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Posted on September 27, 2021Phishing attacks are on the rise — here are some steps you can take to protect yourself
Phishing attacks are on the rise — here are some steps you can take to protect yourself
Tl;Dr: As we have discussed in previous blogs, at Coinbase we believe that a healthy and safe crypto industry is critical to growing and maturing the cryptoeconomy. Part of that means sharing information that we believe is useful to protect consumers broadly across the industry. It’s for this reason that we’re sharing the details of a recent large-scale Coinbase-branded phishing campaign that we believe impacted our customers, and many others.
Between April and early May 2021, the Coinbase security team observed a significant uptick in Coinbase-branded phishing messages targeting users of a range of commonly used email service providers (you can learn more about phishing in our Help Center.) Though the attack was broad, it demonstrated a higher degree of success bypassing the spam filters of certain older email services.
The messages used a wide variety of different subject lines, senders, and content. It sometimes sent multiple variations to the same victims. Depending on the variant of email received, different techniques to steal credentials were used as well. The following screenshots show a representative victim experience, but wouldn’t necessarily have been seen in exactly this order by all victims.
This phishing email is designed to alarm the recipient, hoping that they will click the link quickly without taking time to verify other aspects of the message. For some victims with Hotmail accounts, attackers attempted to add a malicious application to the user’s inbox. If the recipient clicked “Yes”, an attacker would be able to read all the user’s emails (including password reset and device verification emails sent by Coinbase). Finally, the user would be sent to a Coinbase-branded phishing page attempting to capture the user’s Coinbase login credentials. Note that while the URL contains the word “coinbase”, the domain is not “coinbase.com” Once the attackers had compromised the user’s email inbox and their Coinbase credentials, in a small number of cases they were able to use that information to impersonate the user, receive an SMS two-factor authentication code, and gain access to the Coinbase customer account. With access to these accounts, the attacker was able to transfer funds to crypto wallets unassociated with Coinbase.
At no point did the attackers breach Coinbase’s security infrastructure or broader systems, and we have made changes to prevent this from this type of attack succeeding in the future.
Once we learned of the attack, we took a number of steps to protect our customers, including working with external security partners to take down malicious domains and websites associated with the phishing campaign, as well as notifying the email service providers most impacted by the attack.
While attacks like this have the potential to cause significant harm to their victims, taking a few common-sense security precautions can dramatically reduce their efficacy. Below we lay out a few best practices that everyone should follow to keep their various online accounts safe.
Strong passwords
Passwords are the front door locks to your online applications, but far too many people fail when it comes to basic password best practices. In fact, according to a recent study, more than 50% of those polled reused passwords across multiple accounts. If a password is the front door lock to your digital life, reusing a password is like having the same key to your house, car, mailbox and place of work. In other words, reusing a password is barely better than having no password at all. Strong passwords should have a combination of letters (both upper and lower case), numbers and special characters, and be at least 10 characters long. Many password managers will suggest options that meet these standards.
Use a password manager
If you’re following security best practices, you should be using unique, strong passwords for every site you visit, making it impossible to remember your credentials for all of your online accounts. This is where password managers like 1Password and Dashlane become invaluable. Not only will a password manager suggest strong, randomly generated passwords for you, many of them have built-in features that help prevent entering your password on the wrong website — such as those used for phishing campaigns such as the one described above.
Two-Factor Authentication
After choosing a strong, unique password, enabling two-factor authentication (2FA) is the most important way to secure your online accounts. 2FA, also known as 2-step verification, is a security layer in addition to your username and password. With 2FA enabled on your account, you will have to provide your password (first “factor”) and your 2FA code (second “factor”) when signing in to your account. There are many types of 2FA, ranging from a physical key (such as a YubiKey) — the most secure — to SMS verification — the least secure. Many people choose to use SMS 2FA, because it’s linked to a phone number, rather than to one particular device, and is generally the easiest to set up and to use. Unfortunately, that same level of convenience also makes it easier for persistent attackers to intercept your 2FA codes. We strongly encourage everyone that currently uses SMS as a secondary authentication method to upgrade to stronger methods like Google Authenticator or a security key everywhere it is supported.
Question everything
Coinbase, like most financial institutions or FinTech companies, will never contact you asking for your password, two-factor authentication codes, or to take actions like installing new software or sending funds to a cryptocurrency address. Whenever you receive a communication from a company that you have dealings with, check that it is what you think it is. Was it sent from a domain that is consistent with the company? (i.e., help@coinbase.com as opposed to support.coinbase@gmail.com). Is the landing page accurate? (paypal.com as opposed to secure-paypal[.]com). Is the content in the communication or on the website in the same style and of the same quality as previous communications? Many scam sites will have typos, use old logos or have a different feel than their genuine counterparts.
Coinbase provides a number of resources to help our customers avoid online scams and report potential malicious activity. Cryptocurrency transactions are irreversible. If you (or a hacker who has accessed your account illegitimately) send cryptocurrency to a third party, it cannot be reversed or stopped. When you send cryptocurrency to a blockchain address, you must be certain of the legitimacy of any involved third party services and merchants, and only send cryptocurrency to entities you trust. If you’re ever in doubt, do some research and never send funds or share information unless you are 100% certain that you are interacting with who you think you are.
