on trading commissions,
and a 3 percent cut on $3,000 obviously didn’t compare to the 3 per-
cent it took on $20,000. And they were taking fewer commissions: cli-
ent activity had fallen 80 percent since the go-go days of the previous
December.
Coinbase’s problems beyond the slump were mounting, too. The
company’s run-and-gun, just-hold-on approach during the bubble had
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Hangover 173
produced a fine legal mess. Bitcoin Cash customers were suing over
the December debacle. The IRS was still rooting around in Coinbase’s
client files. And to top it off, angry customers had filed over one hun-
dred complaints with the SEC accusing the company of mishandling
their money. Coinbase was in constant contact with its white-shoe law
firm Davis Polk, where partners bill $2,000 an hour. The cost of pissing
off clients and the government was becoming very, very expensive.
Despite all this, Coinbase had reason to be optimistic. The compa-
ny’s finances were in good shape thanks to a series E funding round
worth $300 million and backed by the hedge fund Tiger Global. This
cash infusion topped off a war chest the company had built up during
the boom. Unlike other high-profile startups like Uber and WeWork,
which were bleeding billions every quarter, Coinbase could actually
turn a profit. Meanwhile, Coinbase lacked the hyper-bro culture that
contributed to the implosion of other startups, including WeWork,
whose plans for an IPO blew up spectacularly amid reports of its
CEO’s penchant for tequila shots and smoking weed.
What’s more, crypto winter offered Coinbase a desperately needed
respite. If 2017 had been a wildly successful party, then 2018 would be
a year to clean up all the broken glass and replace the smashed fur-
niture. For Coinbase, the calm offered time to patch up buggy code
and fix its long-running customer service problem. “Things operate
differently during peacetime than wartime,” says Brian. He remained
optimistic. For others, the crash was apocalyptic. For him, 2018 looked
like the slump of 2015, when many had written off the crypto industry
for dead. He would move forward and use the new downturn as an
opportunity to retool for an upswing.
This retooling involved ceding some control to Asiff Hirji, the COO
who had arrived in November as part of the push by Coinbase’s board
to introduce adult supervision to the company. It didn’t take him long
ch13.indd 173 05/10/20 3:10 PM

to get to work. In Asiff’s view, Coinbase had come within a whisker

of complete collapse in December of 2017 as a result of three critical
risks: inadequate insurance coverage; a chaotic accounting system that
made it impossible to tell if the company was up or down $200 million;
and a jerry-rigged proprietary trading system known as “the hedger”
that could blow up any minute.
The first two risks could be addressed easily enough. As part of the
adult supervision mandate, Asiff brought on a chief financial officer,
Alesia Haas, who smoothed out the insurance and accounting snafus.
The hedger was another matter.
It was Fred Ehrsam who had introduced the hedger in the first
place, back in the days when Coinbase lacked its own exchange and
had to source bitcoins on the open market. The system used the com-
pany’s homespun algorithms to determine optimal times to buy and
sell crypto. This not only provided the cash liquidity Coinbase needed
to run its everyday operations, but also for arbitrage opportunities—
chances to profit from small differences in price between different
banks and exchanges.
The homegrown hedger was a source of pride for longtime Coinbase
hands. To Asiff, it was a source of fear and dread. “In December,” he
recalls, “the hedger misbehaved and almost melted down the com-
pany. I’ve seen it before—it’s a guaranteed way for trading companies
to blow up, using those proprietary systems. There’s some misconfig-
uration of the algorithm, and no one knows what’s getting bought and
sold. I went on a crusade to kill the hedger.”
Asiff won his crusade. Soon the hedger was dead and Coinbase
was using an agency trading model—accepting a trade only when the
other half of the trade was there in the market. In Asiff’s view, he had
saved the company by extricating it from a trading model that relied
on a black box that could blow up at any moment.
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Hangover 175
More and more, Coinbase’s leadership looked like a typical corpora-

tion. The executive team at Coinbase, which for years had amounted
to Brian and Fred and a loose mantra of running through brick walls,
added veteran outsiders. Asiff poached Emilie Choi, a longtime vet-
eran of LinkedIn, and anointed her as VP of business development
with the mission of acquiring a host of smaller crypto companies. He
appointed a VP of communications, Rachael Horowitz, a firebrand
who was fazed by nothing after navigating years of crises at Facebook
and Twitter. (With Horowitz on board, David Farmer, the economist
deputized to handle media by Brian, and who hated public relations,
would no longer have to endure reporters’ calls.) As if to underscore
its new posture to the press, the company also added Elliott Suthers, a
caustic Australian who had earned his PR chevrons coaching onetime
Republican candidate Sarah Palin for vice presidential debates.
Brian was freed from managing every last thing. Finally, he had
time to pursue personal activities. He took flying lessons and dated
actresses. And still committed to his longtime passion for using bit-
coin to spread financial autonomy through the world, he launched a
philanthropic fund, Give Crypto. Analytical as ever, Brian subscribed
to research that suggested the best way to alleviate poverty was to give
money to people who are poor. Give Crypto, he declared, would raise
$1 billion for the cause.
As Asiff built the corporate team and Brian nurtured noble ambi-
tions to save the world, the hangover persisted. Crypto winter dragged
on. Safe in its financial fortress, Coinbase waited patiently for spring.
Nearly too late, the company would realize this was a terrible mistake.
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ch13.indd 176 05/10/20 3:10 PM
14
“Getting Our
Asses Kicked”
T
oo much success makes you not as hungry. Not as disciplined.
Not as paranoid,” Olaf says, sipping tea in a Manhattan
restaurant in 2019.
It’s been years since the day he first turned up for work at Coinbase
with a single Uniqlo dress shirt to his name. Olaf doesn’t look boyish
anymore, but his eyes still sparkle with the same intensity, and he’s as
eager as ever to talk about lucid dreaming. Now in his early thirties,
Olaf has the improbable task of managing money for Andreessen
Horowitz and other high-wattage VC firms through his crypto fund,
Polychain Capital. He still cares deeply about Coinbase—he and
Brian are close friends—but frets about what his former employer
has grown into.
“Coinbase got too comfortable,” he adds. “At a board meeting, it
was all about, ‘How are we going to spend all this money in order
to avoid a tax liability?’ ” In Olaf ’s view, Coinbase should have been
ch14.indd 177 05/10/20 3:10 PM

exploring the new frontiers of crypto rather than perfecting its cor-
porate finance game.
• • •
The cash bonanza of 2017, it turned out, did create complacency.

Coinbase entered the crypto winter believing it could simply wait for
the next upswing while spending its time snapping up smaller com-
panies and patching up its battered infrastructure. This was a sensi-
ble tactic but a poor strategy. As Coinbase sat back and waited for the
market to turn, it failed to account for rapid changes that were hap-
pening in crypto even during the downturn—changes that threatened
to make Coinbase obsolete. The company was like a driver tuning up
an old Buick even as, in a garage next door, his rival was detailing a
Porsche.
Brian’s new rival went by the name of CZ (the initials stand for
Changpeng Zhao, but everyone uses the shorthand version). CZ wears
wireless glasses and close-cropped black hair. In public, his go-to attire
is a black hoodie emblazoned with the name of his company in yel-
low letters: BINANCE. Since he appeared on the scene in 2017, CZ has
emerged as the most disruptive figure in the history of crypto after
Satoshi and Vitalik.
CZ was born in the Chinese province of Jiangsu. He and his family
crossed the Pacific when he was twelve years old to start a new life in
Vancouver. The move was necessary after his father, a professor, run
afoul of Chinese authorities for being too outspoken—a characteristic
that, years later, would redound in his son’s demeanor. In Canada, a
teenage CZ dunked fries at McDonald’s and worked overnight shifts
at a gas station to help his family. All the while, he honed his natural
aptitude for finance and computers.
ch14.indd 178 05/10/20 3:10 PM

“Getting Our Asses Kicked” 179
CZ’s coding prowess won him a ticket to McGill University’s com-

puter science program, and then gigs at major financial hubs around the
globe. Like other prominent crypto figures, CZ embarked on a peripa-
tetic existence—building software for the Tokyo Stock Exchange and
then working for Bloomberg in New York before moving on to Beijing,
where he built high-frequency trading tools.
It wasn’t until 2013 that CZ, then thirty-six, discovered bitcoin.
He became fascinated. His new passion led him to London and a
stint with Blockchain, the crypto wallet company founded by Ben
Reeves—the would-be cofounder of Coinbase whom Brian had jilted
on the eve of startup school. In a karmic payback of sorts, Reeves
would help launch the crypto career of the man who would become
Brian’s biggest rival.
CZ thrived at Blockchain and then at another crypto shop, OKCoin,
but what he really wanted was to put his own stamp on the industry.
He bided his time until, in 2017, he chose to strike. As ICO mania hit a
peak, CZ launched a token offering of his own, raising $15 million to
fund his new company, an exchange he called Binance.
Binance wasn’t just any cryptocurrency exchange. In an ingenious
twist on the business model, CZ encouraged customers to use Binance
tokens—the ones he sold in the ICO—to obtain a discount on trading
commissions. This meant the fee for a trade on Binance’s exchange
might cost $10 if a customer paid with bitcoin but only $5 if the fee was
paid in Binance Coin. Unlike so many other new cryptocurrencies,
CZ’s coin was useful.
Owning Binance Coin was a bit like holding shares in ICE, the par-
ent company of the New York Stock Exchange. The shares were an
investment that would rise and fall based on how well the exchange
was doing. But in the case of Binance Coin, the shares could also be
used to purchases stocks listed on the exchange.
ch14.indd 179 05/10/20 3:10 PM

To further juice the value of his new currency, CZ had arranged for
the exchange to destroy a given supply of Binance Coin every quarter.
This served to reduce the overall supply of Binance Coin and drive up
their price—the equivalent of corporate share buybacks in traditional
finance.
In one stroke, CZ had devised a system to keep customers loyal to
his exchange—the discounts on fees offered by Binance Coin—while
also creating a valuable new currency. In the months after the ICO, the
coin’s market cap would cross $1 billion and, by 2019, would become
the sixth-most valuable cryptocurrency. CZ himself joined Brian and
the Winklevoss twins as a crypto billionaire.
A big reason for this success was another clever move by CZ: he
decided Binance would eschew the business of trading conventional
currency—dollars, euros, yen—for crypto and offer only crypto-
to-crypto trades. This meant customers could swap bitcoin for
Ethereum, or Ethereum for Litecoin, or Litecoin for dozens of other
cryptocurrencies.
For CZ, the crypto-to-crypto arrangement offered an obvious
advantage: it meant Binance didn’t need to touch the conventional
banking system, which was a landmine of laws and regulations. CZ
also employed another tactic to avoid tangling with the Treasury
Department and myriad other agencies in the United States and
Europe: He based Binance in small island nations whose governments,
eager for business, did not bother much with US-style banking rules.
“The strategy in places like the US requires lots of lawyers and lobby-
ists,” CZ says with a grin. “I prefer places like Malta where I can just
call up the prime minister and talk to him directly.”
CZ’s shrewd strategy earned Binance buckets of money. The
new exchange was a smash with customers. Those customers, how-
ever, still needed a way to convert government-issued money into
ch14.indd 180 05/10/20 3:10 PM

cryptocurrency in the first place. Many turned to Coinbase. But the

San Francisco–based company supported only four cryptocurrencies
and levied higher fees than Binance, leading many traders to imme-
diately move their new coins over to CZ’s exchange. A refrain began
to echo in crypto circles: “Coinbase is just an onramp to Binance.”
It meant that Coinbase—the longtime star of the crypto scene—had
been reduced to the role of a doorman, collecting a cover charge as
people poured into a luxury nightclub and ordered bottle service.
For ordinary investors looking to buy a little bit of bitcoin or
Ethereum, Coinbase still fit the bill. But to avid traders and hard-core
crypto enthusiasts, the lure of Binance Coin and dozens of exotic assets
was irresistible. Binance was the future. “We were getting our asses
kicked by Binance, and we didn’t have a strategy,” recalls Coinbase
lawyer and political fixer Mike Lempres.
In less than a year, and while Brian and Coinbase were cleaning
their shop and waiting for the market to recover, Binance eclipsed
Coinbase and other established exchanges to become the most popular
crypto service in the world.
• • •
Lempres pushed a plan for Coinbase to split into two legal entities—
one that did business in heavily regulated places like the United States
and another that offered dozens of cryptocurrencies while operating
from a regulatory haven like Bermuda. The plan went nowhere, and
well into 2018, Coinbase stumbled along with the same four curren-
cies. Longtime engineer Craig Hammell recalls a plan for the com-
pany to add Dogecoin, the novelty currency based around the Shiba
Inu dog meme in which an adorable pup speaks silly phrases in bro-
ken English. Dogecoin had a cult following and would have been
ch14.indd 181 05/10/20 3:10 PM

