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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:

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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.

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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.

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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.

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1) The other crypto IPO

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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.

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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.

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10) How about expenses? Coinbase's are... impressive.

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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.

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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.

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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.

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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?

6:32 AM · Aug 14, 2021Twitter Web App

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15) Note that 2021Q2 was probably an unusually good quarter for Coinbase! Volumes and volatility were high. I would expect Q3 to be lower.

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16) Finally, you wonder why you hear so much about crypto exchanges versus other exchanges? twitter.com/SBF_FTX/status I'll just leave this here.

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I think one problem is, the bigger you grow the more inefficient you get. On the other hand the possibility to delegate is important for growth and the concentration on strategy. But at the end I think the balance of that and a flexible & dedicated team is the key

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In Addition I think and more importantly than my first thought is the technology and possibility to scale. Without that I guess you will always have the need for bigger teams to compensate failures, illness, fluctuations

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no its not necessary and can be done in small team actually in my country i personally know few entrepreneurs (because i work close with them) that build insurance company, pension company and now building a brand new bank while having only 30-40 employees and its succesfull

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I love the way you think , one of the most efficiency brain of the century for sure 🙂

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Both WhatsApp and Mojang (Minecraft creator) had less than 60 employees when companies sold for billions and both their products had over 100m downloads Scaleup happens when there's more opportunity to pursue, or you want to tell the market there's more opportunity before an IPO

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It allows you to address more opportunities but as you just said, their core product is 95% of the business, I’m sure they don’t need a huge team to run it. For some companies it was worth it (amzn / aws).

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The employer-employee concept is no longer the only option. Can use suppliers for almost everything. Whatsapp served 13% of the world population with 50 employees.

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Gaurav Dahake (Bitbns)

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Whatsapp built to 450 million active users with 55 employees

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