Phishing attacks are on the rise — here are some steps you can take to protect yourself was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 27, 2021Do more with your crypto: beyond the buy and sell buttons
Simply spend, earn, send, receive and trade 100+ cryptocurrencies and more on Coinbase
- Direct deposit coming soon: customers will be able to deposit any percentage of their paycheck into their Coinbase account in crypto or USD
- Coinbase Card adds ability to spend USD; offers new rewards with DAI, AMP and RLY; and general availability starts this Fall
- Since the launch of Coinbase Earn in 2018 more than 6.5 million unique users on Coinbase have earned crypto
By Max Branzburg, VP of Product, Coinbase
Coinbase began with a radical idea that anyone should be able to easily, simply, and securely access bitcoin. We’ve come a long way since then.
Today, consumers have more options than ever when looking for a place to buy and sell bitcoin. This is something to celebrate. It means crypto is gaining more adoption around the world.
At Coinbase, our goal is to enable everyone to get more out of their money with the power of crypto. That’s why we’re determined to deliver the most trusted full suite of crypto-first financial services to our 68 million users.
Get paid in crypto
With more of their spending, earning, trading and borrowing happening on Coinbase, customers will need simpler ways to fund their Coinbase accounts. In the coming weeks, we’ll launch the ability for customers in the US to get paid into Coinbase. Customers can get paid in crypto or US dollars and can choose any percentage of their paycheck to deposit. With direct deposit, customers can more easily access our crypto-first financial services and be ready for any trade or purchase.
Reimagine crypto spending and earning
As customers look to the cryptoeconomy to meet their everyday financial needs, they need a way to easily make purchases with crypto and earn yield on their portfolio.
Coinbase Card is a Visa® debit card that gives customers up to 4% back in crypto rewards¹ on every eligible purchase, so our customers can seamlessly buy everyday items with crypto². Here’s what’s new:
- Starting this week, cardholders can spend US Dollars (as well as crypto), while earning crypto rewards
- Coinbase Card holders can already choose to earn 1% back in ETH, DOGE, or BTC or 4% back in GRT or XLM. Starting this week, they can also choose to earn 1% back in DAI or 4% back in AMP or RLY.
- All customers* in the US will be eligible to sign up for a Coinbase Card starting this Fall
In addition to earning by spending, the ability to earn crypto without buying or transacting it has been critical in bringing more people into the cryptoeconomy. I’m excited to share that since the launch of Coinbase Earn in 2018, more than 6.5 million unique users have earned crypto for completing educational tasks such as watching videos and answering questions. Coinbase Earn is live today in 42 countries and we have plans to add more in the coming months.
Designing for the cryptoeconomy
Powered by crypto and blockchain technology, the cryptoeconomy has the opportunity to be a more fair, accessible, efficient, and transparent financial system for the internet age. Our goal is to be the gateway to this new financial system, by building a platform that is safe, trusted, and easy-to-use.
That means designing products with a simple UX that makes our platform usable and intuitive for even the newest entrants to the cryptoeconomy. Our app was originally designed for trading a few dozen crypto assets, but as we continue to build out a full-suite of financial services for the cryptoeconomy, our UX needed an overhaul to accommodate.
We made a number of improvements to our Mobile and Web apps, including:
- A new ‘Assets’ tab to view your crypto holdings and discover new features
- A revamped ‘Trade’ tab to help you research assets and transact for both novice & advanced traders alike
- A new ‘Pay’ tab to access Coinbase Card and P2P payments for everyday spending
- A new ‘For You’ tab to discover news, insights & education and engage with the broader cryptoeconomy
Our goal is to deliver the best financial services that consumers are used to, but in an even better way with crypto and blockchain technology. Financial services built on crypto have the potential to enable more fair and equal access to wealth for anyone, anywhere, without prejudice. It’s still early days, but by building the foundation of the primary financial account, we’re one step closer to enabling more economic freedom for the world.
*Coinbase Card will be available to all eligible customers in the US, excluding Hawaii.
¹Crypto rewards is an optional Coinbase offer.
²Coinbase will automatically convert all cryptocurrency to US Dollars for use in purchases and ATM withdrawals.
The Coinbase Card is issued by MetaBank®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Coinbase Card is powered by Marqeta.
Do more with your crypto: beyond the buy and sell buttons was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 27, 2021Now get your paycheck deposited into Coinbase
By Prakash Hariramani, Sr Director, Product, Coinbase
Over the next few weeks, we’re rolling out the ability for customers in the US to deposit their paycheck into Coinbase to more easily make regular crypto trades, spend on Coinbase Card, earn crypto rewards¹, and more. Get paid in crypto² or in US dollars and deposit as much³ or as little of your paycheck as you want. The future of payroll is coming.
Get easy and zero-fee access to crypto
There are many reasons why customers make frequent transfers into Coinbase: to make short or long-term investments, to earn interest on yield-generating assets, and to fund everyday purchases with Coinbase Card. However, customers tell us that making frequent transfers is time-consuming and inconvenient.
