Why Coinbase admitted Apple calls the shots

Illustration by Alex Castro / The Verge

Mainstream adoption means being listed in the App Store

One of Web3’s benefits, according to boosters such as Jack Dorsey, is that it’s censorship-resistant. Because it is decentralized, this argument goes, it is impossible to censor anyone. But it isn’t true that cryptocurrency is decentralized. Right now, Web3 has a choke point: Big Tech.

Cryptocurrency has relied on points of centralization since the days of Mt. Gox. (That hack wouldn’t have mattered nearly as much if Mt. Gox hadn’t been processing 80 percent of all transaction volume in Bitcoin at times). As the ecosystem has expanded, so have the points of centralization, such as AWS and Google Cloud.

One problem with cryptocurrency is that the technology is fairly user-hostile, at least to normal users of the internet. And so centralized services have sprung up for the non-technical, such as Coinbase, OpenSea, Metamask, VeVe, and Rarible. Meanwhile, mainstream payment apps — Venmo, PayPay, and so on — have added cryptocurrency capabilities. This is likely how the general public will get involved with crypto, assuming they do so at all. These services may also be used by people who do understand cryptocurrency since even the savvy may appreciate user-friendly interfaces and protection from scams.

To get to these apps, users will go through the Google and Apple app stores. So if those centralized ways of accessing cryptocurrency want to stay in Apple’s and Google’s app stores, well, functionally, Apple and Google will be setting the terms of content moderation for Web3.

For the purposes of this piece, I am going to focus on Apple because I didn’t sit through the Epic Games v. Apple antitrust trial for nothing. (Epic Games v. Google has not yet taken place; when it does, I imagine we’ll get much more clarity about the Google store.) Apple’s public relations team did not respond to requests for comment.

As Coinbase CEO Brian Armstrong wrote on February 4th, “For any app to be listed in the Apple and Google App Stores, it needs to play by the rules of those two companies.” That means that whatever Apple and Google decide as their content policy, Coinbase will follow, Armstrong says. “Our approach is to be free speech supporters, but not free speech martyrs.” (Emphasis his.) So if a “critical partner” such as Apple or Google objects to something and requires its removal, Coinbase will remove it. Coinbase’s head of policy, Ian Plunkett, declined to comment for this story.

This position has been signaled before. In June 2020, a few employees walked out of work because they wanted an immediate response from Armstrong to the Black Lives Matter protests. Armstrong ultimately did post his support for BLM to Twitter, though those tweets have since been deleted. The following September, Armstrong made a blog post limiting political discussions at work.

In his September 2020 post, Armstrong describes the move as “mission focused.” After the departures, he noted in an email that “[w]e have just made a decision to not engage in broader activism as a company outside of our mission.” (How Coinbase’s attempts at a PAC fit with this framework of ideas is unclear to me.) He offered severance to anyone who objected, which wound up being about 5 percent of its employees. Clearly included in the company’s values were the notions that “broader societal issues” and “political causes” were minimally important.

This is fairly consistent with ceding moderation decisions to Apple — if you squint. Free speech maximalism is, after all, a political cause and thus on Coinbase’s “minimally important” list. One reason that Coinbase has stuck around as long as it has — while competitors have toppled — is pragmatism.

We have some sense of how Apple will moderate Web3 because we already know how it moderates in its little “walled garden”:

Apple booted Parler, a conservative social media site, for insufficient moderation. It was allowed to return after it changed its moderation practices. Google and Amazon did the same.
In Apple’s defense against Epic Games’ antitrust case, Apple argued Epic’s game store couldn’t appear in Apple’s ecosystem because some games within it — which Apple declined to describe because they were “not appropriate for us to speak in federal courts” — were “both offensive and sexualized.” Also during the trial, Apple’s highly paid attorneys suggested that a naked banana should not appear in court due to nudity. (The judge in the case later ruled that naked bananas are courtroom-appropriate.)
“If you want to criticize a religion, write a book.”
Apple declared war on Wordle clones.
Plus, there’s the time Apple rejected Google search from its App Store in 2012 because “these apps need to give you the ability to use your choice of maps, not their version only.” Apple had released its competitor Apple Maps less than four months before. (In fact, Apple feels strongly about not featuring its competitors in the App Store.)

The blockchain has an inherent moderation problem: it’s immutable. So if someone encodes a text string that contains a URL for a website that, for instance, contains child porn, the text string is there forever. Extracting that data requires effort and technical ability, and the linked-to website itself might go down, but the text string remains. It’s also possible to harass people on the blockchain in messages that can’t be altered or deleted, though some level of technical ability is required for this also.

So Apple’s mores are perhaps less of a problem for pure cryptocurrency and more of a problem for NFTs, an area Coinbase is planning to get into this year. Nudity in an NFT? That’s a problem for anyone who displays the NFT and also wants to appear in the Apple App Store. I mean, we already know that the fine folks of Apple are terrified of naked bananas. God forbid they see an actual human titty.

What’s more, Apple can say what currencies it’s willing to support transactions in, and that’s trouble for companies that want to take payments in, for instance, Ethereum.

Fortunately for crypto enthusiasts, Apple has a pretty good incentive to let crypto apps — some, at least — stay in its App Store. One reason you can’t buy a Kindle e-book through the iPhone app is that Apple takes a 30 percent cut of any digital goods sold in apps that appear in its store. This means that anyone trying to buy an NFT — inarguably a digital good — through an iOS app is likely going to pay a premium since app designers can simply pass the charge along to users rather than sacrificing their own cut. (Amazon has chosen not to take this path, which is why you still can’t buy a Kindle e-book on the iPhone app).

The flip side here is that Apple can turn the faucet off at any time. Display an NFT titty? You might be out. Try to bilk Apple out of its cut? You’re definitely out.

Coinbase’s content moderation capitulation here is understandable: Apple, Google, and even Amazon are going to run the show if you’re trying to make Web3 a mass-market technology. Collectively, this group owns the stores where your app appears, the cloud servers you use for your service, the operating systems, and the devices. Say whatever you like about the distributed future of Web3, but for the time being, centralized Big Tech is going to continue calling the shots.