Bitcoin Is Normal Now. Yay?

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I’ll be honest with you. I’m still not sure that cryptocurrencies like Bitcoin are useful. But they are a huge business, and they’re having their biggest moment so far.

Coinbase, which helps people buy and sell cryptocurrencies, listed its stock publicly for the first time on Wednesday. Coinbase is like a bank, but isn’t one, and it’s built to trade money that exists only as lines of computer code. And on Thursday, this not-bank for not-money was valued at more than $85 billion — roughly the same as General Motors.

My colleague Erin Griffith told me that Coinbase’s stock market debut both validates cryptocurrencies and shows how far they have to go to achieve the high-minded vision of upending the global financial system. Investing in cryptocurrency is also not just for true believers anymore. It’s (relatively) mainstream, like investing in stocks or gold, which is both a success and not exactly what cryptocurrency die-hards had in mind.

Shira: Let’s start with the basics. What is Coinbase? And how does it make money?

Erin: It is a cryptocurrency exchange, which is a place for people and companies to buy, sell and trade various cryptocurrencies including Bitcoin. Coinbase handles the whole process, similar to how Robinhood or Schwab handle people’s stock trades. And then Coinbase holds your cryptocurrency in a digital wallet so you don’t need to think about the technical complexities of stowing and using cryptocurrency.

Coinbase makes money mostly by charging fees on transactions, as banks do. Unlike many start-ups of similar size and scale, Coinbase is profitable.

Make the case for why Coinbase matters to people who don’t live and breathe Bitcoin.

Coinbase is a blaring signal that cryptocurrency is becoming a very big business and a significant investment asset — although it’s a risky and volatile one. And Coinbase is a way for people who might be curious about cryptocurrencies, but can’t stomach the risk of buying them directly, to dip into the market.

Coinbase listing its shares on a U.S. stock exchange is a huge validating moment for cryptocurrencies, even if you don’t believe in the big idea behind them.

What is the big idea?

The original vision of cryptocurrencies was this idealistic, maybe even anarchical, idea of everyone being their own sovereign bank. Believers imagined that cryptocurrencies would be the future of money that didn’t require centralized authorities like banks, and the basis of a better, more fair global financial system.

That hasn’t really happened, at least not yet. The prices of the currencies are so volatile that it’s not practical to use them to buy a cup of coffee or most things. Instead cryptocurrency is for now mostly a vehicle for financial speculation and trading.

Let’s say cryptocurrencies never fulfill that ideal, but remain a thing that people buy hoping it will go up in price — like vintage cars. Would that be a win or a failure?

That’s a great question. There is no doubt that Coinbase’s success so far is a win for people who have backed cryptocurrencies for years. Cryptocurrencies are a bit like the cannabis industry. Some people see it only as a business opportunity, and others see it as part of a mission to legalize marijuana and improve the world.

If the principle behind cryptocurrencies is to create a new global financial system, crypto believers see Coinbase as the first building block of that.

Further reading:

  • Even concrete needs computer chips: My colleague Don Clark wrote about lesser-noticed corners of business affected by a global shortage of computer chips, including a company that sells temperature sensors placed where concrete is poured at construction sites. “It’s hell on earth right now,” a different computer chip buyer told Don.

  • A glimpse into scary corners of the internet: Bloomberg News wrote about the 23-year-old software coder who helps keep fringe websites like 8kun up and running when most internet service providers steer clear of them.

  • Jeff Bezos’ last word as C.E.O. (I think?): The Amazon chief executive’s annual letter to stockholders is widely read in Silicon Valley and beyond. In his last one as chief executive, Bezos stood behind his company’s contributions to customers, other businesses and employees — even as he said that Amazon needed to do more to become the “Earth’s Best Employer and Earth’s Safest Place to Work.”

I featured Rico the Brazilian porcupine in the very first edition of On Tech. Rico recently celebrated his fifth birthday with a “cake” of favorite treats including fruit and a peanut butter pop.

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