Now, you’ll save time on the extra steps it takes to move money so you can immediately earn interest on your income or earn crypto rewards with your Coinbase Card. Plus, you’ll pay zero transaction fees on direct deposit funds⁴ so you have instant and free access to the cryptoeconomy.
Maintain full control
Stay in control of your money by depositing as little or as much of your paycheck as you want. Get paid in any of the 100+ crypto available on Coinbase or in US Dollars. Choose to get paid in crypto so you can make recurring buys or earn interest on your income (by getting paid in USDC, DAI, or other interest-yielding assets), or choose to get paid in US Dollars to be ready for any trade or to spend with your Coinbase Card.
Set up just once
You can set up direct deposit in just a few steps without leaving the Coinbase app. Tap direct deposit in the settings, follow the instructions, and find your current payroll company or employer, and we’ll automatically update your paycheck allocation. If you’d prefer to set up direct deposit manually, we’ll provide instructions on what to share with your HR department or employer payroll website. You can modify your direct deposit preferences at any time within your Settings.
Enter the future of payroll
As you begin to do more with your crypto from staking to spending to sending, we’re also making it easier for businesses to pay their employees in crypto. We’ve partnered with a number of companies, including Fortress Investment Group, M31 Capital, Nansen, and SuperRare Labs, to allow employees throughout the creator economy and financial services to enter the future of payroll.
Stay tuned for announcements in the coming months as we make it easier for more businesses to pay employees in crypto.
¹Crypto rewards is an optional Coinbase offer.
²If you choose to be paid in crypto, Coinbase will automatically convert your paycheck from US dollars to crypto with no transaction fees.
³Limits apply, see terms.
⁴No Coinbase transaction fees but a spread applies when we buy, sell, or trade cryptocurrencies. Other standard fees may apply, and will be shared during Coinbase Card sign-up.
The Coinbase Card is issued by MetaBank®, N.A., Member FDIC, pursuant to a license from Visa U.S.A. Inc. The Coinbase Card is powered by Marqeta.
Now get your paycheck deposited into Coinbase was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 24, 2021Coinbase Exchange is launching price auction
As a trusted crypto exchange our priority is to build features that enhance transparency and help us create the best markets. Starting today, when we launch new assets on the Coinbase Exchange we will be using a price auction to help price discovery and create a healthier market when trading starts.
How price auctions work
In our price auctions, limit orders are collected over a minimum of 10 minutes for price discovery. While orders are placed on the book, the Pro and Exchange applications along with the API and data feeds will show an indicative price — a price that may be used to match orders when the auction is opened. Using this indicative price as a signal of the eventual open price, users can cancel and resubmit orders while the auction takes place. Upon completion of the auction, orders crossing the final opening price will be matched and the book will move to full trading or limit only.
For orders matched on completion of the auction, both sides are charged taker fees. Orders that remain on the book during full trading are charged standard rates. For more information about price auctions and how to get a data feed containing the indicative price, please refer to our API docs.
Coinbase Exchange will now use price auctions when we launch a new order book or when we restart an order book that was previously paused. These auctions can be canceled without matching any orders.
About Coinbase Exchange
Coinbase Exchange helps a wide variety of clients access one of the deepest pools of liquidity of any regulated crypto spot exchange using high throughput APIs and an advanced trading interface.
While Coinbase intends to use the price auction for every listing possible, there may be some instances where, for operational or market health reasons, we may use other methods of launching a new book including using Limit and Post Only modes to start new markets.
Coinbase Exchange is launching price auction was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 23, 2021How crypto enables economic freedom
The following is an internal memo that I shared with Coinbase employees this week and would also like to share publicly to help people see how we’re working toward our mission of increasing economic freedom in the world.
Tl;dr: Our core thesis is that greater adoption and usage of cryptocurrency will increase economic freedom in the world, because crypto solves many of the shortcomings of the current financial system that hinder economic freedom.
Team,
Every quarter at our company All Hands, we review our Mission (what we’re trying to achieve) and our Strategy (how we’re going to get there). One question I often hear from employees is: “How does cryptocurrency create more economic freedom in the world?” This is a great question, so I wanted to share my thoughts with all of you.
First, a refresher: Economic freedom is a composite measure of 12 factors. It quantifies the rights of people to control their own labor and property in each country and globally. Economic freedom varies dramatically across the world, and while our economy is increasingly global, the government of any single country has significant control over the financial and economic freedoms of its people. Low economic freedom in a given country isn’t always due to malicious activity (e.g, fraud, oppression, etc) — it’s often due to mismanagement (poor monetary and fiscal policy) or simply bad infrastructure.
Crypto and economic freedom
The question to ask is: How can we build a global economy where anyone with an internet connection can participate, where property rights are enforced, and where money preserves its value? Crypto is the solution. Crypto can’t directly improve every facet of economic freedom (e.g., tax policies and government spending), but it can improve most of the underlying drivers (see below).
