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Coinbase to buy Israeli company, launch local R&D center

Leading cryptocurrency exchange firm acquiring Petah Tikva-based Unbound Security, a developer of cryptographic security solutions

Ricky Ben-David is The Times of Israel’s Startups and Business editor and reporter.

Coinbase employee Daniel Huynh holds a celebratory bottle of champagne as he photographs outside the Nasdaq MarketSite, in New York's Times Square, Wednesday, on April 14, 2021. (AP/Richard Drew)
Coinbase employee Daniel Huynh holds a celebratory bottle of champagne as he photographs outside the Nasdaq MarketSite, in New York's Times Square, Wednesday, on April 14, 2021. (AP/Richard Drew)

Coinbase, the world’s largest cryptocurrency exchange, is acquiring an Israeli cryptography company for an undisclosed amount and setting up an R&D center in Israel, the firm announced on Tuesday.

Founded in 2013, Unbound Security (also Unbound Tech) develops cryptographic security technologies and was co-founded Yehuda Lindell, an Australian-born computer science professor at Bar-Ilan University and a leading cryptography researcher and expert, as well as Professor Nigel Smart, a British cryptography researcher and expert, and Guy Peer, a software expert who serves as Unbound Security’s VP of R&D.

Cryptography is the science and practice of secure communication techniques, on which the cryptocurrency world is built.

Coinbase said Unbound Security was “a pioneer in a number of cryptographic security technologies, including the emerging field of secure multi-party computation” (MPC), in which Lindell is a top researcher.

Protocols of secure MPC Protocols, according to Lindell’s own writing, “enable a set of parties to interact and compute a joint function of their private inputs while revealing nothing but the output.” This can allow crypto assets “to be stored, transferred and deployed more securely, easily and flexibly,” Coinbase said.

Founded in 2012, Coinbase became popular among cryptocurrency fans by providing them with an easier way to exchange shares of Bitcoin and other digital currencies. The company went public earlier this year at a brief valuation of over $100 billion.

Coinbase earns 0.5 percent of the value of every transaction that goes through its system. So if someone buys $100 in Bitcoin, Coinbase earns 50 cents. If Bitcoin or Ethereum prices drop, the commissions Coinbase earns drop as well, giving it some exposure to the digital currencies’ rise and fall.

The company said in the announcement Tuesday that the Israeli company’s “best-in-class multi-party-computation expertise will play a foundational role in Coinbase’s product and security roadmap,” the company said in the announcement Tuesday.

Unbound Security is based in Petah Tikva and has raised $40 million to date with investors such as Goldman Sachs Private Capital and Innovation Endeavors, co-founded by former Google executive chairman and CEO Eric Schmidt.

The acquisition of Unbound Security will establish Coinbase’s presence in Israel, “a well-established and rapidly growing technology hub,” and “will add an additional powerful prong to Coinbase’s global talent acquisition strategy.”

The Unbound Security team “will form the nucleus” of the new Coinbase R&D facility in Israel, the company added.

Coinbase said Israel was “a hotbed of strong technology and cryptography talent,” with “some of the best and brightest minds in these fields.”

The “remote-first” company with no headquarters has acquired more than 13 companies this year, Bloomberg reported, including in India, Singapore, and Brazil.

“This was a very big opportunity for us to bring a deep technology to the world and solve a genuine problem. With the strength of Coinbase behind us, we can make a significant impact,” Lindell told Globes of the acquisition Tuesday.

Coinbase says it has over 70 million verified users and about 7 million monthly transacting users. It employs over 2,700 people across the world.

Instead of using a traditional IPO, Coinbase went public through a public listing. That means it avoided the typical agreements with big banks that would buy thousands of shares and promote them. A direct listing allows insiders and early investors to convert their stakes in the company into publicly traded stock.

AP contributed to this report.

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