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Date: 2018-12-10

Coinbase - What is it?

Coinbase is currently the world's largest "fiat / crypto" currency exchange...

Based in San Francisco, it was created in 2011 and received $3m of funding in 2014. The company has now grown to over 10m users (customers) and is still on the upward trend.

With a rumoured $1bn in revenue in 2017, the company is at the forefront of the "crypto" wave, and is primarily seen as the biggest indicator of the "health" of the market.

Furthermore, it's one of the only "points" in the "crypto" ecosystem which gives you the ability to actually "buy" Bitcoins. This is a VERY important distinction to make; the ONLY way the "Bitcoin" infrastructure has actually attained any sort of quantifiable value is because people have continued to trade USD for BTC. Without this, the system would just be an interesting technical quirk.

Whilst there are a number of similar operations in the world, CoinBase is by far and away the leader. It's seen not only as the most reputable, but technically most robust and offering the most effective prices too. The system has a great amount of uptime (apart from late 2017 when it had to close its doors to new users due to unprecedented demand), and is fully covered by the US juridical system.

The company also follows regulations including "KYC / Know Your Customer" and "AML / Anti Money Laundering". Both of these are essential in ensuring that the business is able to run effectively and securely, especially when dealing with financial products such as the "crypto" space.

This tutorial is going to look at how CoinBase works, what it means for business and how it fits into the "crypto" ecosystem as a whole...

Fiat / Crypto Investments

The most important thing to realize is that "CoinBase" is the main driver in Bitcoin's price & adoption in recent years. It works by accepting "fiat" currency (USD/GBP/EUR etc) for the likes of Bitcoin, Ethereum and Litecoin.

Unlike the "crypto / crypto" exchanges, CoinBase has focused entirely on the exchange of fiat currency for the likes of BTC. In doing so, it has become the "entry point" for many Bitcoin investors, and is why the BTC market has such a large amount of capital tied to it.

Further, the system works very similarly to a "traditional" business. By using them, you're essentially buying "Bitcoin" directly from them (not from other traders). They're a retailer of Bitcoin, buying their stock from the large mining operations such as BitStamp.

This means that if you're using their service, you're essentially a customer (not a "user").

It also means that they are able to charge a small "commission" fee for anyone buying BTC through their platform (this is how they make money). This is how the company earned a rumoured $1bn in 2017 (revenue, not profit).

Apart from the likes of Gemini & Kracken, CoinBase is the only "fiat/crypto" investment exchange available in the Western hemisphere. It's important to note that with the continued regulation of exchanges by governments around the world, it's assuring that "CoinBase" have taken major steps to ensure that their user base is as protected as possible.