Read more about each of the factors here. Why is crypto so uniquely positioned to increase economic freedom? Because it has these inherent properties:
Crypto is an open, global network
Crypto networks are open, removing the barriers of borders. It allows every person in the world to transact on shared networks, in the same way they communicate on a shared network (the internet). More importantly these networks themselves are not controlled by governments that can use their monetary systems to hinder economic freedom (and prosperity). This design principle leads to more open markets and increases trade freedom, investment freedom, financial freedom, and monetary freedom.
Crypto enforces property rights
Property rights allow people to save their income, grow their wealth, and plan for the long term because they know the fruits of their labor are safe from unfair seizure or theft. Before crypto, your confidence in property rights was a function of the trust you had in your government and its respect for the rule of law. With crypto, anyone can acquire and grow their wealth without intervention from trusted 3rd parties like a government or a bank, or fear that their wealth could easily be seized. Property rights are also about the ability to enter contractual agreements. In some areas around the world, a contract has little value, because you can’t be confident in its enforcement. Smart contracts move enforcement from the courts to the blockchain, enabling gains from specialization and commercial exchange.
Crypto is unbiased
Crypto networks are often pseudonymous (or even anonymous). They don’t care where you live, what your race or gender is, or who you voted for in the last election. Unlike the current financial system they are inherently open and unbiased. Anyone with an internet connection can create a wallet, get paid in crypto, spend in crypto and accrue wealth in crypto. Service providers like Coinbase do have compliance programs as required by law, but we don’t control access to all crypto and we don’t own the network. Anyone can access crypto networks through other providers if we make a bad decision, or are forced into bad regulation. In addition, self custody wallets like Coinbase Wallet provide an ever greater degree of freedom when it comes to financial inclusion.
Crypto enables mobility
As I mentioned above, there are important components of economic freedom that cryptocurrency can’t directly benefit (e.g., government integrity, tax policies, fiscal health, etc.). However, cryptocurrency does provide the conditions for mobility by reducing switching costs, allowing people to both accrue wealth and bring it across borders. Cryptocurrency is the ultimate embodiment of the power of the individual, by significantly reducing the barriers to emigration / exit, and thus increasing economic freedom.
Conclusion
As you can see, cryptocurrency can impact many of the factors that lead to more economic freedom. It can both help build better-functioning economies in countries with less economic freedom, and make it easier to emigrate to a better life. This is why our core thesis as a company is that greater adoption and usage of cryptocurrency will increase economic freedom in the world.
Technology is the longest lever we can pull to improve the human condition. At its core, cryptocurrency is a technology breakthrough that allows us to build a more free and open financial system that enables the rights of people to control their own labor and property. It is the best tool that exists to advance our mission of increasing economic freedom in the world.
What does this mean for Coinbase? Crypto is in many ways still nascent. It’s still hard to use, crypto networks are plagued with scaling challenges, and the economy built on top of crypto infrastructure is in its early days. Our strategy and roadmap is geared towards solving these challenges: We’re focused on building easy-to-use products that abstract away the complexity of blockchains, and we’re building the primitives of a functioning financial system. We still have a long way to go, but the future is bright.
How crypto enables economic freedom was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 23, 2021Our open letter to the Financial Accounting Standards Board: “We believe there is a pervasive need…
Our open letter to the Financial Accounting Standards Board: “We believe there is a pervasive need to improve the accounting for crypto assets”
Tl:Dr: Coinbase is actively seeking clarity around crypto accounting standards. Recently, we shared our thoughts with a key industry body, the Financial Accounting Standards Board.
On June 24 2021, the Financial Accounting Standards Board (FASB) issued an invitation to comment, seeking feedback about future accounting standards to address topics that are of the highest priority to investors, businesses and other stakeholders. As a leader in the crypto space with more than 68 million retail customers and 9,000 institutional clients, we saw it as both a privilege and responsibility for us to provide our input.
Today, we responded to the request with an open letter. Here are some of the highlights:
- Not being able to account for crypto assets at market values because of current standards does not provide useful information to our investors.
- Crypto is quickly gaining mainstream adoption. Over the last year, the total crypto assets’ market capitalization grew more than 5x with a total market value over $2 trillion* as of September 15, 2021. More importantly, the innovation is just beginning. Now is the time to improve the accounting for crypto assets.
- We proposed two projects for improvements to US standards with respect to accounting for crypto assets. We believe the FASB should add both proposals to its agenda for future standard setting:
1)Broadly improving the accounting and reporting by holders of crypto assets
2) Clarify that specialized accounting guidance for broker-dealers should also apply to entities making a market in digital assets
Our mission is to increase economic freedom in the world, through a fair, accessible, and efficient financial system. We are furthering this mission through a constructive relationship with the FASB, enabling us to address the challenges in accounting for crypto in a collaborative way. Our letter is a step towards driving progress and providing relevant and useful accounting and reporting information to the public. As always, we look forward to an ongoing, constructive dialogue with FASB and its staff.
*Per CoinMarketCap, total global market capitalization for crypto assets was $350 billion during September 2020, compared with over $2 trillion as of Sept. 15, 2021.
