At 617,000 users and counting, Coinbase, "an international digital wallet that promises to allow you to securely buy, use and accept bitcoin currency," is turning the heads of investors. Indeed, Coinbase has added 400,000 users since Aug. 1 and attracted $25 million in series B funding in a round led by Andreessen Horowitz.
Existing investors Union Square Ventures and Ribbit Capital also joined the round. With this funding, Andreessen Horowitz’s Chris Dixon and Union Square Ventures’ Fred Wilson will join the Coinbase board. Coinbase said the money was needed to keep up with the growing consumer and merchant demand for Bitcoin.
Coinbase reports the investment as its largest in Bitcoin to date, bringing the company’s total to $31 million. In a blog post, the leadership team called the investment a “key moment to show the opportunity of Bitcoin and the dramatic impact it will have on the global economy.”
Scaling for Rapid Growth
“The designers of the Web built placeholders for a system that moved money, but never successfully completed it,” said Dixon. “Bitcoin is the first plausible proposal for an economic protocol for the Internet.”
Coinbase plans to use the funds to expand its team, continue to educate the market, and promote the mainstream adoption of Bitcoin. Coinbase also plans to expand its referral program, where users can give and get $5 in bitcoins for free when they refer a friend who buys or sells at least $100 of bitcoins.
“Coinbase has become a critical piece of the Bitcoin in the U.S., giving people a trustworthy and easy way to buy, sell, trade and store bitcoins,” said Gavin Andresen, chief scientist at the Bitcoin Foundation. “The best part of my job as chief scientist of the Bitcoin Foundation is interacting with the brilliant people at Coinbase and other startups all over the world who are working hard to make Bitcoin accessible to everybody.”
Security Concerns Remain
Coinbase bills itself as the only company that touches the three most important points of the Bitcoin ecosystem: consumers, merchants and developers. The company claims it is averaging 10,000 new sign ups a day, and is now working with over 16,000 merchants including OkCupid, Khan Academy, and Reddit, that use Coinbase to accept Bitcoin. But security experts still have concerns over the digital currency.
We asked Jeff Davis, the vice president of Quarri Technologies, for his take on the flurry around Bitcoin, which spans far beyond the Coinbase investment. He told us Bitcoin transactions are at least as rich a target as regular online banking, and perhaps more so, because the currency works like digital cash -- transactions can be done anonymously, and there’s very little audit trail for investigators to follow.
“In addition, Bitcoin-related organizations are relatively new compared to banks and therefore don’t have as much experience handling security threats,” Davis said. “Today, unsecured browsers are the biggest security threat and the browser is often the weakest link for hackers to focus their attention on. Enterprises would benefit greatly from offering an enhanced security option to their users that would enable them to conduct secure browser sessions.”