easy enough to add in the old days. But with Coinbase’s new layers of
corporate bureaucracy, it stalled. “We were going to do it,” Hammell
remembers, “but then it went into all these meetings where someone
said they didn’t see a return on investment. They didn’t get it. Even if
it wasn’t a money maker, customers wanted more assets and Coinbase
wouldn’t add them.”
The startup where employees had once run through brick walls was
now acting more like a stodgy, middle-aged corporation.
Meanwhile, Binance kept cranking out innovations. It debuted a
marketing service called Launchpad that invited new crypto projects
to buy Binance Coin in exchange for publicity on the exchange. And in
a move that underscored CZ’s sweeping ambitions, Binance laid plans
to challenge Ethereum. Vitalik’s smart contract platform was still top
dog when it came to hosting other cryptocurrencies—even Binance
Coin relied on Ethereum—but CZ concluded it was too slow. The
time had come, he decided, for Binance to build its own blockchain.
While Coinbase was dithering over Dogecoin, CZ was laying plans
to remake the next era of crypto. His exploits made him a cult figure in
the industry. An effusive profile in the trade publication Coindesk blared
without a hint of irony: “The Unbelievable Brilliance of Binance.”
Was CZ as brilliant as all that? Possibly. But some people attribute
the rapid rise of Binance at least in part to the hubris of Coinbase and
its investors. According to one crypto entrepreneur who has worked
in Asian markets, the reason Coinbase didn’t see Binance coming is
because it’s hard to see anything with your head up your ass. “People
think crypto is the next trend and therefore Silicon Valley will dom-
inate it,” the entrepreneur says. “What’s happening here is arrogance
and bias in favor of a company that came up in a Western market.”
The same clique of investors who made a killing on Facebook and
Uber thought Coinbase would create a killer monopoly too. Wrong,
ch14.indd 182 05/10/20 3:10 PM

says this entrepreneur. The winners in the crypto world will instead
be companies like Binance with CEOs who have been battle-tested by
Asian markets. “Asia’s not in Coinbase’s DNA,” he says. “I see a cultural
gap there that’s not closable for them as a company.”
Not everyone was awed by Binance. Wences Casares, the early bit-
coin visionary from Argentina and CEO of the crypto storage service
Xapo, saw Binance as just another crypto cowboy that rose quickly by
skirting the rules. Casares predicts CZ will face a fall like Mt. Gox or
Poloniex—two other exchanges that once dominated crypto trading
but were laid low by scandal and regulatory troubles.
Asiff Hirji, who was charged with battling Binance as Coinbase’s
COO, also claims the rival exchange is not built to last. Much of the
hype around Binance’s rise, Hirji suspects, was built on sleazy business
practices such as wash trading—a common trick where companies or
exchanges take both sides of a trade in order to paint a false picture of
user activity. “‘Run fast and break things’ doesn’t work when you’re
dealing with people’s money,” says Hirji. “You have to move quickly
but you have to aim. What’s going to happen is, I think that guy is
going to jail. He’s a fraud.”
People may have disagreed on whether CZ was a genius or a fraud.
But in mid-2018, both sides would agree on one point: Binance was
indeed kicking Coinbase’s ass. By April, Brian and the board finally
decided to act. Coinbase needed someone to lead an assault on the
bureaucracy enveloping the company. Someone, Brian thought, who
could command like a general. What they got was more like a rogue
special forces soldier.
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ch14.indd 184 05/10/20 3:10 PM
15
Power Struggle
B
alaji Srinivasan crumbled a Tate’s chocolate chip cookie into
a bowl, reached for another from the package and crumbled
that up, too. Then a third. He took a carton of half-and-half
from the fridge, poured it over the crumbs, and began to eat. It was
1:30 in the morning in June of 2018. Balaji looked into the San Francisco
night.
Market Street lay enveloped in the uneasy stillness that wraps
around a financial district after its daytime energy is drained. The city
slept, but Balaji was wide awake. He munched on his bowl of Tate’s
and half-and-half and thought about crypto.
It had been four years since he had turned up in grubby sweatpants
at Coinbase’s old Bluxome Street office and expounded on the theories
of political economist Albert Hirschman. Employees back then had
mistaken him for a hobo at first, but quickly became entranced by his
brilliant ideas about money and technology. Now, that brilliance had
led Coinbase to hire Balaji as its first chief technology officer.
ch15.indd 185 05/10/20 3:10 PM

Balaji was a familiar figure in the Valley. He taught statistics

at Stanford and was one of a handful of partners at Andreessen
Horowitz, where he was known for PowerPoints that ran over three
hundred slides. In 2016, Balaji’s expertise on genetics had led the new
Trump administration to interview him to run the Food and Drug
Administration. As for crypto, Balaji saw it as a subject best left to
geniuses. “Blockchains are the most complicated piece of technology
to arrive since browsers or operating systems,” he declares. “They
require a deep understanding of cryptography, game theory, net-
working, information security, distributed systems, databases, and
systems programming. Only a handful of people have that sort of
knowledge.”
Left unspoken was that Balaji saw himself as one of those people.
Coinbase, though, had sought out Balaji for more than his smarts.
Since Fred’s departure in early 2017, Brian had found it lonely at the
top. The arrival of a high-wattage personality like Balaji promised to
reintroduce the innovative and hard-driving run-through-walls spirit
of the company’s early days. “Someone had to play the Fred Ehrsam
character. Brian needed the yin to his yang,” recalls Nathalie McGrath,
who had joined Coinbase in its early days as a chief of staff and rose
to VP of People.
Balaji agreed to accept the CTO role, but the price was steep.
Getting Balaji meant buying his company, a startup called Earn.com
that had begun its life making devices to mine bitcoin but had piv-
oted to an email introduction service. In Silicon Valley parlance, the
deal was an acqui-hire—acquiring a company to get the talent who
worked there.
Media outlets reported the price of the deal at $120 million, a figure
that rankled many of the Coinbase rank and file. “It was a crummy
company,” claims one Coinbase engineer. “Hiring Balaji was a way for
ch15.indd 186 05/10/20 3:10 PM

Power Struggle 187
Andreessen Horowitz to liquidate its dog of a startup.” (The VC firm

had led Earn.com’s Series B funding round.)
Today, board members as well as Coinbase COO Asiff Hirji—
himself an Andreessen Horowitz alum—defend the Earn.com acquisi-
tion, saying Balaji was worth the cost. More quietly, they add that the
real acquisition price was far below the $120 million figure bruited by
the media. “You can come up with any sort of deal number you like for
public consumption when you factor in hypothetical future payouts.
And Balaji has a big ego, so he wanted as big a number as possible,”
says one Coinbase insider.
• • •
It didn’t take long for Balaji and his ego to make an impact at Coinbase.
He arrived with a singular mission: help Coinbase compete with
Binance by adding new assets.
For months, the company had dithered as Binance grew into a
powerhouse by offering dozens of new cryptocurrencies. Meanwhile,
Coinbase had plodded along with the same four coins: bitcoin,
Ethereum, Litecoin, and—as of late December 2017, after its hiccup of
a debut—Bitcoin Cash.
Coinbase’s foot-dragging made some sense. The SEC was on the
warpath against crypto companies that sold unlicensed securities, and
Coinbase—as the self-proclaimed “white knight” of the industry—
had to guard its reputation. The company could not become a forum
where unscrupulous ICOs peddled shitcoins to Grandma. Still, it was
also possible to play it too safe—surely, the company could offer more
than four tokens.
In addition to playing it safe because of regulators, a big rea-
son Coinbase wasn’t offering more than four coins was because its
ch15.indd 187 05/10/20 3:10 PM

engineering strategy was adrift. Instead of working to support new

coins, Coinbase engineers were fiddling with ways to repackage exist-
ing offerings—creating bundles and index funds that offered the same
boring coins.
In another corner of the office, engineers were at work building
something called Toshi. This was a tool to navigate dApps—short for
decentralized applications—which Brian and others believed would be
the future of crypto. A dApp can be anything from a word-processing
tool to a prediction market, but what makes dApps distinct is the lack
of a central company or manager. Imagine taking the sort of software
programs you find in Microsoft Office and then running them on a
bitcoin-style network. Unlike what you find in the app stores of Apple
and Google, dApps can be distributed without anyone’s permission
and rely on random computers around the world to operate. dApps
are not the most efficient form of software, not least because you need
a special browser to access them in the first place, but their supporters
say they represent the next generation of computing.
The future may well revolve around dApps, but in 2018, their out-
look looked bleak. Even the most popular dApps had only a few hun-
dred users. Olaf and others questioned why Coinbase was tinkering
with Toshi and dApps—especially at a time when millions of people
were flocking to Binance to acquire the newest cryptocurrencies. It
was as if Coinbase had been a road construction company that instead
of laying pavement for interstate highways spent its days adding scenic
overlooks or testing new types of gravel. This was a costly mistake,
not least because the task of building infrastructure for new coins is
intensely technical.
An exchange can offer bitcoin, but that doesn’t mean it’s easy to
offer other cryptocurrencies. Sure, some currencies were created from
the same code base as bitcoin or Ethereum—making it easier for an
ch15.indd 188 05/10/20 3:10 PM

Power Struggle 189
exchange to support them—but they still have their own idiosyncra-

sies. Meanwhile, other new currencies had been crafted from a whole
new set of code. One of them was Tezos, a new type of blockchain
with a built-in voting mechanism that lets owners of Tezos tokens vote
for or against proposed upgrades to its software. Adding a currency
like Tezos was akin to building a whole new assembly line rather than,
as in the case of the bitcoin spin-offs, just modifying an existing line.
And in every single case, adding a new currency meant securing more
code from omnipresent hackers.
Adding these new currencies was a big job, and Coinbase was
playing catch-up. Balaji’s arrival was supposed to jump-start the
effort, and he didn’t disappoint. He had technical chops, and his rep-
utation as a crypto visionary inspired the other engineers. He also
possessed superhuman stamina. When it was sprint time—Coinbase
jargon for bursts of intense work—Balaji would work incessantly
for days. He could function without sleep, appearing just as invigo-
rated at midnight as at seven in the morning. And he barely slowed
down to eat, fueling himself for days at a time with his Tate’s and
half-and-half.
Even amid Coinbase’s workaholic culture, Balaji stood out.
Physically, he stood out, too. Typically clad in a hoodie, his intense
eyes, spiky hair, bushy eyebrows, and salt-and-pepper stubble make
him look like a hungry wolverine. Unfortunately for many at Coin-
base, he also acted like a wolverine—tearing through anyone who
presented an obstacle. “Balaji is not a bad guy. But he’s like a cannon-
ball, and if you can’t explain why you’re in his way, God help you—he’ll
go right through you,” says a Coinbase employee.
In short order, Balaji would fulfill the board’s hope by shred-
ding through much of the bureaucracy that had come to envelop
Coinbase. But he would also try to shred many of the people he
ch15.indd 189 05/10/20 3:10 PM

encountered, including new COO Asiff Hirji, who had lobbied to

bring Balaji aboard in the first place.
• • •
Raised in Calgary, a Canadian oil town with a deep conservative streak,

Asiff had spent a decade in Silicon Valley before joining Coinbase.
But in appearance and outlook, he still comes across as an East Coast
banker—a holdover from his stint as a senior executive at TD
Ameritrade in New York City. Asiff’s fondness for crisp white shirts
and expensive blazers made him an odd fit for a West Coast crypto
company. It didn’t take long for tension to emerge.
“I remember this very, very awkward dinner,” says a senior fig-
ure at Coinbase, recalling Asiff’s arrival in December of 2017. “Asiff
introduced himself as chief operating officer and president of the East
Coast. The second title hadn’t been part of the deal, but Asiff explained
to Brian that president is the same thing as COO in the east. It was
total BS.”
The rest of the table watched the exchange and wondered what
the hell was going on. Had this guy come in to help Brian or to
replace him?
Asiff’s first introduction to the Coinbase rank and file went no bet-
ter. At a Friday morning all-hands meeting, Asiff ascended a small
stage at the front of the room and proceeded to ream out the staff. “I’m
embarrassed about our products,” he told the assembled engineers in
the imperious tone of a corporate executive. He explained he would be
tightening things up.
He may have been right, but his approach did not go over well, espe-
cially given that he appeared to many as a crypto carpetbagger. For
a lot of people in the room, crypto wasn’t just a product. It was an
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Power Struggle 191
idea and a way of life they’d pursued with passion for years. Now they
were being berated by some suit who not only had just come to crypto,
but who had had the gall to go on TV the week before and speak for
Coinbase about its significance. The engineers, especially, seethed.
“He saw Coinbase as a lot of egotistical, emotional millennials,” recalls
Craig Hammell. “We thought, ‘Who are you to go on CNBC and act
like an expert about all this?’ ”
As the weeks passed, Asiff would learn other lessons about manag-
ing millennials. As someone who had come up in the stern culture of
consulting and corporate banking, Asiff faced a steep learning curve.
He would deliver a speech only to learn later that employees had com-
plained that his words had triggered them. What the hell did this even
mean? he wondered. “Asiff was not used to the idea of people being
‘triggered,’ ” Nathalie recalls.
But even as he fumbled interpersonal relationships, Asiff succeeded
in imposing order on the chaos he had found upon arriving at the com-
pany. He cleaned up Coinbase’s unstable trading systems. He brought
in a layer of C-suite executives. And, along with recently added VP of
Business, Emilie Choi, he introduced a get-shit-done decision-making
process they had learned from East Coast management stalwarts Bain &
Company. The process was called RAPID—Recommend, Agree,
Perform, Input, Decide—and it was a helpful antidote to Brian who,
when called on to make an important decision, had increasingly taken
to making no decision at all.
Asiff had been shaped by New York and worked in San Francisco.
But it was a third city—Chicago—that preoccupied him at Coinbase.
The Windy City and its legions of options and commodities trad-
ers were the key to the future of crypto, he believed. “People don’t
understand this, but the biggest traders of crypto are Chicago’s elec-
tronic market makers and prop shops. They’re the ones who took the
ch15.indd 191 05/10/20 3:10 PM

