Kings of crypto is a fun read about a Bitcoin exchange startup. It begins with a readable exposition of blockchains and cryptocurrencies. Blockchains are basically distributed ledgers that show every pertinent transaction. The ledger is organized into blocks linked together. Every ten minutes or so, the unrecorded transactions are “rounded up” and put into a new block.
In the cryptocurrency world, transactions deal with Bitcoins, analogous to physical coins. A complicated address--a private key--is used to keep track of these Bitcoins. Serious computer users have no trouble with these addresses, but less committed individuals want a simple way to deal with Bitcoins. Brian Armstrong, the protagonist of the story, recognized the problem and developed the Coinbase exchange, which makes buying and selling Bitcoin straightforward.
A compelling reason for using Bitcoin is that no central organization, like a big bank, controls the transactions. The Bitcoin world, at least in the beginning, was distinguished by the fervor of those involved, who believed that Bitcoin would liberate financial transactions from the tyranny of control by banks or government. Of course, Coinbase did constitute a controlling mechanism and was opposed by hardcore decentralization advocates, but most users did not seem to care. Money launderers, drug dealers, and the like recognized the possibilities offered by lack of control; however, Coinbase strenuously avoided criminal activity.
Brian, like many game changers, went through Y Combinator and faced many of the same problems seen by other entrepreneurs. He raised his A round partly through the faith of an investor who had seen the financial destruction in Venezuela caused by Hugo Chavez and government agencies and believed Bitcoin would be safer. Coinbase grew by “hiring its customers”: new hires were users and believers. They were also gifted coders. Brian, like many entrepreneurs, was most comfortable sitting in front of a screen. A business magazine called Brian and a colleague “Vulcan Swiss bankers,” but the sixth hire was a woman with emotional intelligence who kept the group together. Coinbase survived the credibility threat when a rival, a bigger exchange called Mt. Cox, was hacked and lost millions of investors’ (actual) currency. Earlier, $250,000 had been stolen from Coinbase through a hack. As Bitcoin became accepted, new currencies came on the market, threatening Coinbase’s original offerings. As the company grew in response to the market, its culture changed; members of the founding team moved on, and some went on to create their own cryptocurrencies.
The rest of the story includes issues familiar to other startups. The technology needed a serious upgrade as customer response times became intolerable. The federal government began to pay more attention, both to the use of Bitcoin for tax evasion and to speculation in Bitcoin. Skilled developers raised millions by offering new currencies through initial coin offerings (ICOs). Eventually, a flash crash took place and a lot of money was lost. Coinbase used super-voting shares in an offering to maintain founder control. The board decided the company needed “adult supervision” and hired a senior executive from New York. Two other themes emerged: one was the use of blockchain technology in other applications, for example, record keeping and logistics; a second theme was the embrace of Bitcoin by Wall Street firms, after their initial dismissal. The book ends with a cordial meeting between Brian and Jamie Dimon, chief executive officer (CEO) of JPMorgan Chase, about the future of blockchains and Bitcoin.
The book is much livelier than this review, with a focus on the people involved. It is an exciting and accessible path into a new technology and how startups develop.
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