Our open letter to the Financial Accounting Standards Board: “We believe there is a pervasive need… was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 23, 2021Web3 Will Be Driven By Crypto’s Networked Collaboration
And What We Can Learn From The Linux Development Model
By Harry Alford, Business Development Manager, Coinbase Cloud
Where Web 1.0 was the Static Web, and Web 2.0 is the Social Web, Web 3.0 will be the Decentralized Web. It will move us from a world where communities contribute but don’t own or profit to one where they can through collaboration. By breaking away from traditional business models centered around benefiting the corporation, Web3 foretells the possibility of community-centered economies of scale. This collaborative spirit, and its associated incentive mechanisms, attracts some of the most talented and ambitious developers working in technology today, unlocking projects never previously possible.
Web3, as Ki Chong Tran once said, is “the next major iteration of the Internet, which promises to wrest control from the centralized corporations that today dominate the web.” Web3-enabled collaboration is made possible by decentralized networks that no single entity controls. What might we expect in these nascent developmental stages of a technology that is collaborative instead of competitive?
In closed-source business models, users trust a business’s people to manage funds and execute services. With open-source projects, users trust the technology to perform these tasks. In Web2, the bigger network wins. In Web3, whoever builds the biggest network together wins.
In a decentralized world, not only is participation open to all, the incentive structure is designed so that the more people who participate, the more everybody succeeds.
Learning from Linux
Linux, the open-source software created in 1991 that is behind a majority of Web2’s websites, was paradigm-shifting for how the Internet (Web2) was developed and provides a clear example of how collaborative processes have the power to drive the future of all technology development. Linux wasn’t developed by an incumbent tech giant, but by a group of volunteer programmers utilizing networked collaboration. Networked collaboration is when autonomous people freely share information without central control, supported instead by code or blockchains.
In The Cathedral And The Bazaar, author Eric S. Raymond shares his observations of the Linux kernel development process and his experiences managing open source projects. During the rise of the Internet, Raymond depicts a time when the popular mindset was to develop complex operating systems carefully coordinated by a small, exclusionary group of people — “cathedrals.” Cathedrals are the traditional corporations and financial institutions, with long releases that take even longer to perfect.
Linux evolved in a completely different way according to Raymond, explaining, “quality was maintained not by rigid standards or autocracy but by the naively simple strategy of releasing every week and getting feedback from hundreds of users within days, creating a sort of Darwinian selection on the mutations introduced by developers. To the amazement of almost everyone, this worked quite well.” This Linux development model, or “bazaar” model as Raymond terms it, assumes that “bugs are generally shallow phenomena” when exposed to an army of hackers without significant coordination.
The open development policy of Linus Torvalds, who conceived the Linux kernel, was far from cathedral-building. Linus’s users were his co-developers. Cultivating a community while leveraging collaboration scales innovation up to a degree of intensity matching the users’ complexity. Linus did a lot of things right, like releasing early and often, growing a beta list of users, sending announcements encouraging participation, and he listened to (and gave credit to) beta testers.
As Linux represents software built by networked participants rather than a single cathedral, Web3 represents an Internet run by vast swathes of networked participants instead of Web2’s version dominated by a controlling few.
Proof of stake: the collaborative testing ground of Web3
Crypto is a technology model for building projects where the user is centered rather than the companies. The incentives for making something secure and usable are made possible by everyone. One area where every user maintains some level of participation is on proof-of-stake protocols — which are also the fastest growing industry sector. Upgrades to the Ethereum network could turn crypto staking into a $40 billion industry by 2025, according to JPMorgan. With proof of stake, there are levels of participation that prevent the “cathedral” from happening.
Even though there’s a team behind every chain, ultimately, the design of a decentralized network means that they will not have absolute control. At different levels of participation, multiple groups of users play critical roles in harmony with key features like governance and scalability.
As developers transition away from proof of work for greater power efficiency and scalability more protocols will implement a version of proof of stake, in which users stake tokens (cryptocurrency) to run validators for a particular network. Whether service providers or retail users, commercial or institutional, users are incentivized to secure the network by locking up tokens and are rewarded in the form of the network’s native tokens. Validators can be slashed for misbehavior like double signing blocks or downtime. Penalties include loss of existing funds and missing out on future rewards. Staking is your voice, good behavior is encouraged to increase the number of participating users, and the network can flourish securely without the need for centralized control.
Since proof of stake protocols are in relatively early-stage development and are newer than proof of work protocols like Bitcoin, frequent upgrades take place. Operators and co-developers are relied upon for network updates and proposals. For instance, Polkadot, a Web3 platform, is a sharded protocol that enables blockchain networks to operate together seamlessly. Polkadot utilizes user-driven governance to upgrade the network. The loose coordination is “on-chain and enacted autonomously, ensuring that Polkadot’s development reflects the values of the community and avoids stagnation.” When the network sees limitations of current staking parameters, they impose restrictions to ensure the stability of the network. The community changes the terms of service, not the company.