crypto marketplace from random tech enthusiasts trading with each

other and created a pool of deep liquidity with dependable order
books,” he says.
“Prop shops” refers to investment firms where partners deploy
their own money to profit from trading strategies, while “electronic
market makers” specialize in dealing in specific stocks and commod-
ities. While both are fixtures of the New York finance world, their
major presence in Chicago testifies to that city’s role as an engine of
American finance.
In Asiff’s view, the crypto engineers of San Francisco may have
been brilliant coders, but when it came to market making, they were
a bunch of amateurs who might as well have been making food deliv-
ery apps. The real talent, the people who knew how to build financial
infrastructure, were in Chicago. And that’s where Coinbase should go,
he declared. He pushed the company to open an office in the city’s
Loop District off Lake Michigan and staff it with executives and engi-
neers poached from the famed Chicago Mercantile Exchange.
Asiff also oversaw the creation of an over-the-counter desk at
Coinbase—a service long offered by competing exchanges like Circle
and Gemini—that catered to traders seeking to move large volumes of
crypto discreetly. He also insisted Coinbase create a custody service
where institutional clients like mutual funds could store crypto assets
in compliance with federal regulations.
All of this together was a big bet on a decidedly corporate future for
Coinbase. A future that stripped crypto of all idealism, all of its outlaw
character. Asiff didn’t care one bit about Satoshi’s libertarian visions.
He believed instead that Coinbase needed to weave its services around
the long-established fixtures of Wall Street and Chicago. Better to get
a head start hitching the company’s wagon to the financial establish-
ment, he argued, than cater to an unpredictable consumer market.
ch15.indd 192 05/10/20 3:10 PM

Power Struggle 193
For many in the San Francisco office, Asiff’s vision was about as
inspiring as a punk rock band that signs an endorsement deal with
Brooks Brothers. More seriously, it risked a strategic muddle, given
Balaji’s quest to challenge Binance by adding exotic cryptocurrencies
to Coinbase’s platform. It didn’t take long for the competing visions—
Wall Street versus libertarian utopia—to produce factions at Coinbase,
with crypto true believers lining up behind Balaji and the corpo-
rate-leaning types backing Asiff.
Conflicting visions in a company are not uncommon. Conflict can
even be beneficial as long as there is a CEO who can manage compet-
ing factions in the way Abraham Lincoln did with his “Team of Rivals”
cabinet. Unfortunately, Coinbase did not have a Lincoln at its head. It
had Brian. And Brian, who did not like conflict, could only stand by as
the factions threatened to tear each other—and his company—apart.
• • •
“Some people lead by loyalty and inspiration. Balaji leads by fear and
by money,” says Nathalie McGrath who, as Coinbase’s VP of People,
watched as infighting engulfed the company.
Balaji’s style as he led the charge for a noncorporate vision of crypto
was abrasive but effective. For someone who by all accounts did not
work well with others, Balaji was remarkably good at office politics.
Anyone in his way got edged aside with alacrity. Balaji either fired
them outright or, through back-office maneuvering, stripped them of
influence until, totally demoralized, they quit on their own accord.
Among these casualties was Adam White. The former Air Force
commander and Coinbase employee number five had risen to run
the company’s professional trading exchange and, in his latest role,
was in charge of the company’s new office in New York City. But in
ch15.indd 193 05/10/20 3:10 PM

Balaji’s view, the New York office was supporting the corporate vision
of the future and would divert resources from his obsession—adding
new cryptocurrency assets—so the office and its staff had to be
demeaned and diminished. Adam knew what was up. “Asiff cared
about decorum in an office environment and tried to carry himself
that way,” says Adam. “But Balaji was cutthroat and manipulative.
He had this political genius. He would be the ideal person to be on
Survivor.”
Adam was okay with this. He had new opportunities. Wall Street
was at last waking up to the potential of cryptocurrency. The New
York Stock Exchange came calling, telling Adam in confidence about
an ambitious plan to offer bitcoin futures and work on a crypto deal
with Starbucks. Would he like to be the new project’s COO? Hell yes,
he would.
Adam flew back to Coinbase headquarters and broke the news to
Brian. Years ago, the early Coinbase crew had instituted something
called a “walk and talk”—a way to get out of the office, get some air,
and speak frankly. Now, treading the streets of San Francisco, Adam
and Brian went for their final walk and talk. For more than ninety min-
utes, the pair engaged in another Coinbase ritual—candid comments
about how the other could improve. Brian offered friendly advice and
encouraged Adam to bring their shared spirit of crypto evangelism to
the East Coast. For his part, Adam offered a subtle plea for his long-
time boss to rein in warring factions at his company. “Brian, at the end
of the day, it’s you and you alone who can shape the culture of this
company as the CEO,” he said.
Good advice is not always heeded, and in this case, the politics and
power struggles went on unabated as Balaji pushed out designers and a
head engineer. Also toppled was Mike Lempres, the veteran legal fixer
who had tried to get Brian to warm to Washington, DC. Lempres had
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Power Struggle 195
worked at the top levels of the Justice Department and once, as a side
hustle, he had served as mayor for the affluent Silicon Valley town of
Atherton. But none of this compared to what he saw at Coinbase in
late 2018. “I’ve been the mayor of a California town, but I’ve never seen
a place as political as Coinbase,” he said on his way out the door in the
spring of 2019.
Lempres would remain philosophical about his ouster and still
speaks warmly of Brian, if not of his lieutenants. “I would be such an
asshole if I was a billionaire at his age,” he observes. “And he’s not.”
Soon after, Coinbase lost Nathalie McGrath, who years before had
helped the startup overcome its “Vulcan banker” culture by introduc-
ing a spirit of warmth and humanity, had endured bomb threats, and
had seen her fill of office warfare. Unlike Lempres, she felt less for-
giving. “Balaji was Coinbase’s first brilliant jerk,” she recalls, “and it
changed the culture of our leadership. That’s why I left. The heart and
soul of what I built is gone.”
The departures of longtime fixtures like Adam and Nathalie did
not trouble Asiff, who regarded employee churn as ordinary. In Silicon
Valley, he says, every startup outgrows its early managers, and the
executive team will turn over four or five times if a company is scaling
up fast. Besides, amid all the drama, he and Balaji were doing a lot to
fix Coinbase’s earlier problems.
In April, the company hired a banking veteran, Alesia Haas, as CFO.
Finally, there would be someone to reform Coinbase’s loosey-goosey
cash management system. And the firm’s scattershot approach to strat-
egy began to tighten up.
In early 2018, the vice president of Coinbase’s Consumer Group, Dan
Romero, boasted to Business Insider that the company was becoming
the “Google of Crypto”—a tagline the public relations team pushed to
others in the media. It was a neat phrase. Being the Google of anything
ch15.indd 195 05/10/20 3:10 PM

sure sounds good. But what did it mean? Google had lots of success-
ful products—YouTube, Gmail, Docs, Cloud, and so on. But Coinbase
only had one product anyone cared about. Meanwhile, it was squan-
dering money on experiments that had no obvious appeal, like Toshi.
One benefit of Balaji’s wrecking-ball approach was that the second-
ary projects got sidelined or smothered, and Coinbase moved to focus
on his priority—adding new cryptocurrencies. Coinbase unveiled new
currency offerings like XRP and Ethereum Classic for US customers,
and dozens more for clients overseas. The gap with Binance started to
shrink.
But as Balaji consolidated power and sidelined lesser rivals, it
became harder to avoid direct collisions with Asiff, who continued to
push a strategy centered on Chicago and Wall Street. Tension between
the two was palpable at executive meetings. The conflict became so
strident that, in time, rumors would swirl in crypto circles that Balaji
and Asiff had come to blows. Like many juicy startup rumors, this
wasn’t true, but screaming matches occurred whenever Asiff pushed
the company down a corporate path. “Balaji would jump in and yell,
‘Fuck all that! We need to add assets!’ ” says a former senior Coinbase
executive who sat in the meetings.
Realpolitik replaced the idealism Brian had always tried to impart.
This became even clearer in early 2019, when the company set out to
buy a blockchain analytics service. Coinbase had long relied on a ser-
vice called Chainalysis, a firm known for creating forensics reports for
law enforcement, to provide it with data about blockchain activity. But
after Chainalysis insisted on parsing data about Coinbase customer
wallets—and after an Israeli security firm reported that a Coinbase
account had been funneling bitcoin donations to the terrorist group
Hamas—the company dropped Chainalysis in order to bring its ana-
lytics service in-house.
ch15.indd 196 05/10/20 3:10 PM

Power Struggle 197
Rather than build it, they bought it. In February, Coinbase triumphant-
ly announced the acquisition of Neutrino, an Italian analytics startup
known for its work analyzing blockchains in Europe. Unfortunately,
Neutrino’s founders also headed up a company called Hacking Team,
which had colluded on spying operations with some of the nastiest gov-
ernments around the globe, including the Saudi intelligence unit that
orchestrated the murder of Washington Post journalist Jamal Khashoggi.
Reporters Without Borders had labeled Hacking Team an “enemy of the
internet” for spy work it had conducted on behalf of despots in Somalia
and Morocco. It was clear that Neutrino’s founders were cold-blooded
mercenaries. And now they were Coinbase’s newest employees.
An uproar ensued as crypto journalist David Z. Morris set out the new
hire’s ugly past. In response, Coinbase’s normally sharp PR team dithered
for days, initially brushing off the allegations as uninformed and then
claiming the company’s higher-ups knew nothing about the Hacking
Team’s activities. That didn’t work. Public outrage grew louder, and a
new hashtag began trending on crypto social media: #DeleteCoinbase.
The apparent duplicity of senior management didn’t play any bet-
ter among Coinbase employees. “They knew about it,” says engineer
Craig Hammell. “It showed a lack of understanding of what crypto
is all about. This is not like other industries. Crypto is driven by the
philosophies and ideals behind it.”
As the scandal rumbled on, Brian finally acted. After weeks of
inertia, he went to where he was most comfortable: writing a blog,
where he announced that Coinbase had screwed up and that the com-
pany would part ways with anyone who had worked at Hacker Team.
“Bitcoin—and crypto more generally—is about the rights of the indi-
vidual and about the technological protection of civil liberties,” he
wrote. “We will fix this and find another way to serve our customers
while complying with the law.”
ch15.indd 197 05/10/20 3:10 PM

But even as Brian tamped down one crisis, another was coming to
a head. The battle between Asiff’s and Balaji’s factions raged on, and
Balaji seemed to have the upper hand. By early 2019, many of Asiff’s
pet projects lay in tatters.
The biggest blow to Asiff came in April 2019, when Coinbase
abruptly shut its Chicago office and sent thirty people packing. The
move came amid growing opposition to Asiff’s corporate vision as
Balaji amassed more allies and more power, but it also came down
to dollars and cents. Crypto winter had dragged on for so long that
even Coinbase began to feel pinched. It didn’t help that word leaked to
the longtime San Francisco engineers that their Chicago counterparts
were making more money than they were. Silicon Valley techies are
used to being the top earners—Asiff ’s decision to pay more for tal-
ent in the Midwest came as an affront. Shutting down Chicago solved
multiple problems, even if it was a black eye for Asiff.
Balaji was winning the internal political struggle, but he wasn’t han-
dling it graciously. In a meeting where Balaji set out his latest road
map for adding new crypto assets, Asiff asked a sensible question:
Was there a process to delist assets? Balaji snapped. “Why are you even
asking about this when you don’t know anything about crypto?” he
sneered at the company’s president and COO.
It looked bad for Asiff. In less than a year, Balaji had sown deep divi-
sions in Coinbase, pushed out many longtime employees, thwarted all
kinds of projects that didn’t benefit his vision, and even got an entire
office shuttered. He had also added many new cryptocurrencies—
by mid-2019, Coinbase offered dozens of coins in markets around the
world—and shook up a tired bureaucracy. And then he quit.
Coinbase’s board had structured Balaji’s contract to pay him richly
once a period of time—in this case, one year—had elapsed, a typical
arrangement in the Valley. And like others before him, Balaji waited
ch15.indd 198 05/10/20 3:10 PM

