Letter #25 Robinhood - Crypto Champion or Villain?
Imagine yourself in early 2009. You’ve just heard about a new technology called Bitcoin that you believe can change the world. It’s digital money, or perhaps someday will be, and carries the promise of a future free from fiscal oversight by governments, banks, and more. You’re interested in learning more about it and, of course, acquiring some of it for yourself. But where do you go to get it?
When Bitcoin first launched, there were really only two ways to get it. You could mine it by plugging your computer into the Bitcoin blockchain. Or you could arrange a peer-to-peer exchange over a Bitcoin forum with someone who owned the cryptocurrency, a similar experience to buying something on Craig’s List or Facebook Marketplace. You’d likely have to meet with your trading partner in person to have a better chance of ensuring that the exchange went over according to plan. Overall it was a rather non-futuristic way to acquire futuristic money.
Fast forward twelve years and the process of trading cryptocurrencies has changed immensely. Granted, there are still a lot of crypto swaps that happen peer-to-peer, and many people swear by it. But the vast majority of crypto purchases happen on cryptocurrency exchanges. At first, cryptocurrency exchanges existed in what is now colloquially referred to as the “wild west” of crypto. It was a time in which you could exchange your crypto without worrying about government regulators breathing down your neck. It was also a time in which your crypto could be gone in an instant if your cryptocurrency exchange went down (just ask Mt. Gox users) - much more so than the present day.
Regardless of what cryptocurrency critics may say, the wild west days of cryptocurrency have seemingly been tamed. Regulators in most countries are actively developing legislation that will allow them to oversee the still-nascent cryptocurrency sector. It’s common to hear about traditional financial companies, like PayPal and Square, facilitating massive amounts of cryptocurrency transfers. And the crypto native exchange Coinbase recently went public on a United States stock exchange and joined the ranks of name brand corporate giants with a huge amount of fanfare. Such is the position in which a relatively recent entrant to the cryptocurrency game, Robinhood Markets Inc., finds itself.