Rewards are the incentive mechanism for people who run nodes, but not every chain draws users for the primary purpose of making a financial return. There needs to be memetics, culture, socialization, and purpose for people to use the network. Blockchains will continue to be abstracted away in Web3. The millions of customers buying NFTs from OpenSea, the first NFT marketplace to pass $1 billion in monthly trading volume, probably don’t care that it supports Polygon, “a popular Layer 2 Ethereum blockchain that boasts a more energy-efficient structure that will allow OpenSea to entirely eliminate gas fees for creators, buyers, and sellers on that blockchain,” according to Techcrunch. Nor do they ultimately care that Degenerate Ape Academy is built on Solana, a proof-of-stake blockchain. The collectors only care about adding rare pictures of cartoon apes to their portfolios. They participate in what offers the memetic value to them that is created by other users on top of the underlying protocol. Unbeknownst to most crypto gamers and art collectors, the more usage there is, the stronger the network becomes.
While abstraction might temporarily bring new users into the space, institutional users want to be reassured for the long-term by solid technology, which means, in some cases, the blockchain supports cathedrals. Provenance is a proof-of-stake blockchain network developed by Figure, a home equity line of credit originator, to help financial service industry needs by providing a ledger, registry, and exchange across multiple financial assets and markets. The chain is run and operated by large financial institutions like Franklin Templeton and Caliber Home Loans.
Financial institutions, despite their traditional practices of centralizing control, are incentivized to run nodes because they receive transaction fees. They’re also incentivized to participate because certain aspects of their business are cheaper using Web3 and blockchain technology than through their old Web2 processes. Even as a cathedral, they have unique incentives powered by a proof of stake protocol.
As decentralized teams play less of a role in managing the protocols, the individual participants manage the protocol requiring only minor organization. However, participants will still need to be incentivized to participate in securing, using, and building on the protocol. All of these examples amplify what makes the bazaar and Web3’s networked collaboration so successful — an alliance of autonomous users receiving constant stimulation while working towards a common goal.
In this case, the medium is the blockchain: network that stores, transfers, and exchanges value. As Raymond stated, “Linus was keeping his hackers/users constantly stimulated and rewarded — stimulated by the prospect of having an ego-satisfying piece of the action. Rewarded by the sight of constant (even daily) improvement in their work.”
Linux was a catalyst for the creative thinking that’s manifesting itself in Web3, today and in its exciting future. Cathedrals, however, still exist and it’s unclear if Web2 will fully transition to Web3. How can technology truly belong to the people and Web3 be wholly driven by networked collaboration? Does it have to be zero-sum? It’s a leap of faith. Cathedrals that enable rent-seeking behavior, and are so ingrained in Web2 economic and business models, will need to continue to embrace the bazaar, bending towards how these communities work from the bottom-up, not top-down.
Web3 might not be the final answer, but it’s the current iteration, and innovation isn’t always obvious in the beginning. Loot “started with lists of fictional gear, aided by ample decentralized imagination.” As long as talented builders are incentivized to collaborate, Web3 can open up a whole new world we’ve never dreamed possible.
The bazaar model partially remade the commercial software world in its image like crypto’s networked collaboration will inevitably do to traditional business models. Centralized organizations will not win without embracing decentralization to some degree, and those that do will be decades ahead of their competition while possibly doing some good.
Networked collaboration harnesses the brainpower of communities and has plausible promise. We’ve seen an explosion of interest in crypto that continues to parallel, if not follow, the principles laid out by Linus Torvalds. The future of the Internet will belong to the “people who leave behind the cathedral and embrace the bazaar.”
This article was originally published in TechCrunch.
Web3 Will Be Driven By Crypto’s Networked Collaboration was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 22, 2021Coinbase To Launch 24/7 Phone Support and Other Enhancements to Customer Support by End of Year
By Casper Sorensen, Vice President, Customer Experience
The following is the latest update in our series of blog posts describing our commitment to continually improving our customer experience.
One of our Coinbase cultural tenets is Customer Focus. This tenet sets the expectation that we solve customer problems with technology that is instinctive to use and continuously ask “How does this create more value for our customers?”
We recognize that when it comes to our customer support experience, we’re early in our journey of creating more value for customers.
In past blog posts we highlighted how improving our customer support experience is a top priority and this year we have more than quadrupled our capacity and launched new ways to contact us. As the journey continues, we are excited to share that we will implement the capabilities below by year end:
Faster Response Times: Speed matters in the fast moving cryptoeconomy, so we are matching that speed by further increasing our capacity to provide customers with the best response times in the industry. Customers should trust that we will match their sense of urgency when they contact us.
24/7 Live Phone Support: Direct connections matter, so 24/7 phone support will be available for all retail customers who prefer speaking live with an expert. Whether the question is simple or complex, customers in the US, UK, Germany, and Japan will have the option to connect with our in-country based customer service teams before the end of 2021 with further expansion planned for 2022.
Live Messaging: We value our customers’ time, so we’re launching messaging, which means customers can connect with us when the time is right and continue the conversation seamlessly if they have to step away. Our team of customer service experts will be available via messaging 24/7 with the speed our customers expect.
In-Product Support: Ease of use is important, so this year we are creating a more seamless support experience within our iOS and Android apps. This suite of features will provide users with an intelligent and personalized self service experience, saving customers time when they have questions. Live support will be a core part of this experience as well, allowing customers to quickly message our team of experts when needed.