Power Struggle 199
until the moment those riches rained down, and then, vested, he left
to do something else.
Balaji’s departure in early May would end the factional drama that
had roiled the company. Asiff, suddenly and unexpectedly, saw an
opening to have a free hand running Coinbase. He took the bold step
of asking Brian in mid-2019 if Brian would report to him, Asiff, on
questions of product.
Asiff had overplayed his hand. He had regarded himself as the com-
pany’s de facto CEO, and for months had acted that part. In the pro-
cess, he had exhausted much of his political capital at the executive
level. Coinbase’s true crypto believers had never warmed to him, and
still wouldn’t even if Balaji was gone. Coinbase’s real CEO at last reas-
serted himself. It was time for Brian to take charge of his company
again. He told Asiff, “No!”
Asiff took the rejection poorly. Rather than accept a reduced role,
he declared he would resign. Brian obliged. And in a moment that still
rankles Asiff, he was quickly shown the door without any sort of for-
mal farewell or chance to say goodbye to his staff. The two men hav-
en’t spoken since.
Asiff says now that Brian has a lot to learn as a leader: “Brian is a
genuinely good person, but he struggles with what his role is. Every suc-
cessful CEO is one of three things—a product visionary, a culture and
talent magnet, or a super salesman. Brian doesn’t fit any of those roles.”
• • •
Weeks later, Brian sat looking at a ship on the Hudson River, not giv-
ing a damn about Asiff or his opinions. He was at TAK, a country club–
style restaurant in New York’s glitzy new Hudson Yards development,
and he felt at ease sitting among friends—real friends.
ch15.indd 199 05/10/20 3:10 PM

Adam had joined him for dinner, and so had Fred Ehrsam. Outwardly,
Fred bore little resemblance to the hard-charging trader who had
slung millions of dollars at Goldman Sachs and then Coinbase. He had
become preoccupied with high fashion and taken to wearing tie-dyed
fur vests and moonboots. And he no longer spent his evenings glued
to a Reddit screen. Now, he ran with Kanye West and other celebrities.
What had not changed was his friendship with Brian. The two were
tighter than ever. Now, Fred was eager to talk Brian into exploring
his other newfound interests, including fasting, which had become a
craze among rich tech executives.
When the talk turned to crypto, Adam and Fred congratulated
Brian on taking his company back, and the three reminisced about the
exploits that had seen them take Coinbase from a ramshackle apart-
ment into a multibillion-dollar company. They drank and laughed, and
for a few precious hours, Brian felt like he had back in the Bluxome
Street days when Coinbase was a small startup.
Outside, a heatwave was descending on New York. And crypto win-
ter was beginning to thaw.
ch15.indd 200 05/10/20 3:10 PM

16
Bitcoin
Triumphant
T
he depth of crypto winter came on December 15, 2018. On
that day, the price of bitcoin dipped to $3,200—more than
80 percent below its high a year earlier. The handful of
mainstream media outlets still reporting on crypto noted how far
the industry had fallen, and a few pundits pronounced that this time
bitcoin was dead for good. Then, as had happened so many times
before, bitcoin responded to predictions of its demise by going on a
bull run.
The uptick was almost imperceptible at first. In February of 2019,
bitcoin shuffled above $4,000, and then, in what would become known
as the April Fools’ Day rally, the price shot up nearly $1,000 in a single
day. By May, bitcoin was trading above $8,000, and in June it hit the
$12,000 mark before settling around $10,000 for the rest of the sum-
mer. Longtime bitcoin owners smiled in satisfaction while the hedge
fund money that had fled rushed back in. The buzz spread to the finan-
cial pages. Bitcoin was back.
ch16.indd 201 05/10/20 3:09 PM

Not all crypto was back though. The altcoins, aka “shitcoins,” born
in the ICO boom still stank. The prices of many remained down over
90 percent, and there was no mystery why: all of the grand blockchain
projects the ICOs were supposed to fund failed to materialize, and
most still consisted of little more than a white paper. Investors had
prepaid for tokens on some marvelous ride—only to discover the ride
was never going to get built and the tokens were now worthless.
In some cases, the projects failed because the ICO promoters were
crooks. But in other cases, the projects didn’t launch because the back-
ers found it hard to stay motivated once they were swimming in cash.
Good intentions failed as ICO founders discovered it was more agree-
able to travel the world and speak at conferences than to labor away
over blockchain code.
Even bitcoin’s biggest rivals couldn’t escape the altcoin wipeout. By
July, even as the price of bitcoin had increased 62 percent from a year
earlier, Ethereum was down 68 percent. It turned out that Ethereum,
which had been hailed as a new and better version of bitcoin, had
repeated some of bitcoin’s mistakes. Long-promised upgrades to its
code base never materialized, meaning that the Ethereum blockchain
remained slow and inefficient. Meanwhile, the person best poised to
lead improvements to Ethereum, Vitalik Buterin, appeared to be get-
ting swallowed by his cult of personality. One of crypto’s more mem-
orable memes, “Vitalik Clapping,” shows the Ethereum creator on a
New York City party boat, pressing his hands together like an alien
learning how to applaud. Around him, a gaggle of fresh-faced aco-
lytes look on as a singer serenades him with a bizarre refrain, “Vitalik
Clapping, Vitalik Impress. Happy and Clapping, Vitalik Is Impress.”
Even by the out-there social mores of crypto, it was weird.
Bitcoin’s other would-be rival, Bitcoin Cash, had basically collapsed.
The currency born in the bitter schism over block size was down
ch16.indd 202 05/10/20 3:09 PM

Bitcoin Triumphant 203
75 percent during the same one-year period bitcoin had gained 62 per-
cent. What’s more, it was engulfed in schisms of its own as renegade
factions pushed successfully to split the Bitcoin Cash blockchain. Once
regarded as a potential replacement for bitcoin, it now looked like an
ugly knockoff.
As badly as Ethereum and Bitcoin Cash were faring, they still
enjoyed market caps of billions of dollars and a loyal base of fans and
developers. The same couldn’t be said of the legions of shitcoins tum-
bling in an unending free fall.
During the height of crypto mania, the phrase “pre-Cambrian explo-
sion” became a staple of conference chatter. It implied the launch of
thousands of cryptocurrencies was akin to the myriad life-forms that
had sprung up in the early days of evolution on Earth. By 2019, pundits
were using a different phrase from the world of biology: “extinction
event.” The gloomier ones predicted that more than two thousand
shitcoins would die off like woolly mammoths.
Longtime bitcoin boosters—at least those who hadn’t also invested
heavily in altcoins—gloated over this turn of events. They even gave
themselves a name—adding yet another term to the ever-growing
body of crypto argot. They called themselves “bitcoin maximalists.”
• • •
By mid-2019, bitcoin again was the undisputed king of the crypto

world. But it wasn’t the only bright spot in the industry. Another came
in the form of stablecoins, a crypto innovation that would create hun-
dreds of billions of dollars of value and pique the interest of one of the
most powerful corporations in the world.
Stablecoins came as a response to one of the most common knocks
on bitcoin: extreme volatility. What good was a new type of money if its
ch16.indd 203 05/10/20 3:09 PM

value fluctuated dramatically every few hours? Stablecoins addressed

this problem by providing all the benefits of blockchain-based
currency—easy transfers, tamper-proof ledgers, and so on—without
that volatility. A bona fide stablecoin would always be worth one US
dollar, or fluctuate no more than a penny above or below that. As they
grew in popularity, other stablecoins would appear that mirrored the
value of other major currencies like the yen or the British pound.
Stablecoins weren’t new in 2019. The best known one, called Tether,
had appeared in 2015. It caught on with traders who wanted to move
in and out of various cryptocurrencies without the fees that came with
converting from crypto to traditional currency. Tether, however, suf-
fered from a sketchy reputation. How, traders wondered, could they
be sure Tether coins were actually worth a greenback? The shad-
owy organization that oversaw Tether assured users that there was
a reserve to back every single Tether with a dollar—yet they refused
to undergo an audit to prove this. This was suspicious. Such suspi-
cions have only mounted in light of Tether’s ties to the controversial
exchange Bitfinex, and in the wake of a fraud investigation by New
York’s attorney general.
Tether wasn’t the only stablecoin to prompt questions about what
was propping it up. In early 2018, a stablecoin startup called Basis raised
$133 million from blue-chip investors like Bain Capital and Google
Ventures. Basis proposed to keep its coin stable by issuing bonds every
time it fell below $1. The plan didn’t make much sense, given there
was no guarantee people would buy the bonds. Meanwhile, the SEC
warned that the bond plan amounted to selling securities. Basis gave
up in short order and returned most of the money it had raised.
What did make sense, when it came to stablecoins, was to peg their
value to a reserve of US dollars and conduct third-party audits to prove
the dollars were really there. This is what Coinbase did in the summer
ch16.indd 204 05/10/20 3:09 PM

of 2019, working with rival Circle to create a new cryptocurrency called

USD Coin. Meanwhile, the Winklevoss twins created a stablecoin of
their own called Gemini Dollar. Soon these and a growing array of
other stablecoins provided credibility to the concept and challenged
Tether as fixtures of crypto trading markets. By 2020, Coinbase and
others were paying interest on customers’ stash of stablecoins—a sign
of how cryptocurrency could resemble an ordinary savings account.
More importantly, the growth of stablecoins signaled to important
people outside the crypto world that blockchain-based money could
transform finance. National governments, which had long looked at
crypto with suspicion, began to experiment with stablecoins as a way
to issue money. Then, in June of 2019, Facebook dropped a bombshell.
Rumors had swirled for months that the social network was going
to launch a cryptocurrency, but the company’s plans, dubbed Project
Libra, turned out to be bigger and more ambitious than many had
imagined. Libra, its new currency, would be pegged to a basket of
global currencies—including dollars, euros, and Swiss francs—and
available to Facebook users around the world. This meant that any-
one who used Facebook, or one of the company’s other products like
Instagram or WhatsApp, would have easy access to the new currency.
Even more remarkable was that Facebook had assembled a coalition
of A-list brands in finance and technology as partners, including Visa,
Mastercard, Uber, Spotify, and eBay. Facebook’s master plan called for
its partners to help maintain dozens of blockchain nodes that would
create a transaction ledger for Libra, and to contribute to the reserve
fund that would back the Libra with hard currency.
The partner list included two companies that specialized in stor-
ing cryptocurrency, and it also included Coinbase. There already
was a link between Facebook and Coinbase: the head of Project
Libra was David Marcus, a former president of PayPal who, until
ch16.indd 205 05/10/20 3:09 PM

recently, had been on Coinbase’s board of directors. But while

Silicon Valley gossips have speculated for years that Facebook has
tried to acquire Coinbase, the rumors are false—Facebook never
even inquired, and Brian Armstrong and Mark Zuckerberg have
never met.
When it came to Project Libra, the plan was for Coinbase to be
just one of a hundred or so partners to help Facebook run the new
blockchain network—if it ever got off the ground in the first place.
Unfortunately for Facebook, by the time it announced Libra, the
company had become radioactive to Congress and regulators around
the world. The social network was already the subject of numerous
antitrust investigations, and for many governments, the prospect of
Facebook controlling a global supply of money was beyond the pale.
Meanwhile, some of Facebook’s high-profile partners, including
Visa and PayPal, became skittish of the political heat and bolted the
consortium.
The Libra plan wasn’t just a political minefield—some feared it
was also an economic one. Katharina Pistor, a professor at Columbia
Law School, told Fortune magazine that Libra could destabilize the
exchange rate in developing economies like Kenya if currency trad-
ers used Facebook’s money instead of the local currency. Others
likened Libra to a gambit by a handful of companies to privatize
the money supply. A few suggested it was tantamount to outright
treason. “If Facebook raised an army, this would be only slightly
more hostile to the people of the United States than what is cur-
rently proposed,” declared Preston Byrne, an outspoken cryptocur-
rency lawyer.
Critics raised many valid questions, and, as of the time of this
writing, it’s far from clear whether Facebook can overcome govern-
ment opposition and actually launch Project Libra. What is clear is
ch16.indd 206 05/10/20 3:09 PM

that Silicon Valley is still able to dream up grand and world-changing

technologies—whether or not the rest of the world wants to
embrace them. It also shows that those technologies are likely to
disrupt global finance.
If the US government won’t allow crypto to blossom, it’s very likely
China will. The People’s Republic has already tasked its central bank
with creating a digital version of its currency, the renminbi. For the
Communist Party, the advantages are twofold: digital currency can
be used to surveil Chinese citizens more closely than ever, and it will
be a tool to pressure other countries to abandon the US dollar as the
world’s main reserve currency. If this begins to take place, it’s a safe
bet Congress and the United States will look at Facebook’s Libra in a
different light.
• • •
Governments may have greeted Facebook’s digital currency plans

with surprise and alarm, but in crypto circles, Project Libra mostly
generated guffaws. This wasn’t real cryptocurrency but a debased ver-
sion, one that would be controlled by a cabal of powerful companies.
Veteran crypto boosters invoked the c-word—centralized—and warned
people to avoid it.
Suspicions of the new corporate cryptocurrency, coupled with the
ongoing slump of altcoins, led bitcoin’s halo to shine brighter than
ever. Satoshi’s currency was now a decade old and more secure than
ever. To underscore the point, crypto billionaire and early Coinbase
investor Barry Silbert launched a wave of national TV commercials
urging investors to drop gold and buy bitcoin. Meanwhile, the ven-
erable brokerage firm Charles Schwab published a list in late 2019 of
the most commonly held stocks by the millennial generation. The
ch16.indd 207 05/10/20 3:09 PM

