Skip to content Tracking fintech, banking & financial services innovations since 1994 Bitcoin and Ethereum wallet company Coinbase has been doing some spring cleaning lately.Earlier this week, the company launched a developer preview of its new tool, Token.Coinbase describes Token as a combination of a private, secure messaging app, a mobile browser for Ethereum apps, and an Ethereum wallet.The system was created to work like a global, open protocol version of China’s WeChat, India’s PayTM, and Kenya’s mPESA— all apps that drive large volumes of digital payments.Because the app is made for small value payments, Coinbase opted to build Token for Ethereum, which has lower transaction fees than Bitcoin.In order to let users know who they can trust when it comes to money transfers, Token created a reputation system that allows users to build their trust profile each time they transact with others.The impetus behind the new launch is to promote financial inclusion across the globe.

In the blog post announcing Token, Coinbase wrote, “We believe that everyone in the world should have access to financial services, and with smartphones becoming ubiquitous, digital currency can make that happen.” The company has long term goals to “provide financial services to the 2 billion people in the developing world who have a cell phone, but don’t have access to a bank account; make it dramatically easier for people to build and use Ethereum applications; and shift digital currency from being just a speculative investment to being a payment network for useful goods and services.” Founded in 2012, Coinbase serves as a digital currency wallet and offers tools to help merchants accept digital currencies at physical and digital points-of-sale.At FinovateSpring 2014, the company debuted Instant Exchange, a tool to help merchants avoid currency volatility when accepting digital currencies.Last month, Coinbase was granted approval to extend ether trades in New York and began offering margin trading to allow users to trade up to 3X leveraged orders on Bitcoin, Ethereum and Litecoin order books.

This is the eleventh edition of a new weekly vlog series where we pitch a Moonshot tech idea.Intro - Crypto-currencies Coming of Age in 2017?As I type this, Bitcoin is making new all time highs at $1,615 per coin (according to Google Finance).The crypto-currency's price already has risen over 50% YTD, but that's not the only exciting metric.Bitcoin's usage, measured in transactions per day by Coindesk, continue to climb as well.As more and more services built around Bitcoin continue to proliferate, the currency's utility will continue to increase.At the end of April, there were 1,150 Bitcoin ATMs around the world.As it becomes easier and easier to both access, spend and transfer value between dollars and Bitcoin, the digital currency's popularity is in a positive reinforcing loop that is driving adoption.With a market capitalization of $25B, Bitcoin is quickly getting too big to ignore for traditional financial institutions.Where's PayPal (NASDAQ:PYPL) In All of This?PayPal, once heralded as the digital bank of the future, has ironically been far behind the curve in terms of Bitcoin adoption.

Although the company did anounce a partnership with Coinbase in mid 2016 to allow its users to buy and sell Bitcoin, that's basically been the extent of their involvement.Rather than leading a disruptive charge to bring crypto-currencies into the mainstream, PayPal has let companies like Coinbase do the innovating.This risk-averse mentality is something that's applauded by Wall Street, but seems painfully counterproductive for a company that is predicated on being a digital bank.bitcoin cleProducts built on top of crypto-currencies like Bitcoin and Ethereum continue chip away at the service offerings of established financial institutions.litecoin chatIf PayPal wants a piece of the action, they will need to do a lot more than partnering with the startup that's beating them at their own game (Coinbase).wie in bitcoin investieren

Founded in 2012, Coinbase is on a mission to create an "open financial system that is not controlled by any one country or company," they believe "an open financial system can be a great equalizer and lift billions out of poverty while accelerating the pace of innovation around the world."At its core, Coinbase is a online crypto-currency bank.It allows you to store your Bitcoin/Ethereum and send it to anyone with a Coinbase account, in over 33 counties.bitcoin executive arrestedCoinbase has several core tenants of mission statement that are worth noting, the first is to be the most trusted company in their space.litecoin miners windowsThe second is being the easiest to use.asic usb bitcoin miner driverAs a happy Coinbase customer I believe they are genuinely accomplishing both of these goals and building critical brand equity with young, well-educated, tech-savvy millennials.bitcoin value in indian rupees

A demographic any financial institution would drool over.The company has raised $117M since its founding, from some of the world's most respected venture capitalists and individual investors.Coinbase's main business can be split into two divisions, consumers and merchants.On the consumer side, Coinbase has over 6.7M users hosting 21.5M wallets on its platform.On the merchant side, Coinbase has 46,000 businesses using its product to accept Bitcoin/Ethereum from their customers.de bitcoin a peso chilenoAdditionally, the company is investing in a growing developer community that has already produced more than 9,000 apps.cours bitcoin 2016Coinbase's main source of revenue is derived from taking a small cut of each transaction that occurs through its platform.Although the actual figure is unknown, Coinbase CEO Brian Armstrong tweeted that revenue grew 2.5X in 2016.

