Olaf Carlson-Wee, the first employee at Coinbase who created a cryptocurrency hedge fund Polychain Capital in 2017, stated that the success of Coinbase could be primarily attributed to its track record. Throughout its six-year history, Coinbase has never experienced a single security breach or a hacking attack, unlike Bitfinex, Bithumb, and other major cryptocurrency exchanges that suffered from multi-million dollar hacking attacks.
“Not being compromised is one of the big reasons that Coinbase is what it is today,” said Olaf Carlson-Wee.
As of December 2017, Bithumb stored more than $6 billion on behalf of its customers in its wallets and vaults. Coinbase stores far more funds than Bithumb, as its operations, expand internationally. Earlier this month, Coinbase general manager Adam White disclosed that the company manages more than $20 billion.
“We have leveraged our experience safely storing more than $20 billion of cryptocurrency to create Coinbase Custody, the most secure crypto storage solution available,” said White, adding “Coinbase already offers the deepest pool of liquidity to the largest number of participants in the cryptocurrency space.”
A significant portion of the budget of cryptocurrency exchanges like Bitfinex, Coinbase, and Bithumb is spent on improving security measures and maintaining an infrastructure that is not vulnerable to security breaches. Additionally, companies have to aggressively expand their customer support team to handle support tickets and errors that may occur in depositing or withdrawing funds.
Dan Romero, an executive at Coinbase, stated that the customer support team of Coinbase has grown by more than 150 percent since February.
Cryptocurrency Problem Solving
Still, despite the infrastructure and talents Coinbase and other exchanges have, unexpected errors occur and due to the volatility of the cryptocurrency market, investors often get anxious and impatient with unforeseen situations. According to the WSJ, more than 1,530 complaints have been filed by Coinbase investors with the Consumer Financial Protection Bureau (CFPB), well surpassing the number of complaints filed by the users of American Express and PayPal combined.
To compete against traditional financial institutions, cryptocurrency businesses have to scale at an unprecedented rate and continuously improve its infrastructure to deal with emerging technologies.