list was topped by Amazon, Apple, Tesla, and Facebook. Number

five, ahead of Berkshire Hathaway and Disney, was a stock called
Grayscale Bitcoin Trust that offers a way for investors to buy bitcoin
in the form of a share.
Bitcoin’s resilience—the network has run without interruption
for over ten years—resulted in yet more memes. “The Fed Wire is
Down. Bitcoin is never down,” tweeted a crypto fund manager and
social media personality known as Pomp. He followed this with:
“The stock market is closed. Bitcoin never closes.” Hundreds of other
crypto disciples chimed in with their own aphorisms—“Banks close
your account without notice. Bitcoin never closes your account.”
And so on.
The buzz around bitcoin in mid-2019 felt like a religious revival.
The oldest cryptocurrency had triumphed over rival sects that had
sprung up around different altcoins, and bitcoin believers felt their
god was on top once and for all. That didn’t mean bitcoin didn’t have
powerful enemies—including the president of the United States.
“I am not a fan of bitcoin and other Cryptocurrencies, which are
not money, and whose value is highly volatile and based on thin air,”
huffed President Trump in a Twitter tirade, adding that crypto had
been tied to unlawful behavior. The July outburst appeared tied to
news about Facebook’s Project Libra and to Trump’s general hostility
to the tech industry.
The presidential outburst produced a backlash, ironically, among
fringe alt-right figures who were normally staunch Trump supporters.
Meanwhile, ordinary bitcoin enthusiasts celebrated that the president’s
outburst caused only a small dip in the currency’s price. To them, it
was yet more evidence of bitcoin’s resilience.
For Brian and others at Coinbase, bitcoin’s 2019 resurgence felt
like the return of an old friend—not least because the company’s
ch16.indd 208 05/10/20 3:09 PM

revenues began surging anew on the higher price and an upswing

of trading volume. And inside the company, ordinary employees
cheered the return of Brian to day-to-day decision making. Asiff ’s
presence had been, for many, never natural or right—only a crypto
believer like Brian could lead a company like Coinbase. He had also
found in Emilie Choi, the LinkedIn veteran he promoted to succeed
Asiff as COO, a trusted lieutenant who could quell internal political
battles.
On the business front, the company was still lagging behind Binance,
but the gap between the two was shrinking, in part because Coinbase
now offered dozens of cryptocurrencies in markets around the world.
Meanwhile, Binance’s star lost some of its luster after the exchange
suffered a major hack that saw thieves plunder $40 million worth of
bitcoin. At the same time, CZ’s run-and-gun style with regulators had
become more perilous as rumors swirled about looming investigations
by the SEC and other agencies.
Meanwhile, Coinbase’s latest attempt to diversify its income away
from trading commissions showed signs of success. Since early 2018,
Coinbase had been building out a service called Custody, which
allowed funds and wealthy individuals to store their crypto for a small
fee. The Custody service also opened the door to offer other crypto-
based financial services such as lending and proxy voting for block-
chains like Tezos. And in a nod to how crypto trading was becoming
ever more like traditional finance, Coinbase outbid Binance to acquire
a prime brokerage called Tagomi, which had been founded by a senior
Goldman Sachs executive.
In doing all this, Coinbase and its rivals were adding layers of infra-
structure that had existed in the traditional banking industry for years.
Maybe Asiff wasn’t all wrong. Wall Street and Silicon Valley were
growing closer together—a point underscored when Coinbase beat
ch16.indd 209 05/10/20 3:09 PM

out Fidelity, the epitome of old-school East Coast investment firms,

in a bid to acquire bitcoin storage business Xapo. Coinbase’s $55 mil-
lion acquisition also saw the company take possession of nearly eight
hundred thousand new bitcoins. By the end of summer 2019, Coinbase
would control more than 5 percent of all bitcoins in existence.
ch16.indd 210 05/10/20 3:09 PM

17
The Future
of Finance
T
he JP Morgan Chase Tower stretches fifty-two stories
above Manhattan’s fabled Park Avenue, an imposing glass
declaration of power and prestige. From one perch on the
forty-ninth f loor are stunning views of Central Park and midtown,
along with fine art and a glass case that displays the pistols used
by Vice President Aaron Burr to kill the country’s first treasury
secretary, Alexander Hamilton, in a duel. There’s a bar and a long
table where bankers and their guests dine high above the city.
Presiding over all of it is Jamie Dimon, the most inf luential bank-
ing CEO in the world and bitcoin’s most famous, most powerful
nemesis.
Dimon has thick white-gray hair, soft features, and piercing blue
eyes. One spring morning in 2019, he rose and trained those eyes on
a CEO half his age who’d arrived from California. He extended his
hand, and Brian shook it. The two men turned and stared out the win-
dows of Dimon’s office at the financial capital of the world.
ch17.indd 211 05/10/20 3:09 PM

For Brian, the clandestine meeting was an opportunity to learn. Still

possessed of his insatiable desire for self-improvement, Brian asked
Dimon for insights about the financial system. He had recently done
the same with Lloyd Blankfein, the senior chairman of Goldman Sachs.
Dimon’s motives for the meeting were less obvious. Beyond the
good grace of mentoring a younger executive, why would crypto’s
most prominent critic sit down with one of its biggest advocates? As
it turned out, Dimon’s views of crypto were a lot more nuanced than
media caricatures would imply. And part of him was simply tired of
being asked about it.
Later, people would come to understand this. “I didn’t want to be
the spokesman against bitcoin. I don’t really give a shit—that’s the
point, OK?” Dimon said in an interview.
What Dimon said about crypto was surprising. More surprising still
was what he had done about crypto. Over five years, while he had pub-
licly ranted against about bitcoin and dismissed crypto, he had also
quietly encouraged ambitious blockchain research inside JP Morgan.
This included the creation of Quorum, a spin-off of Ethereum that
serves as a private network and ledger for financial transactions. He
had even approved JPM Coin, a new cryptocurrency to settle cross-
border payments with clients.
At the same time JP Morgan was dabbling with crypto, Coinbase
was moving closer to traditional banking. The one-time startup was
applying for a federal bank charter, a powerful license that would open
the door to offering FDIC-insured deposits and give Coinbase direct
access to the Federal Reserve. Without realizing it, the two leaders,
seemingly as far apart ideologically as their offices were geographi-
cally, had been moving toward each other.
By 2019, the worlds of Wall Street and Silicon Valley were sud-
denly not so far apart. Coinbase had spent the year playing catch up to
ch17.indd 212 05/10/20 3:09 PM

The Future of Finance 213
Binance. But, “in the long term, it’s not Coinbase versus Binance,” says
Barry Silbert, the early Coinbase investor and bitcoin billionaire. “It’s
Coinbase versus JP Morgan.”
Silbert’s prediction may come true in the long term, but in 2020
the upstart Coinbase and the senior incumbent of finance, JP Morgan,
would come together in a surprising way. Brian and Dimon’s meeting,
it turned out, had laid the groundwork for JP Morgan to take Coinbase
on as a banking customer. Only five years earlier, startup-friendly
Silicon Valley Bank had cut off Coinbase over fears about bitcoin, and
now the most venerable financial firm on Wall Street had agreed to
handle its money.
• • •
It’s an axiom that we overestimate the impact of technology in the short

term and underestimate it in the long term. That’s certainly true of the
consumer internet, whose arrival in the 1990s produced a frenzy of spec-
ulation and then a spectacular crash. Barry Schuler, who was CEO of
one of the dot-com boom’s most famous companies, America Online,
recalls what happened next: “When the cool-down came, a lot of the
media establishment breathed easy and said, ‘We don’t have to worry
about that.’ AOL’s market collapsed and everyone was like, ‘Thank God
that was a fad.’ Now, of course, Netflix is killing media companies.”
As a longtime member of Coinbase’s board, Schuler sees the same
phenomenon taking hold. The Wall Street establishment, he says, has
become smugly complacent about crypto since the collapse of the 2017
bubble. But Schuler says the status quo can’t last. “Look back at the first
phase of the internet from the ’90s to now,” he continues, “and look at
all the businesses that have been disrupted—from retail to media to
advertising. Financial services is basically untouched. They’ve built a
ch17.indd 213 05/10/20 3:09 PM

transaction layer on top of their core services so people can check their
accounts but everything underneath is archaic and obsolete. And this
is the largest industry in the world.”
Schuler predicts that Wall Street is on the cusp of the same mas-
sive internet-driven disruption that befell so many other industries.
Blockchain, he says, will give rise to a new token-based financial sys-
tem that will radically transform traditional debt and equity markets.
The question is whether banks and old-school financial firms will
adapt to this changing world quickly enough. Alex Tapscott, a CFA
and coauthor of the book Blockchain Revolution, notes how industry
incumbents are rarely at the forefront of technological change.
“Typically, the leaders of old paradigms don’t embrace new ones.
That’s the reason Marriott didn’t embrace Airbnb and why the White
Pages got replaced by Google,” Tapscott says. His observation is a per-
fect example of “the gale of creative destruction,” a phrase coined by
legendary economist Joseph Schumpeter, who nearly eighty years ago
defined it as “a process of industrial mutation that incessantly revolu-
tionizes the economic structure from within, incessantly destroying
the old one, incessantly creating a new one.”
But in the case of banks, Tapscott notes, some are more poised to
adapt to the impending gale than typical incumbents. He points to
JP Morgan’s pursuit of blockchain research and to Fidelity, the invest-
ment giant with nearly $7 trillion in assets under management that’s
expanding aggressively into crypto.
Schuler and Tapscott aren’t the only ones who believe massive,
blockchain-based disruption is coming to Wall Street. Anyone very
familiar with crypto is quick to make the case that the technology is
so superior to the current system that its adoption is inevitable. They
point to the power of digital tokens, which can be used not just as a
currency but as a system of tracking ownership and for tamper-proof
ch17.indd 214 05/10/20 3:09 PM

record keeping. One obvious use for tokens, says Balaji Srinivasan, is
for cap tables—the documents that show who owns how many shares
in a company, a fixture of the startup and venture capital worlds.
“Right now, cap tables are hand-edited in Excel. With blockchain,
all tokens will update automatically. Portfolio management and updat-
ing private stock records will become so much easier. There will be no
need to nag fifty people to respond to an email,” says Balaji, who, after
his controversial reign at Coinbase, joined another crypto startup.
Cap tables, though, are just one small piece of the financial world that
could be transformed by widespread token adoption. Professor Emin
Gün Sirer, a computer scientist and blockchain authority at Cornell
University, predicts whole swaths of Wall Street middlemen—notably
lawyers and auditors—will be replaced. “The nature of tokens is they lend
themselves to easy public scrutiny and auditing,” he says. “The technology
can’t be interfered with, so we won’t need many of these middlemen.”
Sirer also predicts that every stock certificate will eventually be a
token on a blockchain. Once he thought that stock exchanges would
drive this change by replacing their shares with tokens. But now he
thinks the move to tokens will come when startups decide to raise
money on crypto exchanges, turning to companies like Coinbase
rather than traditional exchanges. Eventually, Sirer expects the likes
of the New York Stock Exchange will buy their crypto counterparts
and incorporate them into their existing services.
Sirer has another observation about the future of the crypto indus-
try: As long as the industry is driven by speculation, he says, it will
be exchanges—Coinbase, Binance, Kraken, and Gemini—that occupy
the most prominent place in crypto. But as the industry matures and
tokens become part of the financial mainstream, it could be companies
that offer other services—loans, investment advice, or consulting—
that become its face.
ch17.indd 215 05/10/20 3:09 PM

If Sirer is right, what does this mean for Coinbase? The company has
long tried to become more than a trading floor and is gaining traction
with new services including its custody business. If it acquires a federal
banking charter, Coinbase could evolve into a full-fledged financial
services giant.
For now, though, Coinbase’s biggest achievement has been closing
divisions between ideological bitcoin believers and ordinary consum-
ers. Brian’s early insight that everyday people would buy crypto if you
offered an easy way to do it proved to be correct. Wences Casares, an
early bitcoin entrepreneur and one of the first to introduce crypto to
Silicon Valley, sees Coinbase as a pillar of the larger crypto economy.
“I think sometimes bitcoin fundamentalists are a bit naïve or simplistic
in not realizing that they wouldn’t enjoy the high price of bitcoin if
Coinbase hadn’t created a big market for it,” he says.
None of this, though, means Coinbase is destined to be the JP Morgan
in a coming era of crypto. A big reason is because, even though every-
one familiar with crypto predicts it will disrupt Wall Street, no one’s
quite sure when.
• • •
“We’re in the Apple II phase of crypto. What we really need is the PC,”
says Chris Dixon, the venture capitalist and Coinbase board member.
Dixon’s analogy is a good one. The desktop device Apple launched
in 1977 was a hit, but only a small fraction of Americans would ever
own one. It would only be four years later with the arrival of the IBM
PC that personal computers became mainstream to the point that Time
magazine declared 1982 the “year of the computer.”
Asiff Hirji also thinks something big is coming to crypto but isn’t
sure when. Despite his awkward exit from Coinbase, his ardor for
ch17.indd 216 05/10/20 3:09 PM

