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Coinbase Co-Founder Ehrsam: Bitcoin’s Open Network Beats Private Blockchains

Last Updated March 4, 2021 4:48 PM
Lester Coleman
Last Updated March 4, 2021 4:48 PM

Fred Ehrsam, co-founder of Coinbase, noted in a Yahoo video interview  that while the present period is a great time for bitcoin, controversy also surrounds bitcoin and blockchain technology.

Asked by Yahoo finance reporter Dan Roberts about the interest in blockchain technology that is overshadowing bitcoin, Ehrsam compared the debate to the dawn of the Internet when closed corporate Intranets were common.

Fred Ehrsam
Fred Ehrsam

The people using the corporate Intranets said they wanted the efficiency gains the Internet provided without any of the “wild west scary stuff.” Twenty years later, we know that “the open Internet is where all the interesting things happen,” such as the open network environment, a shared protocol that anyone can build on, Ehrsam said.

Blockchain Without Bitcoin?

“I’m a huge proponent of the open network… I think the whole network of blockchain without bitcoin will amount to very little in comparison with the open network,” he said.

Ehrsam is one of several bitcoin observers to question those who say they want the benefits of blockchain technology but want to shun bitcoin. Paul Chou, CEO of LedgerX and the bitcoin advisor to the U.S. Commodities and Future Trading Commission (CFTC), noted in February that companies trying to use the blockchain without bitcoin are seriously misguided, and so far the concept is unproven, CCN.com reported.

Concerning the block size debate, Roberts asked Ehrsam if the block size debate would “tear bitcoin apart,” as some have said.

One group wants the blocks to remain small to keep bitcoin as decentralized as possible, while another group thinks the future requires change. Some want to increase the block size as bitcoin transactional limits are reached. Ehrsam said he is in the latter group.

Expand The Block Size

“The reality is we can actually have a small increase in the block size that will permit further growth without really sacrificing the decentralization part,” he said.

“We think the right tradeoff is to allow for further growth and development,” Ehrsam said.

Regarding the digital currency exchange that Coinbase now has in addition to its bitcoin wallet, Ehrsam said Coinbase has a “triangle of trust” with customers, banks and regulators. Roberts noted there has been an explosion in bitcoin exchanges.

“I think the exchange is a very clear business model, so a lot of people tried doing that,” Ehrsam said. He said the exchange model has been tested and it has a very clear revenue model.

The reason Coinbase’s exchange has been successful is that it has been very open with customers about what it does. He said Coinbase launched its exchange in 2015 after there were already many exchanges. Coinbase, however, is now the most liquid U.S. exchange and is in 32 countries.

“I hope that we become the most liquid exchange globally,” he said. “The more business and liquidity that’s on the exchange, the more people that want to use it.”

Satoshi’s Identity: Does It Matter?

Concerning the question of bitcoin founder Satoshi Nakamoto’s identity, Roberts asked Ehrsam if it matters, noting that Australian entrepreneur Craig Wright recently claimed to be Nakamoto, a claim many have questioned.

“I don’t think it matters one bit,” Ehrsam said. “I think it matters a little bit in the short term because Satoshi, or whoever Satoshi is, owns a pretty good deal of bitcoin. But long-term, that’s the beauty of having this open source network where everybody can review the code. It’s being run all over the place, and Satoshi, for all practical intents and purposes, hasn’t been involved in the development of the protocol for years. So really, this is, in some ways, kind of an old story, and it doesn’t really matter” since the bicoin code has changed significantly.

Ehrsam said he is sitting back and watching the drama unfold about Nakamoto’s identity, knowing that it doesn’t matter much.

Images from Shutterstock and Facebook/SWSX.