Crypto Twitter was in a tizzy about Coinbase's client data being monetized, but there's a simple explanation

Crypto Twitter was in a tizzy Sunday morning over recent comments from a Coinbase executive about its latest acquisition.

 

In an interview with Cheddar, the internet business news site, Coinbase's head of institutional sales Christine Sandler defended the firm's acquisition of Neutrino, the controversial Italian crypto data technology provider. The firm has ties to Hacking Team, which sold technology to human rights abusers — a fact that has triggered a #DeleteCoinbase movement on social media.

 

Sandler said the firm was aware of the connections between Neutrino and Hacking Team and is actively monitoring that situation. Still, she said that Coinbase wanted to move away from its current blockchain data providers, citing concerns about them monetizing client data.

 

"They were selling client data to outside sources and it was compelling for us to get control over that," she added.

 

This sparked a new wave of controversy across the Twitter world. Specifically, market observers voiced their concerns that Coinbase allowed its client data to be monetized by its vendors, namely Chainalysis, which sources confirmed worked with Coinbase.

 

As is often the case, Twitter over-reacted. First, the data that Chainalysis monitored for Coinbase is transactional data – not customer data including dates, social security numbers, etcetera, according to people familiar with the situation. The acquisition, to be sure, could reflect Coinbase's desire to have more control over its data.

 

Sandler's message, particularly wording it as "selling client data", was misinterpreted widely. While Chainalysis works with a wide range of firms, sources familiar with the company clarified that they explicitly don't sell customer data. In the long-standing "give-get" model, public blockchain data that companies provide to exchanges help improve the service for all Chainalysis clients, improving their network effects. This suggests that Coinbase bringing blockchain data services in-house may help break their vendor lock-in long-term.

 

Still, people familiar with Coinbase's business told The Block the acquisition has more to do with Coinbase's ambitions to list more coins, more quickly. The acquisition of Neutrino provides Coinbase with the in-house chops to analyze blockchains prior to new listings without having to rely on a third party — who may or may not have the tech to examine a coin Coinbase might be interested.