blockchain technology has only grown. “I view crypto as a third big

evolution in tech,” he says. “We went from the mainframe to mobile
cloud computing, and the next tech phase will be decentralized block-
chain computing.”
While it’s easy to imagine the future of finance as a showdown
between the likes of Coinbase and JP Morgan, they’re not the only
contenders. Tapscott, the Blockchain Revolution author, says big tech
giants—not just Facebook but Amazon and Apple too—could just
as easily dominate crypto. Then there are national governments.
Authoritarian regimes like China or Venezuela, Tapscott points out,
are developing cryptocurrencies. Their strategic goals involve not
only undermining the US dollar’s role as the world’s reserve currency
but using crypto to surveil and control their citizens. “There’s a lot
of forces coming together in crypto—tech companies, banks, upstart
financial companies, and authoritarian governments. It’s going to be a
heck of a fight,” says Tapscott.
Ironically, it’s possible that the winner of this fight will be none of
these players. Instead, the prevailing force in crypto could be an emerg-
ing technology called DeFi—short for decentralized finance. In a DeFi
world, bitcoin-like networks would offer financial services like loans or
deposits run by smart contracts, all beyond the control of a company or
government. DeFi isn’t just an idea—a number of projects are already
up and running, and CZ, the cowboy CEO of Binance, has launched a
decentralized exchange. There are even rumors that CZ plans to move
his entire crypto empire to DeFi networks and oversee it from a yacht
in international waters, beyond the reach of any regulator.
If this renegade vision of crypto comes to pass, a big reason for it
may be the US government’s aggressive and incoherent attempt at
regulation. In the course of researching this book, interview subjects
over and over again shared fears the United States will smother crypto
ch17.indd 217 05/10/20 3:09 PM

innovation and force it offshore. In the absence of a national crypto

policy and laws to support it—similar to the legislation Congress
passed in the 1990s to support internet innovation—America runs a
very real risk of forfeiting the lead on a world-changing technology.
Sirer believes DeFi has a real chance to be the future of crypto,
but he cautions it will be five years until the technology is viable. He
also notes that the crypto community’s plans to improve existing
networks—notably bitcoin and Ethereum—may be out of reach.
“Bitcoin relies on narrative tricks. The solution to scaling the network
is always 18 months always. It’s like Godot. He never arrives,” says
Sirer, invoking Samuel Beckett’s famous existential play.
Sirer isn’t the only one to point out how the crypto movement is driven
as much by mythology as it is by technology. The Nobel Prize–winning
economist Robert Shiller’s latest book, Narrative Economics, devotes its
first chapter to bitcoin. The cryptocurrency, Shiller says, has no intrinsic
value but has been propped up by a contagious belief that it does.
Academics like Shiller who are deeply skeptical of crypto, however,
belong to a shrinking minority. In recent years, there’s been an explo-
sion of crypto and blockchain research on campuses in the United
States and around the world. It was only in 2016 that Katie Haun, the
former prosecutor and Coinbase board member, began teaching one
of the only crypto classes in the country at Stanford. By 2019, 56 per-
cent of the world’s top fifty universities offered at least one such class,
and some schools now offer many: Cornell’s curriculum includes four-
teen blockchain-related courses, while Columbia, NYU, and MIT offer
at least half a dozen. Also striking is that these classes aren’t confined
to computer science. Instead, departments as diverse as law, manage-
ment, humanities, and engineering are teaching crypto courses too.
All of this represents not just a proliferation of knowledge, but a
signal that a young generation is aspiring to careers in crypto. Their
ch17.indd 218 05/10/20 3:09 PM

presence is likely to bring new breakthroughs that solve the scaling

problems that have always plagued the blockchain. Meanwhile, some
of these students will start companies that will bring new types of
crypto and blockchain technology to the financial sector or make
crypto accessible to consumers in ways we can’t imagine.
• • •
By 2019, Coinbase’s security detail began insisting that Brian use

aliases even to book a table for a casual drink. So now at restaurants
in the Bay Area, the reservation is under Simon Bradshaw, or one of
several other British-sounding pseudonyms. It’s a small price to pay for
running a billion-dollar company.
“Simon” arrives at the nondescript hotel restaurant in San Franc-
isco’s financial district wearing his trademark black T-shirt. He orders
a soda water. It’s all he will have for the evening—a nod to the twenty-
four-hour fast Fred has convinced him to try. Brian is polite to the
restaurant staff and has shed the “Don’t fucking bother me” demeanor
he had adopted when Coinbase launched.
I ask him about the future of Coinbase and if there’s anything keep-
ing him up at night. Brian’s biggest worry, it turns out, is not JP Morgan
or Binance or even the long shadow that America’s regulators are cast-
ing over the crypto industry. It’s something he has yet to encounter.
“When Coinbase was in an awkward teenage state, the industry
didn’t stop. A Generation 2 of crypto came along and started to eat our
lunch. Now, there’s going to be a Generation 3 crypto company that
will be well funded, compliant, and the biggest threat yet,” Brian says.
It’s a common fear among Silicon Valley entrepreneurs. It’s also a
very healthy one, given a ceaseless pace of disruption that topples even
the most famous companies if they stop innovating.
ch17.indd 219 05/10/20 3:09 PM

“I don’t want to be become Wall Street or Wells Fargo. I want

Coinbase to bring about economic freedom,” says Brian. “One of the
hardest things to do in business is repeated innovation. The hardest
of all is to build a company that survives the test of time.” Part of this
will necessitate Coinbase one day becoming a public company. Brian
demurs when asked when or how this will happen, but people long
familiar with Coinbase predict this will entail some combination of a
token offering and a traditional IPO.
“It would be pretty boring, wouldn’t it?” says cofounder Fred
Ehrsam of a conventional listing, adding that Coinbase is “spiritually”
built to go public using a blockchain. When it does, it will be another
first in Coinbase’s long and important legacy of crypto innovation.
Many of Coinbase’s former employees are in the process of building
crypto legacies of their own. Fred and Olaf are running crypto funds
worth hundreds of millions of dollars. Craig Hammell, Coinbase’s
soft-spoken fourth employee, is planning a startup of his own. He’s not
sure of the details but likes the idea of working with shopkeepers in
South America where more and more local people are turning to bit-
coin as a means of shielding their wealth from the disastrous economic
policies of their governments.
A common thread among all of their visions is applying Silicon
Valley’s do-the-impossible attitude to the staid world of finance. “I
wish more people would try big ideas and new things,” Brian says pen-
sively. “In the early days, I remember when a lot of people described
bitcoin as a scam and hung up the phone on us. A lot of people are just
scared of new ideas. But one of the things about Silicon Valley is that
people are not as skeptical as everywhere else. You can still throw out
a crazy idea, and people will get excited.”
ch17.indd 220 05/10/20 3:09 PM

Epilogue
O
n March 9, 2020, the Dow Jones Industrial Average
dropped a record 2,000 points amid fears over oil prices
and the Covid-19 pandemic that had begun to consume
the world. Three days later, the Dow fell another 2,350 points, and
the following Monday it lost 3,000 more. It was a once-in-a-century
financial calamity, and nothing in the market was spared—stocks,
bonds, commodities, and even precious metals suffered a dizzying
plunge.
So did bitcoin.
Its price dipped below $5,000 on March 16. Only weeks before, the
currency had sat above $10,300. Crypto haters gleefully pointed out
that, far from being a superior form of gold—something traditionally
coveted to protect against financial shocks—bitcoin had choked in this
critical moment.
Then, as it did so many times before, bitcoin came roaring back. By
June, the price topped $10,000 again, and the original cryptocurrency
was posting a better 2020 performance than gold and nearly every
other asset. For those who had owned it for years, the episode was
Epilogue.indd 221 05/10/20 3:14 PM

222 Epilogue
yet more proof that bitcoin was the honey badger—able to take any
beating and emerge even stronger. Coinbase, meanwhile, rode the vol-
atility to trading riches on the scale of what it enjoyed during the peak
of the 2017 bubble.
• • •
In San Francisco, Coinbase’s founder waited out the pandemic in his

penthouse in the city’s tallest building, where his neighbors included
NBA star Kevin Durant and other members of the Golden State
Warriors. Brian had grasped the implications of the Covid-19 cri-
sis early, and Coinbase’s work-from-home blueprint had been shared
widely among companies in the Valley and beyond.
But he was hardly the first from the crypto world to warn about
what was coming as coronavirus emerged—that designation belonged
to Balaji Srinivasan, Coinbase’s former CTO who had almost burned
the company to the ground in order to save it.
Months before the virus hit the United States with full force,
Balaji had been tweeting like a maniac about the disease spread-
ing out of Wuhan, China. His campaign led a tech journalist to
mock him as “bubble boy” and, upon being vindicated, Balaji did
not respond with quiet satisfaction. Instead, he embarked upon a
ruthless grudge match against the media and egged on others to do
the same—underscoring how the crypto world, and the Valley at
large, has a knack for fostering people with wealth, brilliance, and
incredibly thin skin.
The broader crypto community responded to the economic fallout
from the disease with—what else—memes. Twitter handles, websites,
and other corners of crypto land all adopted a version of the moniker
“Fed go brrr,” a snarky nod to the US Treasury’s mass money printing

Epilogue 223
during the crisis. Many showed the slogan alongside of a bureaucrat

cranking out dollars from a printing press.
• • •
By 2020, the early team that had helped Brian built Coinbase had long
since scattered to other ventures, but nearly all remained immersed
in crypto. This included the company’s second employee, Craig
Hammell, who took up a deep study of bitcoin’s code as part of a plan
to use crypto to help impoverished communities. Employee number
three, Charlie Lee, had given himself over to creating new privacy fea-
tures for Litecoin, the bitcoin rival he had created a decade before.
Olaf Carlson-Wee, who had arrived to join Coinbase with lumber-
jack sap on his clothes and only a friend’s couch to sleep on, had trans-
formed from jester to king. His crypto hedge fund, Polychain Capital,
had moved from improvised, ramshackle offices in San Francisco’s
Mission District to a palatial suite of offices on the city’s waterfront.
It’s hard to avoid such trappings when you control more than a billion
dollars of investor funds. But Olaf refused to renounce his eccentric-
ities entirely, dedicating nooks of his corporate palace to his literary
hero, David Foster Wallace.
Olaf was not the only early Coinbase vet to undergo a transforma-
tion. Adam White was the earnest Californian who had tried to sell
old-money powerhouse Cantor Fitzgerald on bitcoin in early 2017, only
to be laughed out of the room by a phalanx of Wall Street guys. Three
years later, he was a Wall Street guy himself. As president of Bakkt,
the New York Stock Exchange’s crypto venture, he had become one of
the most prominent faces of bitcoin in the traditional finance world. In
doing so, he and Coinbase had helped bridge what was once a grand can-
yon between Silicon Valley and the East Coast financial establishment.

224 Epilogue
Coinbase alumni were not only spreading the crypto gospel to

Wall Street, but to Washington, DC, as well. The company’s chief
legal officer, Brian Brooks, would come to lead the Office of the
Comptroller of the Currency, which oversees the country’s banking
laws. Meanwhile, two other Coinbase lawyers, Dorothy Dewitt and
Andrew Ridenour, would take roles at the CFTC, the nation’s power-
ful commodities regulator.
Their arrivals coincided with a growing realization among some
regulators and members of Congress that crypto was not simply a front
for crime and chaos, but a powerful technology that could transform
money. Slowly, the federal government’s antipathy to bitcoin is lift-
ing. Meanwhile, some states are working to welcome it. These include
Wyoming, which has passed a series of banking laws that encourage
crypto companies to set up shop.
• • •
All this doesn’t mean crypto has lost its outlaw side, of course. A report
revealed that scammers took in a record $4 billion in 2019 as a result
of crypto hustles, most notably through Ponzi schemes. On social
media, the scams became so bad that crypto firm Ripple filed a law-
suit against YouTube over a series of send-us-your-money videos that
hijacked the image of its CEO Brad Garlinghouse. Meanwhile, teen-
agers would hack into Twitter in July of 2020, hijacking the accounts
of everyone from Brian to Elon Musk to Michelle Obama in order
to invite their millions of followers to send bitcoin. And, in the fifth
season of Billions, the Showtime series beloved by finance junkies, a
key plot point turns on an illegal bitcoin mining operation run by the
main character’s teenage son.
Overall, though, bitcoin’s reputation is better than it’s ever been.
This is reflected in the mainstream news media, which for a long time

Epilogue 225
ignored crypto stories unless they involved something criminal or

salacious. Today, a typical headline is more likely to focus on news like
the VC fund Andreessen Horowitz’s new $200 million crypto fund,
which was launched in April 2020 and is overseen by former prosecu-
tor turned Coinbase board member, Katie Haun.
And while Wall Street and Silicon Valley continue to move to meet
each other in the middle with cryptocurrency, some of the old rival-
ries still flare up. As late as May of 2020, slides from a Goldman Sachs
presentation to investors sneered at bitcoin, comparing it to the tulip
bulb mania and pointing to its use by criminals. Crypto Twitter shot
back immediately, pointing to examples of Goldman’s sketchy busi-
ness dealings and reminding the bank of its abortive attempt to set
up a crypto desk of its own, staffed by a pair of young executives with
ill-advised man-buns.
Battles between bitcoin believers and analysts at firms like
Goldman Sachs are likely to be a permanent part of crypto culture,
it seems. That culture, lively as it is, also continues to suffer from an
ongoing inability to bring women into its fold. Nathalie McGrath,
Coinbase’s early head of people who founded a boutique firm ded-
icated to helping startups with corporate culture, observes that
crypto needs “more diversity and representation to truly thrive”—a
challenge that is likely to become more pressing as inclusion and
social justice issues move to the forefront of US society.
• • •
Making predictions about crypto can be hard, especially since those

who do are so often wrong. Many people have wrongly predicted bit-
coin’s demise, while a good number of others have made equally off-
the-mark assurances about the digital currency hitting $100,000 before
long.

