Fresh off $100 million in new funding, expectations are high that Coinbase – the largest and most visible US cryptocurrency startup – will use its new investment to improve services that have succumbed to the stress of a growing industry.
So, while praise rolled in quickly for Coinbase in the mainstream press this week, just as quick were the social media criticisms, with users refraining from any reticence in describing their dissatisfaction with certain aspects of its service.
On Twitter, Coinbase users openly grumbled about the startup’s struggles with uptime, as well as technology decisions that some felt have left them, unlike the company, short on funds. Not that this should be a surprise on either side – from site outages to shoddy customer support, Coinbase has struggled to keep users happy.
And to be fair, the company has been open about where it believes it has fallen short in adjusting to a market that went from cold to hot virtually overnight as the total market capitalization of the asset class exploded at the start of 2017.
“Over the past six months, Coinbase and GDAX have seen unprecedented growth,” said a Coinbase spokesperson in an email. “As a result, our systems have been pushed to the limit and [this] has resulted in a negative experience for customers.”
While a blog post about the raise suggests Coinbase will be using the money to address some of these concerns, increasing the size of its customer support teams, it’s yet to be seen how successful it will be in correcting them.
The spokesperson continued:
“We understand how frustrating this can be, and we are committed to improving the experience for our customers. We haven’t done enough to keep up with our growth and now we are taking steps to correct it.”
Hopeful this proves true, but until then, here are some of the biggest questions the startup will have to answer in the months ahead.
1. Will exchange uptime improve?
Perhaps the most visible problem of late, Coinbase’s exchange, GDAX, has proven to be problematic at times of high volume, going down when users arguably most need it to function. (A criticism that could just as likely be volleyed at CoinDesk itself).
But given the influence of Coinbase’s brand, those outages and slip-ups generally have had a negative impact on cryptocurrency prices, leading users to be denied economic opportunities, such as the ability to capitalize on volatility.
The latest incident happened in June when a multimillion dollar sale of ether was placed on GDAX, pushing the price down drastically and automatically executing a few hundred margin calls and stop losses. Stop losses allow users to limit their loss on a position by ordering the sale should the price of the asset reach a certain price, but it’s not typically put in place for exchange slippage.
That flash crash, when ether prices plunged from more than $300 to $13, resulted in GDAX blocking withdrawals and disabling trading of the ETH/USD pair.
Because the site was inaccessible, traders that wanted to cancel their stop losses and margin calls were unable to do so. Here on Coinbase’s community forum, one user talks about losing $5,000 worth of ether after the flash crash.
In response, Coinbase moved quickly, crediting the accounts of those directly affected, and is now looking to put trading safeguards in place. But for some, the inability to participate in a market movement was painful.
In an email, a Coinbase spokesperson said the exchange has “committed to using funds from this round to increase the size of our engineering and support teams to improve customer experience on Coinbase.”
2. Will customer service improve?
As Coinbase expands into new markets, issues have also arisen in its communication of its coverage area. For instance, the startup has an influx of customer support tickets, even in areas where it doesn’t operate.
For instance, CoinDesk has talked to about a dozen people who have been locked out of their Coinbase accounts after accessing their account in Cuba. In July, Coinbase told us it was working through backlogged support tickets, but CoinDesk continues to get messages from users that have yet to hear about their Cuba-related ticket.
And their Twitter feed shows an underlying problem with support in general.
In early June, Coinbase committed to decreasing first response times to less than six hours, and cases concerning large balances in under two hours.
The spokesperson reiterated this pledge in statements for this article.
3. Will Coinbase list ‘forked’ coins?
Coinbase has said it would like to add more assets for users to trade, but just where it draws the line is unclear.
Cautious not to upset regulators, Coinbase likely spends a significant amount of time and money integrating a new coin into its exchange. But here, too, this has sometimes rubbed users the wrong way, especially when they could benefit economically from such listings.
Most recently, Coinbase indicated it would not support the new cryptocurrency “bitcoin cash,” when it was suddenly created through a fork of the bitcoin network. Holders of bitcoin would automatically receive an equal amount of bitcoin cash as part of the process – if it was held in a wallet or exchange that supported bitcoin cash – but Coinbase told users interested in receiving their new funds to withdraw their coins.
Some, even with Coinbase’s advanced notice, didn’t take their bitcoins off the platform and are now upset that they can’t reap the rewards of bitcoin cash’s current price of around $330, especially when a quick sale could mean they could invest more in bitcoin.
Not only is this a missed opportunity for users, but Coinbase also stands to lose since it has access to bitcoin cash without having the ability to make money off those reserves through trading.
The exchange recently followed up on its statement about bitcoin cash support, pledging to enable withdrawals of the new cryptocurrency by January.
The question then becomes whether stalls in listing the new cryptocurrency are resource constraints that the new raise could help shore up, as the company is looking to fill many open positions.
And with another potential fork ahead, it remains to be seen whether the company will, or should, take steps to respond to this complaint.
Disclosure: CoinDesk is a subsidiary of Digital Currency Group, which has an ownership stake in Coinbase.
Coinbase office image via Glassdoor
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https://www.coindesk.com/open-questions-coinbase-will-users-benefit-100-million-raise/
