4) First of all, where does that revenue come from?
Most analyses I've read of this get it wrong.
They'll talk breathlessly about the growth in subscription revenue (82%!) and point to custody, staking, etc.
But that's not the right way to think about it:
5) Their "transaction revenue" (trading fees etc.) was $1.9B.
Their "subscription revenue" (custody, staking, etc.) was $0.1B.
Their subscriptions grew quickly! But that's still just 5% of revenue.
95% is trading fees.
6) To be fair, I've been guilty of this too. I'll talk about growth metrics in FTX's margin borrow/lending book, but the truth is that, for FTX--like Coinbase, and like most crypto exchanges--most of the revenue comes from trading fees.
7) Another interesting thing to note here: retail vs institutional.
In Q2, Coinbase made $1.8B on retail fees, and $0.1B on institutional fees.
So 90% of their revenue is from retail trading fees, 5% instos, and 5% custody/staking.
8) Again, reports will talk a lot about the institutional clients Coinbase is winning, and that really is important to the future of their business!
But I think they often miss the numbers here.
When it comes to retail, Coinbase blows everyone else out of the water.
9) In fact! In 2021Q2, Coinbase made $100m revenue on institutional trading fees.
FTX made... $100m.
I'm actually not sure which made more on institutional trading fees; they're within a few % of each other.
But on retail, Coinbase is massively bigger than FTX.
11) Coinbase had $1.3B of expenses in 2021Q2 alone. Removing one-time costs (e.g. listing), its revenue was $2B and its EBITDA was $1B.
So they had about $1B of expenses in 2021Q2, for a run rate of $4B/year.
12) This is roughly evenly distributed between
--"transaction expenses" (gas?)
--Tech
--Marketing
--Payroll
They spent roughly $250m on each.
They had ~2k employees, so that implies ~$400k/year/employee, which makes sense given the workforce.
13) For context, FTX's expenses in 2021Q2 were around $50m (excluding buy/burn).
The big differences were.... I guess everywhere?
I guess 5% of the expenses aren't surprising given we also have 5% of the employee headcount.
14) One of the biggest questions I've been thinking about recently:
Big companies tend to have big teams.
Is that necessary? Is that correct?
What happens if you try to build a big company with a medium sized team?
Is it efficient and nimble, or is it just overloaded?