Our goal is to provide our customers with the most trusted customer service experience in crypto. We look forward to providing these new capabilities to you, so please stay tuned as we will continue to update this blog with the status of our journey.
Coinbase To Launch 24/7 Phone Support and Other Enhancements to Customer Support by End of Year was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 21, 2021An overview of the use of cryptocurrencies in terrorist financing
By Heidi Wilder, Senior Associate, Coinbase Special Investigations Team
Following the fall of the elected Afghan government and rise of the Taliban in its place, many speculated that the group had or may turn to cryptocurrencies as a way to finance its operations. As part of our compliance program, Coinbase tracks these types of transactions and often works with law enforcement agencies around the world on interdiction and enforcement efforts.
After conducting an exhaustive analysis of global crypto transactions, our Coinbase Special Investigations Team is sharing its findings below. To conduct this research, Coinbase relied on cryptocurrency data analyzed by Coinbase Analytics across various blockchains. This data study provides a holistic overview of terror funding using cryptocurrencies across the entire industry and is not limited to Coinbase.
A quick step back
With institutional and consumer interest in crypto at an all-time high, alongside the continued rise of DeFi, 2020 and 2021 have seen cryptocurrency achieve the mainstream adoption that the space has anticipated for many years.
While the industry has come a long way since Satoshidice, Mt. Gox, and the Silk Road, illicit activity has dwindled but not fully ceased. However, representing far less than 1% of all activity in the crypto space in 2020, illicit activity is no more of a concern for the cryptoeconomy than it is for the traditional financial system.(1)
Further breaking down illicit activity, we find that transactions associated with terrorist financing (TF) in 2020 made up less than 0.05% of all illicit volume. As such, terror funding in cryptocurrencies remains extremely low in overall terms.
Nevertheless, so long as any organization thinks it can use crypto for TF, we are committed to proving them wrong. To that end, we provide this update on our ongoing work.
Overall funds raised by TF-related organizations
Our Coinbase Special Investigations team focused its research on the largest TF-related organizations’ fundraising efforts over the past few years. (2),(3),(4)
Assessing these organizations’ fundraising over time, we find that Hamas has raised the most funds, by far. This is likely because Hamas actively solicits donations primarily in the form of BTC on their website and related Telegram channels.
Hamas’ fundraising volume is trailed by an al Qaeda-related exchange service and a Saudi-led jihadi activist movement. Changes to fundraising efforts per organization over time
Breaking down these TF-related organization’s fundraising efforts, we find that Hamas’s fundraising efforts are staggering compared to the other organizations analyzed. Hamas first began soliciting donations in Bitcoin in January 2018, with a singular donation address. Within a few months, their fundraising tactics evolved to attempt obfuscate the funds raised by providing fresh donation addresses when accessing their donation page
Periods of intensified fundraising activities by Hamas appear to correlate to the time frames of the most intense geopolitical conflict.
Periods of intensified fundraising activities by Hamas appear to correlate to the time frames of the most intense geopolitical conflict. Removing Hamas’ fundraising efforts from the above chart, we find that the other TF-related organizations’ fundraising efforts trend for a finite period of time. For example, ISIS’ fundraising was primarily done between February and October 2020. This is likely due to various authorities taking its fundraising website down only for it to reappear months later.
Growing donations in altcoins
Further breaking down these TF-related organization fundraising efforts over time by currency, we find that although fundraising efforts continue in BTC across the TF-related organizations of interest, fundraising in ETH, ERC20s and XRP has fluctuated.
Beginning in August 2020 through August 2021, terror organizations began receiving ETH, ERC20 tokens, and XRP donations. This fundraising can solely be attributed to a Saudi-led jihadi activist movement, which began soliciting donations in the form of BTC, ETH, XRP, and various ERC20 tokens in 2020. The movement’s leader has advocated for the recent Taliban uprising in Afghanistan and appears to have incited violence against governments and countries, including Pakistan, Israel and the US on Twitter. A previous website belonging to the movement website was cited in a West Point study of Islamic terrorism.
Breaking down this movement’s fundraising by currency, we find that they have primarily raised funds in altcoins.
What Coinbase is doing about this
Coinbase is committed to minimizing — and ultimately ending — the use of crypto as a fundraising tactic for terrorist actors. Coinbase does not just actively research and identify trends in TF, we also take action. Preventing TF is a team effort that includes the Coinbase Special Investigations and Global Intelligence teams. After identifying a terror funding campaign, Coinbase takes at least three critical steps:
- Blocklist any crypto addresses associated with these organizations to prevent users from sending funds to them.
- Leverage Coinbase Analytics to detect wider terror organization campaign efforts and identify possible participants and accessories.
- Coordinate with law enforcement and regulatory agencies, such as FinCEN, the FBI and others.
When it comes to terror funding, it is important to be accurate, but swift. Thanks to blockchain analytics, we can trace and accurately identify TF campaigns and do our part to stop them. TF may only make up less than 0.05% of all illicit activity, but it is and will always remain one of our highest priorities at Coinbase.
