These comments are so out of touch. Let me explain how https://twitter.com/brian_armstrong/status/1282106176000233472

Brian argues that Coinbase sells blockchain analysis to government agencies to recoup costs (after acquiring Neutrino for $13.5M) and to build better relationships with law enforcement.

Coinbase acquired Neutrino in early 2019, which was essentially a spyware company that sold products to countries known for human rights abuses. Brian says this “did not go very well” and that Coinbase had to cycle out some team members.

What’s still not clear is whether Coinbase is giving government agencies access to the full cluster of all of their addresses. Coinbase has always had a notoriously difficult set of addresses to cluster. That data is only ever probabilistic unless you are Coinbase.

The issue this creates is that it can be relatively hard for law enforcement to use data from other blockchain analysis companies to prosecute somebody as their only evidence. Because the data is probabilistic.

Remember that in 2018, Coinbase served client data of 13,000 users to the IRS. When you combine client data exports with perfect knowledge of the cluster, it creates a new (dangerous) dynamic.

The recouping money argument... The government agencies said themselves that “this is the least expensive tool on the market and has the most features for the money.” Coinbase is undercutting competitors’ prices by a lot. The 4Y contract to Secret Service is only worth $184k.

Coinbase likely makes that much in a couple of hours just from trading fees. What’s a much more credible explanation is the relationships with government agencies - especially as Coinbase is preparing to go public soon. The cost is basically a lobbying budget.

Coinbase could only use this tool internally. Or at the very least only use the software for compliance use case vs. investigation use case. And @brian_armstrong should address whether Coinbase is giving away perfect clusters.

Coinbase should also address which Neutrino members were cycled out and when. No transparency there whatsoever https://twitter.com/brian_armstrong/status/1282106633745625089

Overall I’m glad Coinbase is starting to comment on the issues, which they have historically almost never done. But the explanation comes extremely short IMO

This is spot on https://twitter.com/jespow/status/1282181584909594631