Ten Directions That Coinbase Founders Are Optimistic About: On-chain Reputation, L2 Privacy, RWA, etc

Author: Brian Armstrong, Coinbase

Compiled by: Cookie, ChainCatcher

Recently, Coinbase co-founder and CEO Brian Armstrong shared his top 10 ideas that interest him in the crypto space, in response to the question "If you were to start a cryptocurrency company today, what would you choose?" These ideas span various fields, from finance, markets, labor, privacy to the virtual world, exploring how to achieve innovation and improvement in the blockchain and crypto economy. ChainCatcher translates the full text as follows:

In Short

• Coinbase aims to update the financial system established over 100 years ago by supporting diverse cryptocurrency use cases, creating more economic freedom and opportunities globally.
• In addition to internally developed products and services, Coinbase has launched a request for entrepreneurs that includes 10 exciting ideas.
• In October this year, Coinbase Ventures will host its first summit in Los Angeles, bringing together outstanding builders to discuss advancing the field.

Sometimes I am asked, if you were to start another cryptocurrency company today, what would you choose? The cryptocurrency space is still in its infancy. Five years from now, many entrepreneurs will look back and wish they had started a cryptocurrency company in 2023. Bear markets are for building, so why not start today?

I decided to share 10 of the most competitive ideas, hoping someone will step up and realize them. Knowing is easy, but doing is hard; the effort and determination to build these ideas will be challenging. Coinbase has the resources to build a lot in the crypto space, but we don’t have time to build everything and hope to help enable the ecosystem around us. We have already invested in some outstanding teams and are working with them on some of these ideas. Most of these ideas have not yet been explored, and we need more people to get involved.

For now, here are my main ideas, in no particular order.

Note: Coinbase Ventures has already invested and will continue to invest in startups involving many of these themes, some of which are cited below (not exhaustive).

Flatcoin

Bitcoin is seen as the gold standard of the internet, and the concept of it as currency is great. However, due to its massive appreciation potential, many people are reluctant to use it as actual currency. It still needs further development. Stablecoins backed by fiat currency are a good intermediate step, but they are still subject to issues like inflation and seizure. So, what would a better form of currency look like if created through cryptocurrency?

This currency could be completely decentralized (with censorship resistance) and track the consumer price index (e.g., CPI in the U.S.) to maintain or approximate purchasing power. It might require backing by a basket of assets to track CPI or adopt an algorithmic approach. There are even services like Truflation that provide the possibility of tracking on-chain inflation today to further achieve decentralization. Companies or protocols capable of building a better form of cryptocurrency will have a significant impact.

On-chain Reputation

While we already have decentralized identity systems like ENS, how do we know who to trust? How do we know if a merchant is trustworthy? Or if we are sending funds to a real artist?

To address this, we could build a decentralized protocol that assigns reputation scores to each address or ENS name based on on-chain data graphs. This is similar to how PageRank scores each website based on incoming links and related metadata. This could be used for lending (decentralized FICO scores), merchant ratings (similar to Yelp), fraud prevention (wallets could warn before sending funds to risky addresses), VIP airdrops, etc. It needs to be a decentralized protocol to prevent monopolization or abuse.

On-chain Advertising

In Web 2, one of the most successful business models is advertising. It’s reasonable to predict that some form of advertising will also play an important role in Web 3. While developers and startups in Web 3 are willing to pay for distribution, can we do better than traditional advertising models? In Web 2, the biggest innovation was shifting from paying per thousand impressions (CPM) to paying only when users click on ads (CPC).

In Web 3, perhaps we explore paying only when users make purchases or take actions on-chain (CPA). Imagine if any smart contract could publicly disclose some metadata about being willing to pay fees to guide users to execute function calls. This function call could accept the referrer’s address and pay a set commission. Indexing all smart contracts that support this advertising standard would create advertising inventory.

Now, wallets and applications with large user bases could choose which ads or referral links to route requests to and share revenue upon delivery to users. A real-time auction mechanism would help find the best price. Of course, advertising in Web 3 may also have other variations, but the above is just one example.

On-chain Capital

The ICO craze, while facing many challenges including fraud and unregistered securities, had its frenzy for a reason: the friction of global capital formation remains quite high and unevenly distributed. If you are an entrepreneur living in Budapest or Bangalore, your chances of securing funding may be less than those of entrepreneurs in Silicon Valley or Cleveland. If raising funds becomes easier, we will see more startups emerge (this applies not only to startups but also to real people, such as fundraising for apartment buildings, etc.).

So, what would the next generation of ICOs look like in a legitimate and trustworthy manner? Imagine a combination of something like Stripe Atlas and AngelList in Web 3 that not only helps you register a company or idea (registering in every country by submitting documents, or as a DAO using pseudonyms) but also helps you raise funds for your idea. Each idea could have promotional materials or videos, discussions and ratings, participants' reputations, and on-chain transparent funding flows. Democratized fundraising could unleash tremendous entrepreneurial potential worldwide.

Work/Task for Cryptocurrency

The global market has a limited population that can invest in cryptocurrency, but almost everyone needs to make a living and allocate income for basic life needs. A major barrier in the global job market is the difficulty of making cross-border payments to individuals. Why not create a more global and free labor market by allowing jobs and tasks to be posted in cryptocurrency and helping employees and contractors find these jobs?

Layer 2 Privacy

While layer 2 solutions have begun to help scale cryptocurrency, most transactions still occur on public blockchains. While transparency is beneficial in many cases, people do not want most transactions in the economy to be public. So, what is the right way to introduce privacy in layer 2 solutions? Is it possible to build a business in this area?

Fully On-chain P2P Exchange

P2P exchanges for cryptocurrency provide important entry and exit points for emerging and underdeveloped markets. However, these P2P exchanges are operated by centralized entities that may be forced to shut down, thereby compromising individual freedoms. Is there a way to build a fully on-chain decentralized P2P exchange with custody, reputation, and arbitration features?

On-chain Gaming

While I am not an expert in gaming, I believe we have only scratched the surface of the intersection of cryptocurrency and gaming. How can players truly own the items they collect and use in games? How do these items survive in a persistent world (or dare I say "metaverse") to create more complex interactions and economies?

Early examples like Dark Forest are exciting. Perhaps more games like Loot could be used. These games do not have to be massive bestsellers; even simple games like "A Dark Room" could adapt to using NFT game items that players can own in a persistent virtual world shared with other players.

Tokenizing Real-World Assets

Fiat-backed stablecoins like USDC, which are supported at a 1:1 ratio, are among the earliest "real-world assets" realized on-chain. We believe that over time, many forms of assets can and will be realized on open, permissionless blockchain networks, creating new financial infrastructure characterized by programmability, composability, global 24/7 liquidity, and trust-minimized settlement. Many projects (including some companies in our portfolio) are working to explore methods in this area, involving bonds, treasury bills, commodities, receivables, and even high-end luxury goods.

Network State Launch and Management Software

The concept of "network state," proposed by Balaji Srinivasan, accelerates the development of startup cities and network states. More network states will be launched in the future, and they will need tools to manage voting, governance, fundraising, citizenship, tax collection, service provision, etc. Recall that this software would also be useful for many different types of startup cities and communities.