Coinbase to relaunch Earn.com as Coinbase Earn, the latest iteration of a product with many former identities

Coinbase announced on Wednesday the next evolution of Earn.com, dubbed Coinbase Earn. The new product will start as an educational platform where users can earn small amounts of cryptocurrencies by learning about an asset’s utility and its underlying technology. Priced at slightly more than $100 million last April, Earn.com was Coinbase’s first significant acquisition. Recode reported that a large part of the deal’s appeal was to bring on a founder of Earn.com Balaji Srinivasan as Coinbase’s CTO.

Despite significant buzz, what was once the best-funded company in crypto has now transformed, through several pivots, into a niche offering. A spokesperson for Coinbase told The Block that Coinbase will be scaling up Earn.com via Coinbase Earn, piece by piece. According to the spokesperson, "The first piece is today. Beyond that, we don't have specific plans to share at this time."

The early days as a secret project

Srinivasan and five other co-founders (Lily Liu, Daniel Firu, Matt Pauker, Nigel Drego, and Veerbhan Kheterpal) founded Earn.com as 21e6 in May 2013. According to a 2015 story by Nathaniel Popper, Srinivasan structured 21e6 as a limited liability company rather as a C corporation and sold it as a secret project, which allowed individuals to invest without needing to reveal themselves as public supporters of Bitcoin.

The company offered to pay out dividends in bitcoins, which let investors get exposure without buying the asset directly. 21e6 played an important role in making high-profile Silicon Valley investors take Bitcoin seriously. In the series A round in May of 2013, the company raised $5 million from several prominent investors including Marc Andreessen, Ben Horowitz, Naval Ravikant, Peter Thiel, and Winklevoss Capital. According to the Form D filing, 55 investors put in money.

As there wasn’t much competition in 2013, the team initially focused on producing ASIC chips to mine bitcoin and deploying them for private use in data centers. The data centers were mainly based in California and had very high capital expenditures. Regardless, business was good: the company brought in $3.8 million in revenue in 2013. Following a strong 2013, 21e6 raised $59 million in a series B led by Andreessen Horowitz at a $216 million pre-money valuation.

Extremely rapid growth

The company used the funds to develop the company’s second and third generation of ASIC chips. In 2014, 21e6 brought in an estimated $41 million in revenue. It was doing so well that 21e6 called itself one of the fastest growing startups of all time and compared its first two years to Facebook and Google in one of its decks, from which the slide below is sourced.

At one point, 21e6 was allegedly earning up to 25% of Bitcoin’s total mining revenue. But as mining became gradually more competitive, less profitable, and bitcoin’s price continued to fall, 21e6 decided to rebrand as 21.co and diversify into consumer products. It spent most of the raised money on R&D, data center deployments, and capital expenditures. 

A miner in every device and in every hand

As part of the rebrand, 21.co raised $52 million in a series C led by Andreessen Horowitz and RRE Ventures at a $310 pre-money valuation. Its new focus was “to put a miner in every device and in every hand” as well as to popularize the use of bitcoin in Internet of Things and Machine to Machine payments. Srinivasan also replaced Matthew Pauker as CEO in the spring of 2015 after working full time at Andreessen Horowitz as a General Partner. At the same time, Lily Liu joined as the co-founding CFO. When Srinivasan and Liu took over, the company had more than $80 million in data center and venture debt commitments and less than a year of runway remaining.

In September 2015, 21.co announced their first consumer product, dubbed “The 21 Bitcoin Computer,” and started selling it for $399.99 in November. It's worth noting that the company was simply recycling their old ASICs that they couldn't profit off of anymore via mining.

21.co’s embedded mining chip was so hotly anticipated that even Larry Summers chimed in: "The 21 chip adds a whole new dimension to bitcoin's potential utility. At first we will be struck by the presence of a technology like embedded mining; eventually we may be struck by its absence."

Shortly after the release of the Bitcoin Computer, Vitalik Buterin did some calculations and found that the device would yield only $38.30 per year before taking into account network difficulty increases. Unsurprisingly, the sales were underwhelming and 21.co soon discontinued the product altogether.

The "third web"

Then came a pivot of creating the “third web” where machines would earn bitcoin on every HTTP request, which Srinivasan presented at Consensus in 2016. 21.co released a free tool to create the “machine web” by allowing machines to create a bitcoin economy and also let developers add bitcoin micropayments to their API calls.

