Blockchain analysis software is both a blessing and a curse rolled into one. Coinbase’s involvement in this industry has raised a lot of eyebrows. Even so, CEO Briam Armstrong is convinced that there’s absolutely nothing wrong with providing these tools.
Coinbase Analytics Serve a Purpose
Whether one approves or disapproves of Coinbase Analytics, the tool set has a lot of benefits. It is a great way to track suspicious and criminal activities taking place on public blockchains. Reducing the appeal of Bitcoin and top altcoins to criminals will help bring more legitimacy to this industry as a whole.
At the same time, the concept receives a lot of flack. That is odd, considering how blockchain analysis tools have been prevalent for quite some time. Several companies provide this type of functionality, either free of charge or as a paid service.
Moreover, Coinbase CEO Brian Armstrong considers this a crucial connection to AML requirements in finance. Dealing with traditional finances requires following AML laws, either for better or worse. By introducing blockchain analysis, companies such as Coinbse can follow these laws and provide their services.
In the early days, Coinbase started off by using some of the existing blockchain analytics services out there. This worked out ok, but the issue with it was that we don’t like sharing data with third parties when we can avoid it, and they didn’t support all the features/chains…
— Brian Armstrong (@brian_armstrong) July 12, 2020
It is also interesting to learn how Coinbase used existing blockchain analysis tools at an early stage. Developing their own set of tools wasn’t planned initially. However, having to rely on sharing data with third parties was far from ideal.
It’s expensive to build this capability, and we want to recoup costs. There is an existing market for blockchain analytics software, so we sell it to a handful of folks as well. It also helps us build relationships with law enforcement which is important to growing crypto.
— Brian Armstrong (@brian_armstrong) July 12, 2020
Building a native blockchain analysis tool is not easy. It takes a lot of time, money, and effort. Armstrong confirms that Coinbase is looking to recoup some of the costs associated with building the tools.Offering the kit for sale to external clients makes a lot of sense in this regard.
Community Responds
It is evident that most people don’t like the idea of Coinbase Analytics. Any form of eroding pseudonymity when using digital assets is often scrutinized by the broader community. An understandable response, although it is sometimes necessary to embrace a necessary evil.
A lot of the concerns stem forth from half truths and misinformation floating around. It is certainly true that Coinbase Analytics is being offered for sale. Who they are selling to exactly, is a different matter altogether.
Primarily US government agencies appear to be interested in these tools. Those include the DEA and IRS, for the time being. Some sources claim that the Secret Service and Homeland Security are paying clients as well. All of this is based on a recently leaked contract.
One thing many people forget is how Coinbase isn’t the only blockchain analysis service provider. If they wouldn’t sell to government agencies, someone else would.
Extending a helping hand may feel like “betrayal” at first, but it doesn’t have to be. Coinbase is doing its part to cooperate with regulators and lawmakers, instead of opposing them.
That latter option would have far more serious consequences for the crypto industry.
Disclaimer
Please note that the information provided on this page is not intended to be and should not be interpreted as legal, tax, investment, financial, or any other form of advice. It is important to only invest what you can afford to lose and to seek independent financial advice if you have any doubts. For further information, we suggest referring to the terms and conditions as well as the help and support pages provided by the issuer or advertiser. CryptoMode is committed to accurate, unbiased reporting, but market conditions are subject to change without notice.
