Shopify CEO Joins Coinbase Board. Will His Move Legitimize Crypto?

In this video clip from “The Crypto Show” on Motley Fool Live, recorded on Feb. 2, Fool contributors Jon Quast, Travis Hoium, and Chris MacDonald discuss the strategic move made by the CEO of e-commerce giant Shopify (NYSE:SHOP) to join the board of Coinbase (NASDAQ:COIN). It opens up a lot of possibilities for both companies.

Jon Quast: Tobi Lütke, the CEO, and co-founder of Shopify, joining Coinbase’s board of directors. This is pretty big news. For a lot of investors, Shopify is a very right top-tier, legitimate investment opportunity. For others, maybe Coinbase is a little bit out there. I wonder, does this give legitimacy to Coinbase and what they are building for some investors maybe?

Travis Hoium: I think it definitely does. I think this is also showing the direction that Coinbase is going. I’ve written about this a little bit for Fool.com, but Coinbase is known as a crypto company but I think long term, there’s going to be a lot more utility they are going to provide. They’ve added things like direct deposit of paychecks into Coinbase’s account. We’ll talk a little bit about how you might use that money later on in the show.

Then with NFTs and their upcoming NFT marketplace, I look at this as the next-generation bank and if you’re a company like Shopify, you want to be associated with that. You want to know what’s going on in that ecosystem. Shopify may have some interesting things coming in the crypto world as well. Definitely an interesting marriage there.

Chris MacDonald: Yeah, I think just to add to that, Shopify, I think, it’s an interesting strategic move for Lütke to join the board of directors of Coinbase. Shopify was one of the earlier adopters of Coinbase commerce. There’s an integration there and maybe being more hands-on with what Coinbase is doing in terms of integrating with e-commerce. This seems like a pretty intelligent move on his part and it’ll be interesting to see what comes of this.

Quast: Yeah, that is awesome and I’ve really liked this from Coinbase’s blog posts announcing Lütke, and this is still pending board approval. He still has to officially be voted in to the Board of Directors. But it says that “Shopify sits at the nexus of three important areas that crypto seeks to revolutionize; finance and payments, web applications, and the Internet itself.”

What I found interesting about that quote is that I think, for many newcomers to the cryptocurrency space, we’re oftentimes just thinking finance and payments. We’re thinking about taking a coin like Bitcoin and using it to buy something, finance, and payments here. We’re not always thinking web applications and the Internet itself. We actually, the three of us, had a really lively conversation yesterday as we talked about all these different nuances, facets, and not rabbit holes, but all these different avenues that cryptocurrency is involved in. Really interesting here from Shopify, the three important areas. What does it mean to revolutionize a web application with crypto? What are we talking about?

Hoium: I think that’s where you start thinking about NFTs in applications and giving access. There are different options. If you’re paying with some cryptocurrency, whether that’s a crypto that we think about like Bitcoin or Solana, or if it’s a stablecoin living on one of these platforms, then you know where the buyer’s wallet is. You can drop them an NFT. You can give them access to something. You can give them access to a website and there are a lot of applications. 

They’re calling them web applications, basically just websites. A lot of them are dot app in the crypto world so the NFT itself is often a gating token or access pass, if you will, to some of these. That’s something that’s a new concept as crypto and NFTs become more popular.

Quast: How about the internet itself? Well, I’ll go ahead and on to the next one here. This is actually a quote from Lütke in the press release. It says, “The concepts of decentralized finance and entrepreneurship exemplify the promise of Web3,” or sometimes we refer to that as Web 3.0, “where opportunity exists for the many, not the few.”

Again, I think that when we hear the term Web 3.0, all of us have struggled to explain what that means to various degrees. But I think a lot of people and even on the show have asked, what is the point of all this? Why are we doing these things? Lütke here saying, it’s about creating opportunities for a larger number of people. I think that that is something that a lot of people aren’t aware of and maybe need some expounding.

Hoium: Go ahead, Chris.

MacDonald: I was just going to say for Shopify, one of the interesting things, when you look at that company specifically is their mission and decentralizing or making e-commerce more available for the average small and medium-sized business.

In previous decades, let’s say, before Shopify really came on the scene, it was difficult for anyone other than a large merchant to set up their own online store. Democratizing that and having that view, that mission seems to align with what Coinbase is trying to aim for. Coinbase right now is technically a centralized entity. This comment is interesting Travis’ thoughts on that. Because there are decentralized exchanges that do things in what many would probably call more of a Web3 or Web 3.0 way, but Coinbase is certainly the leader or one of the leaders in terms of name recognition in this space. The opportunity here seems to be immense and this partnership is definitely interesting from my perspective, but I’d like to hear what you have to say too.

Hoium: The entire idea of what Web3 is an interesting one because I think a lot of people who are very into this and early adopters are really concerned about that decentralization piece of it, this is my take on this, but I think this is generally the way people think about it is. If you think about the internet today, it’s really dominated by a handful of companies, Google or Alphabet (NASDAQ:GOOGL) (NASDAQ:GOOG) reported earnings today incredible earnings because they are where you have to go to find things on the internet. Whether you’re looking for a new pair of pants or you’re trying to find one of our articles. Google is that central spot, they collect a ton of data on you, whether you like it or not.

Same thing with Facebook (NASDAQ:FB), Microsoft (NASDAQ:MSFT), and Amazon (NASDAQ:AMZN) sit in different places in the internet. Same thing with Apple (NASDAQ:AAPL), but between those five companies, there’s a lot of control and centralization of the internet’s data and that’s what a lot of the proponents of the concept of Web3 are building around is decentralizing that and moving that data and the power that data to individuals. I think that’s sort of the core belief.

Now, the interesting thing, you guys brought this up. Oftentimes, I think what is the end goal is really centralization in a different place. [laughs] It’s like we’re still going to have giant companies controlling Web3 and Coinbase could be one of them, maybe Shopify is one of them. It isn’t like these big players are going away, but maybe things are a little bit different.