226 Epilogue
But one of the better predictions comes from Coinbase cofounder

Fred Ehrsam. By 2020, Fred has lost most of his hard-charging “run
through brick walls” demeanor, while taking up activities like vipas-
sana, a silent meditation technique. He describes one ten-day retreat
that obliged him to reflect without talking, paper, or possessions. The
process led him to ruminate about life and ideas that would change the
world, and most particularly about crypto.
“The hardest part about getting a new network effects-based tech-
nology is the start, and crypto seems to have overcome that initial
inertia,” says Fred. “The next twenty years, much like the internet, is
likely to awe us in ways no one can predict.”

Index
Accenture, 140 origins of Coinbase and, 3–15

addresses, blockchain, 19–20 personal life of, 175
Age of Cryptocurrency, The (Vigna and Casey), 23 at Satoshi Roundtable, 80–81
Airbnb, 3, 5 social media scams using, 143
Alford, Gary, 122 Srinivasan and, 186
algorithms, in financial trading, 11–12 super voting shares to, 112–113
AlphaBay, 107–108 targeted by bitcoin believers,
Alphabet, 64 78–80
altcoins, 138 in Washington, DC, 129–131
crash in, 165, 202 workplace morale and, 67–68
value of, 146–148 authentication, two-factor, 143
Altman, Sam, 5–6, 7–8
American Kingpin (Bilton), 31 Bain & Company, 191
Andreessen, Marc, 11, 48 Bain Capital, 204
Andreessen Horowitz, 137, 177, 186–187, 225 Bakkt, 223
Andresen, Gavin, 82 Bancor, 135–136
Antonopoulos, Andreas, 44 Berlin, Leslie, 99
Apple, 7, 216 Bezos, Jeff, 111
Coinbase app and, 40, 63 Big Pump, 144
gift cards, money laundering with, 45 Billions (TV show), 168, 224
iPhone, 94–95 Binance Coin, 179–182, 187, 196, 209
April Fools’ Day rally, 201 bitcoin
Arca, 105–106 academic attention to, 107
Armstrong, Brian, 155, 206 acceptance of by merchants, 29–30, 55, 64
in Beijing, 81–83 anonymity of, 20
blog posts by, 109–111, 161 blocks, 19–20, 152–153
Coinbase culture and, 49–51 bull run in, 201–203
Covid-19 and, 222 in China, 81–83
on the crypto winter, 173 code oversight, 94
Dimon and, 211–213 Covid-19 and, 221–223
first meeting with Fred, 13–14 crashes, 40, 160–161, 165–175
in funding rounds, 33–37 creation of, 4–5
on the future of Coinbase, 219–220 criminal activity with, 17–18, 30–31, 58–60,
Gemini and, 116–117 79, 107–108
Hirji and, 190, 192–200 in the crypto winter, 172–175
IRS and, 125–126 decentralization and, 8–9, 12, 104–105
leadership development of, 66, 68, 111–113, Ethereum compared with, 88–93
117, 199–200 federal efforts to prosecute, 17–18, 20
media coverage and, 159 future of, 224–225
Index.indd 227 05/10/20 3:13 PM

228 Index
bitcoin (continued) blocks, 19–20

IRS on, 121–126 infrastructure problems with, 75–84
lifestyle and, 105–106 size issues with, 152–153
network problems with, 152–154 Bloomberg, 179
origin story of, 23–24 Bloomberg Businessweek, 49, 112
Pizza Day, 22 Brave, 136
problems with using, 61–62 Bridges, Shaun, 59–60
as property versus currency, 122–126 Brooks, Brian, 224
reputation of, 58, 69–70 Buffett, Warren, 171
resilience of, 208–210 Burges, Kolin, 56
as rival to gold, 83–84 Burnham, Brad, 36
scaling and, 88 Burning Man, 55
traditional finance and, 65, 99–108 Business Insider, 195–196
true believers in, 23, 25 Buterin, Vitalik, 48, 87–88, 90, 92, 182
user growth and network problems in, cult of personality around, 202
75–84 profile of, 167–168
US government ownership of, 126–127 social media scams using, 143
value fluctuation in, 21–23, 47, 57–60, 61–62, Byrne, Preston, 206
65–66, 121, 139, 146–148, 151–155
Wall Street and, 99 Cantor Fitzgerald, 101–103
warring factions in, 75–84 capital gains rules, 122–126
Bitcoin Cash, 147, 173 cap tables, 215
on Coinbase, 159–160 Carlson-Wee, Olaf, 24–30
collapse of, 202–203 on bitcoin valuation, 62
Bitcoin Core, 75–76, 78, 82–83 on Coinbase’s complacency, 177–178
bitcoin exchanges. See Coinbase; Mt. Gox on the crypto bubble, 148
Bitcoin Foundation, 54, 55, 56, in the crypto winter, 172
58–59 on dApps, 188
Bitcoin Magazine, 87 departure from Coinbase, 95–96, 157
bitcoin maximalists, 203 hedge fund of, 223
bitcoin meetups, 30 on hiring, 38–39
bitcoin Sign Guy, 139 legacy of, 220
Bitconnect, 141–142 on Mt. Gox, 57
Bitfinex, 108, 114 Casares, Wences, 182–183, 216
BitInstant, 54–55, 97, 115–116 Casey, Michael, 23
Bit License, 127 celebrity endorsements, 144–145
Bitmain, 171–172 Chainalysis, 196
Blankfein, Lloyd, 212 Charles Schwab, 207–208
Blockchain, 179 China, 81–83, 207
“blockchain not bitcoin” faction, Choi, Emilie, 175, 191, 209
104–105 Circle, 55, 105
Blockchain Revolution (Tapscott and Tapscott), circuit breakers, 140
214, 217 Clayton, Jay, 169
blockchains, 19–21, 24 CNBC, 146
academic research on, 218–219 Coinbase, 173
block size issues, 152–153 acquisitions by, 186–187, 197, 209
enterprise, 73 agency trading model at, 174
future of, 214–220 Apple Store and, 40, 63
processing time backlogs in, 83 Balaji at, 185–187
smart contracts and, 89–95 Binance and, 179–181, 187–190
social engineering for, 21 Bluxome Street office, 37–38, 66–67
2.0, 88 capacity issues at, 151
block rewards, 21 Chicago and, 192
Index.indd 228 05/10/20 3:13 PM

Index 229
cold storage at, 43–44 criminal activity, 18, 224

competition for, 54–55, 178–181 Dread Pirate Roberts and, 31, 59
the crypto winter and, 172–175 money laundering, 45, 58
culture at, 39, 49–51, 67–68, 189–190 Mt. Gox and, 56–58
currencies added to, 96–97, 181–182, Ponzi schemes, 141–142
187–190, 196 swindles, 141–145
customer acquisition at, 47, 139, 154, 156–157 threats of, 149–151
customer service at, 159, 173–175 cryptocurrencies
diversification at, 64, 209 academic research on, 218–219
engineering strategy at, 187–188 altcoins/shitcoins, 138
Ethereum and, 93–95 Binance and, 179–181
Facebook and, 205–206 bubble around, 133–139
first hires at, 24–30 bubble in, 138–145, 149–155
flash crash and, 139–141 bull run in, 201–203
funding rounds for, 33–37, 51, 64–65, celebrity endorsements of, 144–145
154–155, 173 code for, 188–189
future of, 216, 219–220, 225–226 crash in, 160–161, 165–175
hacking attacks on, 40–43, 143, 157 exchanges of, 127, 215–216
hiring at, 29, 37–41, 45–47, 49–51 Libra, 205–207
Hirji at, 157–158 as property versus currency, 122–126
hot wallet attack on, 40–43 swindles using, 141–145
infrastructure issues at, 155–159, 209–210 See also individual currencies
IRS and, 121–126 crypto winter, 170–175, 198, 201
JP Morgan and, 213 Custody, 209
layoffs at, 74 cypherpunks, 23, 99–100
leadership team at, 157, 175 CZ. See Zhao, Changpeng
Market Street office, 67
Moon Launch, 65 DAO (Decentralized Autonomous Organiza-
opposition to, 27 tion), 90–93, 145–146, 169–170
origins of, 3–15 dApps, 188
in other countries, 65 Davenport, Ben, 57
private keys and, 9 decentralized finance (DeFi), 217–218
profits at, 154–155 Dentacoin, 138
regulation and, 118, 121–131 Dewitt, Dorothy, 224
reputation of, 42–43, 68, 71–72, 124, 125 Digital Asset, 104, 105
running through brick walls at, 33–52, Digital Gold (Popper), 23
63–64 Dimon, Jamie, 103, 138, 211–213
security systems at, 79–80 diversity, 225
Silicon Valley Bank and, 69–70, 72–73 Dixon, Chris, 69, 93, 124, 157, 216
staff departures from, 117–118, 193–195 Dogecoin, 54, 181–182
super voting shares at, 112–113 Dorman, Jeff, 105–106
threats against, 149–151 Draper, Tim, 167
Wall Street and, 104 Dread Pirate Roberts, 31, 59, 122
coinbase, in bitcoin, 21
CoinDesk, 145, 182 Earn.com, 186–187
Commodity Futures Trading Commission Ehrsam, Fred, 10–14
(CFTC), 126 on Ethereum and smart contracts, 93–95
Conscious Leadership, 68 on the future, 220, 225–226
Consensus, 167 the hedger and, 174
ConsenSys, 94 Olaf hired by, 28–29
Covid-19 pandemic, 221–223 Electronic Frontier Foundation, 100
The Creamery, 37–38 electronic market makers, 192
creative destruction, 214 Elliott Wave Theory, 151
Index.indd 229 05/10/20 3:13 PM

230 Index
enterprise blockchain, 73 Hammell, Craig, 38, 64

ether, 92–93 on adding currencies, 181–182
Ethereum, 84, 87–97 on Hirji, 191
Binance and, 182 on infrastructure, 155–156
blockchain issues in, 202 Hanyecz, Laszlo, 22
flash crash of, 139–141 hard forks, 92, 147
hard fork at, 91–93 Haun, Katie, 17–18, 20, 155, 225
market caps of, 203 as Coinbase ally, 49
popularity of, 134–139 cryptocurrency expertise of, 59–60
value of, 152 on prosecuting bitcoin, 24, 31
Ethereum Classic, 196 at Stanford, 107, 218
Hearn, Mike, 76
Facebook, 63, 64 hedge funds, 96, 172
Project Libra, 205–207 Heroku, 156
Winklevoss twins and, 114–115 hijackers, 142–143
Farmer, David, 159, 175 Hilton, Paris, 144–145
Federal Bureau of Investigation, 59–60, Hirji, Asiff, 157–158, 173–175, 209
126–127 on Binance, 183
Federal Reserve, 12, 53, 212 departure of, 198–199
Federal Reserve Bank of New York, 102 on Earn.com, 187
Fidelity, 209–210 on the future of crypto, 216–217
Financial Crimes Enforcement Network, 126 Srinivasan and, 193–200
Financial Times, 136–137 style and personality of, 190–193
Finney, Hal, 23 Hirschman, Albert, 48, 185
flash crashes, 139–141 “hockey stick growth,” 51–52
Forbes magazine, 148 hodlers, 83–84
Force, Carl Mark, IV, 59–60 HoweyCoin, 168–169
Fortune magazine, 206
Founder’s Fund, 166–167 IBM, 90, 216
Freeman, Kristian, 153 ICOs (initial coin offerings), 135–138
Binance and, 179
Galaxy Digital, 172 HoweyCoin and, 168–170
Garlinghouse, Brad, 224 SEC on, 145–146, 168–170
GDAX (Global Digital Asset Exchange), 96–97, swindles around, 141–145
101–103 impulse wave pattern, 151
flash crash in, 139–141 infrastructure, 75–84, 155–159,
professional traders and, 113–117 209–210
Gemini, 97, 105, 116–117 insider trading, 160
Gemini Dollar, 205 Internal Revenue Service, 121–126, 173
geo-fencing, 40
Gilmore, John, 100 Jobs, Steve, 7, 99, 109, 111
Give Crypto, 175 JPM Coin, 212
Goldman Sachs, 11–12, 37, 104, 171, 212 JPMorgan Chase, 103, 104, 138, 211
on bitcoin, 225
Elliott Wave Theory at, 151 Karpelès, Mark, 55–58
Google, 40, 64, 157, 195–196 Knight, Phil, 39
Google Ventures, 204 KodakCoin, 167
Graham, Paul, 36 Kraken, 96–97, 114
Grayscale, 54
Grayscale Bitcoin Trust, 208 Lamborghinis, 146–147, 167
Langschaedel, Julian, 39
Hacker News, 78 Lawsky, Benjamin, 127
Hacking Team, 197 Lee, Bobby, 82
Index.indd 230 05/10/20 3:13 PM

