One reason I am invested in Coinbase (COIN +2.48%) is that it is a trusted brand for crypto enthusiasts. Where do I keep my coins? I keep my coins at Coinbase. I have trust in Coinbase. In fact, I trust the company so much, I bought its stock. So that's double trust. I trust Coinbase to hold my crypto, and I think Coinbase shares will increase in value.
This is ironic because a lot of crypto, right now, is built on non-trust. I think this comes from the tech side, and also from the culture. In the software industry, there is an idea called "Zero Trust." I hate this concept. I hate the idea, I hate the framing. Would you like to live in a world with "zero trust"? I would not. So while "zero trust" might be a catchy slogan with security consultants and crypto enthusiasts, it's actually a horrible idea vis-a-vis the financial industry.
If crypto is going to go mainstream, trust is vital.
NASDAQ: COIN
Key Data Points
Here’s a fake interview with a made up crypto specialist
Me: “Okay, I’m not a crypto specialist, I’m just an investor trying to make money. Who do you trust in the world of crypto?
Random crypto specialist: “Nobody! Nobody! We don’t trust anybody! We’re libertarian coders, man, and there is zero trust among us. You got that? No trust whatsoever. When we release our code out into the world, what do we call it? Zero trust. Because there is zero trust, man. You get it now? We have zero trust. That’s why the blockchain will free us all, man. We have zero trust.”
Me: “Yeah, okay. I keep my coins at Coinbase. Where do you keep your coins?”
Random crypto specialist: “I keep them in a wallet man, my own wallet. Because there is zero trust.”
Me: “Don’t you think there has to be some sort of trust and relationships for crypto to ultimately prosper? Like, for instance, when I first bought something on Amazon.com 25 years ago, I had to give my credit card information to Amazon in order to buy something on the internet. So I had to trust Amazon with my information. And Visa (V +1.06%) and the other credit card companies had to promise that I would be reimbursed if I was ripped off. And that decision, by the credit card companies, to make that call, that was based on trust, right? I mean, doesn’t capitalism really work on the basis of some kind of trust? We can’t have internet transactions unless there is trust.”
Random crypto specialist: “You don’t know what you’re talking about, man. The world is filled with thieves, and they’re all trying to rip us off. Crypto will free us, man…”
Image source: Getty Images
Software coders may have "zero trust," but the financial industry is built on trust
Finance and banking and money are all built on trust. There is actually a financial document called a "trust." Many banks and other lenders work "trust" into their name. A piece of paper with George Washington's face on it has no value whatsoever unless we trust each other that this is money, which can be exchanged for goods and services. Trust is critical in finance (and marriage, and a lot of other things).
So while I get that "zero trust" is just a branding slogan, that is actually a horrible brand for crypto, which seeks to be a currency. All the people who buy crypto trust that it has value and will increase in value. If you destroy that trust, you destroy that currency. Trust is vital.
I trust Coinbase. We’ve established that. Cynical people would suggest that my trust is ridiculous.
Is it?
Do you trust your bank? Do you keep your money under a mattress? Coinbase inspires a lot of trust in a lot of people. 100 million people keep their coins at Coinbase. Over 14,000 institutions invest with Coinbase. The company says it has 245,000 ecosystem partners around the world. In the world of crypto, Coinbase is a whale.
Block (SQ +1.40%) and PayPal (PYPL +0.62%) have validated crypto when they jumped on board. Both of those companies are bigger than Coinbase. On the other hand, Coinbase gets all of its money from crypto. For Block and PayPal, crypto is a side-gig. For Coinbase, it's 100% of what this company does.
If crypto is going to survive and thrive and make it out into the world economy, there has to be some kind of authority or institution that delivers on the promise of trust. And Coinbase is the company that I would suggest is the one that will do that.
So investing in Coinbase is both a way to move crypto forward. And it's a way to profit from the crypto revolution. That's one major reason to invest in Coinbase. It's the financial institution in crypto that is creating the trust, and relationships, that will make the blockchain work for more and more people.