The tool was also expected to let anyone “get some bitcoin on any device.” Anyone who had the embedded mining chip could mine bitcoin or earn it by doing micro tasks for others or by selling their machine’s resources for bitcoin. 21.co also launched a marketplace for paid APIs for bitcoin. The server-side support for the Bitcoin Computer, command line interface, and marketplace officially ended a year later in October 2017.

The Earn.com era

In the email that announced the end of support, 21.co pivoted once more. The email said that the company would now focus on allowing users to earn digital currency by replying to emails and completing tasks. It also said that 21.co would be putting all energy into the corresponding token launch “because we think the ability to earn digital currency by replying to emails and completing tasks will be one of the most useful applications of the blockchain.” In the following week, 21.co rebranded to Earn.com.

The token that was supposed to launch was called the “Earnable Token.” The whitepaper, which is no longer publicly available, said that the token could be earned by participating in the ecosystem as opposed to buying it via a traditional ICO. One of the options to earn the token was by onboarding new users. The whitepaper said: “Because the number of tokens earned for onboarding halves each time the userbase doubles, early adopters are incentivized to sign up immediately.”

Earn.com raised a total of $120 million. To Earn.com's credit, the total value of cash, cryptocurrency, and equity returned to the shareholders was allegedly in excess of the capital invested in the company. This is no small feat given the company's many iterations and significant investment.

Shortly after the acquisition of Earn.com, Srinivasan published a post detailing how him and Lily Liu “dug 21.co out of an $80 million hole, turned it into Earn.com and built it into a fast-growing business with millions in revenue." Srinivasan said that once he saw that things went wrong, he had to step in as full-time CEO “with a mandate to fix things.” What's often forgotten is the chief financial officer Lily Liu who played as much of a role as Srinivasan in turning the company around. The fact that the company survived while most mining companies (Aquifer, Cointerra, Hashfast, etc.) went under is a small miracle in itself and likely can be attributed to both Liu and Srinivasan. 

Srinivasan also said that he inherited the embedded mining chip from the previous management and that it was “a risky Hail Mary project,” which tried to salvage some value from the data centers by repurposing the mining chips. Moreover, the idea of Machine to Machine micropayments supposedly didn’t work because “micropayments went from potentially feasible to definitely infeasible due to the scaling controversy.”

However, Srinivasan said that the open source software that they built to handle micropayments “ended up being the core of something that did work: namely the paid email and tasks product at the core of what is now Earn.com.” Srinivasan reiterated that he believes Earn.com is a successful product and “one of the first truly useful blockchain-based applications.” He was hopeful that Coinbase would help Earn.com to scale up across its large user base.

Earn.com loses steam as part of Coinbase

Even at its peak, Earn.com failed to gain traction for replying to emails. What it did gain traction for were the targeted marketing messages. Earn.com managed to create a large database of up to 150,000 users that had at least some interest in cryptocurrency. Its large user base made it an attractive direct marketing tool for ICOs and other cryptocurrency products that wanted to reach a large audience.

At the top of the ICO mania in January, Earn.com announced the launch of Earn.com Airdrops, which was supposed to create “a new way for blockchain entrepreneurs to give 100,000+ Earn.com users a free trial of any new coin or token.” According to the announcement, the projects could “simply pay to acquire huge numbers of cryptocurrency early adopters, including many influential angels, VCs, CEOs, and blockchain personalities.”

Before Wednesday's announcement of Coinbase Earn, Earn.com was turning into a ghost town. The official Twitter account hasn’t tweeted since September, whereas it had been fairly active before. Both the official Medium and Facebook account that were used for announcements haven’t been updated since April. There have also been no active tasks (polls or actions) for a considerable amount of time according to multiple previously active users.

The Block has spoken to some of Earn.com’s enterprise clients, who have found that the paid campaigns have drastically decreased in effectiveness and reach. When reached out to comment, a spokesperson for Coinbase told The Block that the team has been focused on integrating Earn.com with Coinbase, "in order to allow millions of Coinbase users to earn crypto."

Despite the decline of Earn.com, the acquisition by Coinbase has likely paid off, according to sources. Srinivasan has helped to stabilize and grow the engineering team, playing a very active role as on of the most outward-facing technical leaders in the industry. Srinivasan and his team's significant experience and leadership talents have given Coinbase a leg up in the competitive cryptocurrency exchange market. 

Unfortunately the Earn.com product could not keep up with the success of Coinbase and Srinivasan himself. As a result, it will once again take on a new identity as Coinbase Earn.