Token Browser, As An Example Of Coinbase's Innovation Beyond its flagship platform, Coinbase has launched several exciting stand alone products.Perhaps the most interesting, is a newly announced Ethereum-based mobile browser called Token.Token will allow for instant payments around the world, secure messaging and host an app marketplace.Essentially, it's Venmo 2.0, built on open-source crypto-currency protocols.Venmo is the peer to peer payment app that PayPal acquired in 2013, as a part of a deal where it bought out Braintree for $800M.Venmo has quickly become one of PayPal's top assets, and produced TPV (total payment volume) of $5.6B in Q4 2016, up 126% year over year.In Q1 2017, Venmo's TPV grew 26% sequentially to $6.8B.Coinbase's vision for Token is not only to facilitate payments but to create a peer to peer lending network.This would entail giving users a digital credit rating based on their payment histories on Token.Token's vision is the beginning of a very exciting transition into a society where instead of going to banks for loans we open an app and can solicit loans from friends, family or other individuals.

A true democratization of the financial system.With a much grander vision, and crypto-currency backbone, Token has the potential to outdo Venmo in the long term if it begins to gain traction with Coinbase's core users.Although Venmo is the dominant mobile payment solution right now, the competition is coming.This is just one example of how Coinbase is slowly chipping away at different pieces of PayPal's business, and becoming more and more of a threat by the day.Why PayPal + Coinbase Makes Sense First, I want to say that I believe PayPal needs Coinbase a lot more than Coinbase needs PayPal.However, PayPal has enough capital to acquire Coinbase outright with no dilution, so if management is willing/wanting to sell, then we have potentially have a win/win situation.PayPal already is behind in offering services around digital currencies, and part of the reason may be hesitation to damage PayPal's brand.Acquiring Coinbase and leveraging their brand name to integrate Bitcoin and Ethereum functionality would help isolate the risk to PayPal's core image.

PayPal has become a massively profitable digital payments leader, and literally has billions sitting in the bank.Although the core business is performing well know, its growth rate is eroding lower, and the lack of a leadership position in digital currencies continues to loom as the company's biggest threat.Acquiring Coinbase will not have any noticeable near term revenue impact (I'm guessing), but it will solidify PayPal's leadership as a crypto-currency bank.The combination of PayPal's capital and massive userbase could serve to turbo-charge Coinbase's growth.In the long term, I believe Coinbase will become the dominant crypto-currency bank and continue to expand its offerings to compete with more and more financial services that PayPal offers.Coinbase's CEO, Brian Armstrong, has proven to be a visionary in the space, and would be a critical asset to PayPal.If PayPal let's Coinbase continue to run its course, it won't be long before they are full-fledged competitor.This has the potential to be a real threat to PayPal's business.

At $49/share with 1.25B shares outstanding, PayPal is trading for a market capitalization of $61.3B.In 2016, PayPal produced revenue of $10.8B and operating income of $1.6B, up 17.2% and up 8.6%, respectively.This puts the valuation at 5.7X P/S and 38.7X P/EBIT, based on 2016 numbers.Given a top-line growth rate below 20%, the earnings multiple seems very pricey.Although, it may be partially justified by the steady nature of PayPal's business and its consistent profitability.In short, it looks like PayPal's business is not adequately pricing in the growing popularity of crypto-currencies, and their potential to damage its core business.If Bitcoin and Ethereum continue their current trend, then the market may slowly begin to price in this threat, significantly impacting Paypal's lofty earnings multiple.PayPal should go beyond partnering with Coinbase and buy the company outright.This will both accelerate top-line growth in the long-term by giving PayPal exposure to the crypto-currency trend, and mitigate the risk posed by the burgeoning success of Coinbase and its subsidiaries (Token).