Footnotes
1) This percentage was taken from transactions on the BTC, ETH, LTC, BCH, and XRP blockchains/ledgers.
2) Please note that the selected organizations’ fundraising efforts have been amalgamated into generalized buckets. Coinbase included information in this analysis that could be independently confirmed through blockchain analytics.
3) Cryptocurrency USD values estimated at the time when donations were made.
4) Data last retrieved on August 24, 2021.
An overview of the use of cryptocurrencies in terrorist financing was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
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Posted on September 21, 2021How Coinbase is making compliance a driver of innovation
By Melissa Strait, Chief Compliance Officer
At Coinbase, we think about compliance a little differently than most companies. Over the coming months, we plan to give the public a look “under the hood” at the programs and technologies we use to keep our customers safe and keep bad actors off our platforms. In addition, we will be publishing a series of research papers that explore some of the biggest challenges that our compliance teams face on a daily basis. The first looks at the misuse of crypto in funding terrorist activities across the globe.
When it comes to innovation, compliance often gets a bad rap. It’s not traditionally seen as driving product innovation — or revenue — and too rarely operates at the bleeding edge of technology. In short, companies often see compliance as a blocker and not an enabler. This perception, paired with an aggressive regulatory and enforcement environment, creates an environment where true innovation and transformation are hard to drive. However, Coinbase is changing that.
Crypto is a highly regulated market. The SEC, CFTC, FinCEN, OFAC, various states and others each oversee different parts of that market. At Coinbase, we’ve prioritized regulatory compliance from the very earliest days of the company. We’ve always believed that for crypto to gain the legitimacy needed for mainstream adoption, compliance can’t be an afterthought — it has to be core to the way we operate. We strongly believe that in order for cryptocurrency to gain widespread acceptance, we must have a constructive relationship with the regulators and agencies that have been charged with oversight of the crypto ecosystem. That trust starts by understanding the principles behind core compliance standards and demonstrating best-in-class efforts to meet or even exceed those standards.
Coinbase’s dedication to compliance is underpinned by a deep sense of care and concern for the health of the global financial ecosystem and the people who participate in it. Our compliance programs detect and prevent financial crime, monitor the health of the market overall, and much more. All this is done for a single reason: to protect our customers.
So how different does compliance in crypto look when compared to a traditional bank or other large financial institution? While crypto aims to create an entirely new and open financial system, compliance with existing regulatory frameworks isn’t an option — it’s a necessity. This means that Coinbase’s compliance team has exactly the same responsibilities as the world’s largest financial institutions when it comes to customer verification, the enforcement of anti-money laundering policies and maintaining internal controls. In fact, many of our programs are modelled on those deployed by the same global retail banks that you probably use on a daily basis.
The very nature of cryptocurrencies nevertheless creates a variety of unique challenges, and, more importantly, opportunities. For instance, the transparent and immutable nature of blockchain transactions makes it far easier and quicker for skilled investigators to track illicit transactions no matter where they occur. This is in stark contrast to the traditional financial system where illicit funds can be difficult to trace because of obfuscation through offshore bank accounts or complex corporate structures that limit transparency and visibility.
Blockchain technology, which underpins crypto, has the promise of creating myriad solutions in financial compliance. Part of the promise of crypto is to bring financial access to the underbanked. This is a demographic that lacks access to basic financial services, such as bank accounts, wire transfers and basic consumer financing options such as mortgages or small business loans. One driver of this issue is the lack of trusted identity documents in certain regions that we take for granted in others. Blockchain technology addresses this issue by enabling the creation and maintenance of unique digital identities which can be ingested by third parties to comply with identity verification requirements. But widespread adoption of this model is still far off unfortunately. Existing regulatory frameworks would likely make it difficult for most institutions to adopt such a model, and regulators may be skeptical of systems where institutions are not either performing Know-Your-Customer checks themselves or independently collecting and having visibility into the identifying information of their customers. Making this process global and not limited to a single country also runs into a complex web of international rules and regulations, further complicating efforts for innovation.
So with all this in mind, Coinbase is in an incredible position: we’ve been able to rethink compliance from the ground up, to build systems and processes that not only meet the compliance requirements for the regions in which we operate, but also build a foundation for the next generation of compliance that takes advantage of all the features that the blockchain has to offer. Over time, it’s our hope that the systems and processes that we’re developing will drive a compliance revolution.
For now, however, at Coinbase, we’re focusing our resources in two main areas: 1) working with our Product, Engineering, and Data Science teams to develop cutting-edge solutions to manage financial crime risk, and 2) developing intelligence that could only be gleaned from the blockchain around current issues in money laundering, terrorist financing, and sanctions that we can share publicly to provide others in the crypto space, regulators and law enforcement agencies.
These types of innovations in compliance, which increase the availability, accessibility, and equity of financial services, are far too important to ignore. We believe that we can demonstrate that new compliance technologies can both safeguard the financial ecosystem from bad actors and introduce new innovations to a critical corner of the industry. It’s time for compliance to get a new reputation: innovator.
How Coinbase is making compliance a driver of innovation was originally published in The Coinbase Blog on Medium, where people are continuing the conversation by highlighting and responding to this story.