Index 231
Lee, Charlie, 39–40, 54, 80–81, 88 New York Stock Exchange, 223
in Beijing, 81–83 Niejadlik, Martine, 45–46, 49, 70–71
departure of from Coinbase, 117–118 Nike, 39
on infrastructure, 156 Novogratz, Mike, 172
Litecoin and, 223
on Mt. Gox, 57 Office of the Comptroller of the Currency, 224
Lempres, Mike, 130–131, 150 Ohanian, Alexis, 34–35
on Binance, 181 OKCoin, 179
pushed out of Coinbase, 194–195 Oliver, John, 142
LendingClub, 33 oracles, 89
LHV bank, 156–157
Libra, 205–207 Pandit, Vikram, 65
Litecoin, 54, 106, 117–118, 152, 223 Parets, J. C., 151
Long Blockchain Corp., 154 Patriot Act, 71
Lutnick, Howard, 102–103 PayPal, 70–71, 206
Lydian, 144–145 Pelosi, Nancy, 130
Pierce, Brock, 58, 136
Magic: The Gathering, 56 Pistor, Katharina, 206
Malka, Micky, 36–37 pivots, 73
Marcus, David, 205–206 Pizza Day, 22
Martin, Philip, 79–80, 150–151 Polychain Capital, 96, 177, 223
Masters, Blythe, 104, 105 Pomp, 208
Matos, Carlos, 141 Ponzi schemes, 141–142, 224
Mayweather, Floyd “Money,” 144 Popper, Nathaniel, 23
McCaleb, Jed, 54, 56 pop-up blockchain ventures, 136–138
McGeenan, Ryan, 78–79 Powell, Jesse, 97
McGrath, Nathalie pre-Cambrian explosion, 203
Coinbase culture and, 50–51, 112 private keys, 9, 43
departure of, from Coinbase, 195 Project Libra, 205–207
on diversity, 225 prop shops, 192
on Srinivasan, 193 Puertopia, 167
workplace morale and, 67–68
media coverage, 107, 146, 159, 167–168, Qash, 138
224–225 QuarkChain, 138
Mezrich, Ben, 115 Quorum, 212
miners, 21
Monero, 108 R3 consortium, 104
MongoDB, 156 RAPID process, 191
Moon Launch, 65 Reddit, 78, 151, 161
Morris, David Z., 197 on the crash, 166
Mow, Samson, 78 threats against Coinbase on, 158–159
Mt. Gox, 55–58, 106 Reeves, Ben, 8–9, 179
Munger, Charlie, 171 regulation, 49, 53–54, 71, 118, 121–131, 187
Murck, Patrick, 53–54 Binance and, 180, 209
DeFi and, 217–218
Nakamoto, Dorian Satoshi, 60–61 GDAX and, 114
Nakamoto, Satoshi, 4–5, 88 ICOs and, 145–146
blockchain developed by, 19 IRS and, 121–126
on decentralization, 8–9 lobbying on, 129–131
real identity of, 23–24, 60–61 safe harbors from, 128
Neutrino, 197 regulatory arbitrage, 128–129
Newsweek, 60–61 renminbi, 207
New York Department of Financial Services, 127 Ribbit Capital, 36–37
Index.indd 231 05/10/20 3:13 PM

232 Index
Ridenour, Andrew, 224 solitary genius versus partnerships in,

“The Rise and Fall of Bitcoin” (Wallace), 26 7–8
Rockdale, Texas, 171–172 Stellar, 54
Romero, Dan, 157, 195–196 Stox, 144
Suarez, Juan, 48–49, 50, 156
safe harbors, 128 on regulation, 129
SAFT (Simple Agreement for Future Tokens), on strategy, 69
146, 169–170 super voting shares, 112–113
San Jose, California, 3–4 Suthers, Elliott, 175
Santori, Marco, 169–170 SVB. See Silicon Valley Bank (SVB)
Satoshi Dice, 127 Szabo, Nick, 23–24
Satoshi Roundtable, 80–81, 94
Schuler, Barry, 213–214 Tagomi, 209
Schumpeter, Joseph, 214 Tapscott, Alex, 214, 217
Secret Service, 49 Tapscott, Don, 214, 217
Securities and Exchange Commission (SEC), tax evasion, 123–126
145–146, 168–170 TechCrunch, 78
security threats, 78–80 Techmeme, 78
Selkis, Ryan, 57, 58, 115–116 Telegram, 144, 167
ShapeShift, 127 Tether, 204–205
Shiller, Robert, 218 Tezos, 189
Shin, Laura, 76 Thiel, Peter, 5, 70–71, 166–167
shitcoins. See altcoins “Thoughts on Tokens” (Srinivasan),
Shrem, Charlie, 58, 115–116 136–137
Silbert, Barry, 34–35, 54, 207, 213 Tiger Global, 173
Silicon Valley, 3–4, 10, 99–100, token projects, 135–139
212–213, 225 Tokyo, 137–138
Silicon Valley (TV show), 168 Tokyo Stock Exchange, 179
Silicon Valley Bank (SVB), 68–70, 72–73 Toshi, 188
Silk Road, 31, 59–60, 107, 122, 126–127 transaction fees, 153–154
Sirer, Emin Gün, 107, 215–216, 218 Treasury Department, 126
Slack, 73 Tron, 166
smart contracts, 89–95 Trump, Donald J., 121, 130, 186, 208
social media Twitter, 34, 143
Covid-19 and, 222–223 Two Bit Idiot. See Selkis, Ryan
scams involving, 143–144
See also Reddit Uber, 5, 173
SoftBank, 171 Ulbricht, Ross, 31, 59, 122
Solidity, 89 uncapped notes, 35
Son, Masayoshi, 171 Union Square Ventures, 33–34, 36
South Korea, 137 “up and to the right,” 35–36
SpankChain, 135 US Treasury, 45
Srinivasan, Balaji, 48, 136–137, 185–190 Utzke, David, 121–125
on cap tables, 215
departure of, 198–199 Ver, Roger, 27, 56
Hirji and, 193–200 Vigna, Paul, 23
political skills of, 193–196 Visa, 206
stablecoins, 203–205 Voorhees, Erik, 27, 127
Stanford Law School, 107
Starbucks, 194 Wallace, Benjamin, 26
startups, 5–6 Wall Street, 65, 99–108, 212–213,
failure of, 6, 9–10 225
moving “up and to the right,” 35–36 Bit Licenses and, 127
Index.indd 232 05/10/20 3:13 PM

Index 233
decentralized currencies and, 11–12 Winklevoss, Cameron and Tyler, 48, 54–55, 97,
future of, 215–216 105, 114–117, 205. See also Gemini
Wall Street Journal, 37, 170, Wired magazine, 9, 26, 90
172 Wozniak, Steve, 7
Washington Free Beacon, 72 Wu, Jihan, 82
Washington Post, 107 Wuille, Pieter, 75–76
Western Union, 45
White, Adam, 46–47, 55, 64, 107, 154, Xapo, 43, 55, 183, 209–210
157 Xie, Linda, 158–159
at Bakkt, 223 XRP, 106, 196
on the flash crash, 140
GDAX and, 101–103 Yahoo Finance, 107
on Gemini, 116 Y Combinator, 3, 5–6, 9–10
Srinivasan and, 193–194 Demo Day at, 6–7
Wilson, Fred, 33–34, 36, 37, 66 Paul Graham in, 36
Coinbase culture and, 49–51 startup cofounders and, 7–8
compliance and, 70–72 Yellen, Janet, 53, 138
first meeting with Brian, 13–14 YouTube, 91, 224
in funding rounds, 33–37
on “running through brick walls,” 40 Zero to One (Thiel), 5
Silicon Valley Bank and, 70 Zhao, Changpeng, 178–181, 182–183, 209
workplace morale and, 67–68 Zuckerberg, Mark, 48, 109, 114–115, 206
Index.indd 233 05/10/20 3:13 PM

Index.indd 234 05/10/20 3:13 PM
Acknowledgments
Bitcoin is a digital currency, but also a technology—one that can be

intimidating and difficult to understand at first. Fortunately, there
are many people who are passionate to explain the novel aspects of
bitcoin and other cryptocurrencies. I met such people the first time I
encountered bitcoin at an open air festival in New York City in 2013
and, since then, I’ve been fortunate to speak with many others who
have taken the time to help me understand the splendid technology
called blockchain.
Despite its well-deserved reputation for drama and infighting, the
cryptocurrency community is also incredibly supportive, and I want
to thank those who offered me advice and encouragement during the
writing of this book: Laura Shin, Alex Tapscott, Ryan Selkis, Frank
Chaparro, Pete Rizzo, Dan Roberts, and Kathleen Breitman.
I’m also grateful to the many current and former employees of
Coinbase who took the time to speak candidly with me about the com-
pany and share many of its secrets, and to Coinbase’s communications
team for arranging many interviews. Likewise, I want to thank Barry
Silbert, Chris Dixon, Emin Gün Sirer, and the numerous other cryp-
tocurrency theorists and entrepreneurs who helped supply the larger
ideas that inform this book.
I could not have written Kings of Crypto without the support of my
employer, Fortune magazine, which not only provided me time to write
Acknowledgments.indd 235 06/10/20 9:52 AM

236 Acknowledgments
but also gave me free rein to report and write about cryptocurrency,
even when the topics roamed far beyond those familiar to the publica-
tion’s regular business audience. My appreciation extends in particular
to Fortune CEO Alan Murray and stellar editors Cliff Leaf, Andrew
Nusca, Adam Lashinsky, and Matt Heimer. I’m equally grateful to my
fellow writers at Fortune, delightful people who have been a frequent
source of inspiration and collaboration—especially Jen Wieczner and
David Z. Morris.
I owe a debt of gratitude to the Eastham Public Library on Cape
Cod, Massachusetts, whose pleasant staff and delightful ambience
helped Kings of Crypto come into existence. I have also been fortunate
for the crack talent and professionalism of Anne Starr and the entire
production team at Harvard Business Review Press.
Thanks also to my family, who provided both support and pleasant
distraction during the many times when this project consumed nights
and weekends, and to my friend Justin Doom for reading early drafts.
Finally, I want to acknowledge three people to whom I’m particu-
larly indebted: my editor at the Press, Scott Berinato, who improved
the text at every turn; my agent, Lisa DiMona, who provided energy
and encouragement during critical moments in the publication pro-
cess; and Robert Hackett, my friend and Fortune colleague, who not
only read the draft but also shares my passion for cryptocurrency and
new ideas.
Acknowledgments.indd 236 06/10/20 9:52 AM

About the Author
Jeff John Roberts is a senior writer and prize-winning reporter at

Fortune magazine, where he covers cryptocurrency, law, finance, and
technology. He has also written for the New York Times, Reuters, the
Economist, the Globe & Mail, and numerous other mainstream publi-
cations, as well as for the McGill Law Journal. He is a regular guest on
radio and TV news programs, appearing on outlets such as the BBC,
NPR, CBC, Fox Business, and CNBC.
A lawyer by training, Roberts passed the bar in both New York State
and Ontario, Canada. He became a full-time journalist in 2010 after
completing a Master of Arts at Columbia Journalism School. In 2016,
he obtained a Master of Science and credits for the first year of an MBA
while attending the Knight-Bagehot Fellowship at the Business and
Journalism Schools at Columbia. In addition, Roberts holds a BA and
an LLB/BCL from the McGill Faculty of Law.
In the course of his journalism career, Roberts has covered the inter-
section of law and technology, focusing on topics as diverse as high-
tech patent litigation, the Federal Communications Commission, and
digital payment systems. He has covered blockchain and cryptocur-
rency since 2013 and regularly interviews the most influential people
in the industry.
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About_the_Author.indd 238 05/10/20 3:05 PM

Kings of Crypto One Startup's Quest To Take Cryptocurrency Out of Silicon Valley and Onto Wall Street (Jeff John Roberts)

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What is the book about?

What is the book about?

What challenges does Coinbase face?

What challenges does Coinbase face?

Kings

FM.indd 1 05/10/20 3:13 PM

JEFF JOHN ROBERTS

Harvard Business Review Press

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For details and discount information for both print and

Copyright 2021 Jeff John Roberts

Library of Congress Cataloging-in-Publication Data

Names: Roberts, Jeff John, author.

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From Open Secret to Civil War

1. Brian Has a Secret 3

2. The Outlaw Currency 17

3. Running through Brick Walls 33

From Boom to Bubble to Bust

8. Wall Street Comes Calling 99

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9. Brian Has a Master Plan 109

10. Uncle Sam Comes Calling 121

11. Initial Coin Insanity 133

12. Coinbase Crackup 149

From Crypto Winter to the Crypto Future

13. Hangover 165

14. “Getting Our Asses Kicked” 177

15. Power Struggle 185

16. Bitcoin Triumphant 201

17. The Future of Finance 211

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I first encountered bitcoin and Coinbase in 2013. I was a reporter at

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the realm of any bank, company, or government. Bitcoin kept track of

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history of successful companies, they’ve been founded by partners,”

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gobbledygook string of letters, numbers, and symbols—that opened

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Five miles south of Y Combinator in Mountain View is another Silicon

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exciting,” Fred recalls. This emerging company called Coinbase felt

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The idea of prosecuting a currency seems ridiculous. It makes as much

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permanent ledger of transactions that show who’s spending the digital