Video and slides synchronized, mp3 and slide download available at URL http://bit.ly/2wEkAfi. Jim Posen provides an overview of blockchain protocols and discusses how Coinbase’s unified architecture for payment services abstracts away integration-specific logic from core transaction processing. He dives into the details of Coinbase’s Bitcoin, Ethereum, and US banking integrations and compares how they implement the generalized service interface. Filmed at qconnewyork.com. Jim Posen is a tech lead at Coinbase and has spent his time there architecting and building many of its core back-end services. He has worked on a variety of systems including the data pipelines, compliance and fraud controls, and most recently has been rebuilding the payments infrastructure to support integrations with new blockchains and global banking partners.

1. Unifying Banks & Blockchains
@ Coinbase

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Watch the video with slide
synchronization on InfoQ.com!
https://www.infoq.com/presentations/
coinbase-blockchain

3. Presented at QCon New York
www.qconnewyork.com
Purpose of QCon
- to empower software development by facilitating the spread of
knowledge and innovation
Strategy
- practitioner-driven conference designed for YOU: influencers of
change and innovation in your teams
- speakers and topics driving the evolution and innovation
- connecting and catalyzing the influencers and innovators
Highlights
- attended by more than 12,000 delegates since 2007
- held in 9 cities worldwide

4. History of Coinbase
2012 2013 2014 2015 2016 2017
Bitcoin
US Buy & Sell
Europe Bitcoin Microservice
Exchange (GDAX) Ethereum

5. 2 Trading Platforms

6. 3 Digital Currencies

7. 6 Fiat Currencies
USD
EUR
GBP
SGD
CAD
AUD

8. 7 Traditional Payment Integrations
US Domestic Wires
3-D Secure Cards

9. 32 Countries

10. 4 Microservices
Knox (Private keys)
Wallace (Bitcoin)
Macbeth (Ethereum)
Iron Bank (US Banking)

11. 1 Monolithic Rails App

12. What is Bitcoin?
Bitcoin is both:
1) a scarce digital resource
2) a protocol for transferring the resource over the
Internet

13. US Banking System Bitcoin
Bank accounts Cryptographic addresses
ACH/Wire Peer-to-peer protocol
Interbank settlement Public transaction ledger
Issued by US government Fixed issuance
3 business days ~30 minutes
Chargebacks Irreversible payments

14. Overview
- How ACH & Bitcoin work
- Unified payments architecture
- How our ACH & Bitcoin services work

15. Automated Clearing House (ACH)
ACH Operator
(Federal Reserve)
Receiving Depository
Financial Institution
Originating Depository
Financial Institution
ReceiverOriginator

16. Automated Clearing House (ACH)
ACH Operator
(Federal Reserve)
Receiving Depository
Financial Institution
Originating Depository
Financial Institution
ReceiverOriginator

17. Automated Clearing House (ACH)
ACH Operator
(Federal Reserve)
Receiving Depository
Financial Institution
Originating Depository
Financial Institution
ReceiverOriginator

18. Automated Clearing House (ACH)
ACH Operator
(Federal Reserve)
Receiving Depository
Financial Institution
Originating Depository
Financial Institution
ReceiverOriginator

19. Automated Clearing House (ACH)
ACH Operator
(Federal Reserve)
Receiving Depository
Financial Institution
Originating Depository
Financial Institution
ReceiverOriginator

20. ACH Returns
- Payments are returned if insufficient funds,
account closed, unauthorized debit, etc.
- RDFI has 24 hours to return for insufficient funds
- Receiver has 60 days to issue a chargeback
- “No news is good news”

21. How Bitcoin Works

22. Cryptography Review
Digital signature schemes:
- Gen() => (Public key, Private key)
- Sign(Private key, Data) => Signature
- Verify(Public key, Data, Signature) => {True, False}
Collision-resistant one-way functions
- Hash(Data) => Fixed length binary string

23. Bits of Coin

24. Transactions
0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice

25. Transactions
0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice
Inputs Outputs
5.0 BTC
Bob
1.0 BTC
Alice

26. Transactions
0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice
Inputs Outputs
5.0 BTC
Bob
1.0 BTC
Alice
✔
✔

27. Transactions
0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice
Inputs Outputs
5.0 BTC
Bob
1.0 BTC
Alice
✔
✔
UTXO means “Unspent Transaction Output”

28. Public Ledger
Transaction #286 0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice

29. Public Ledger
Transaction #286
Transaction #287
0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice
5.0 BTC
Bob
1.0 BTC
Alice

30. Public Ledger
Transaction #286
Transaction #287
Transaction #288
0.5 BTC
Alice
2.0 BTC
Alice
4.0 BTC
Alice
5.0 BTC
Bob
1.0 BTC
Alice
3.0 BTC
Carol
2.0 BTC
Bob

31. Blocks & Chains
Block 276
Block 277
Transaction #286
Transaction #287
Transaction #288

32. Blocks & Chains
Block 276
Block 277 Block 277?

33. Blocks & Chains
Block 276
Block 277a
Block 278
Block 277b
Longest chain =
Main chain

34. Overview
- How ACH & Bitcoin work
- Unified payments architecture
- How our ACH & Bitcoin services work

35. History of Coinbase
2012 2013 2014 2015 2016 2017
Bitcoin
US Buy & Sell
Europe Bitcoin Microservice
EthereumExchange (GDAX)

36. A Not-So-Scalable Architecture

37. Core Transaction Processing
Debit Credit
Deposit External account Coinbase account
Withdrawal Coinbase account External account
Buy Bank account Coinbase crypto account
Sell Coinbase crypto account Bank account
Send Coinbase account Coinbase account

38. Transaction Processing Service
- Why is a payment made?
- Coordinates calls to payment
services
- Ensures credits and debits
balance out
- Buys, sells, deposits,

39. Payment Services
- How is a payment made?
- Can send and charge/receive
money
- Encapsulates integration logic
- Implemented for both banks and
blockchains

40. A Scalable Architecture

41. A Scalable Architecture

42. Universal Interface: Payment Structure
{
"id": "21ee4091-ad9a-45b7-be49-6562ef19ea0e",
"currency": "BTC",
"amount": "-2.500000000",
"fee": "0.000000000",
"payment_method":
"15pef9Cq8yd5a4b38DjKyKcT7R48VS4How",
"account_id":
"6ac6b0e1-8a2d-47d9-9f1e-bb3361b4f93e",
"status": "completed"
}

43. Universal Interface: Microservice Protocol
SQS
SQS
HTTP
Payment
Service

44. Universal Interface: Microservice Protocol
SQS
SQS
HTTP
Payment
Service
GET /payments/:id

45. Universal Interface: Microservice Protocol
SQS
SQS
HTTP
Payment
Service
create_payment(id, amount, currency, …)

46. Universal Interface: Microservice Protocol
SQS
SQS
HTTP
Payment
Service
payment_update(id)

47. Overview
- How ACH & Bitcoin work
- Unified payments architecture
- How our ACH & Bitcoin services work

48. Iron Bank
SQS
SQS
HTTP
SFTP
ODFI

49. Iron Bank
SQS
SQS
HTTP
SFTP
create_payment
ODFI

50. Iron Bank
SQS
HTTP
SFTP
payment_update
SQS
ODFI

51. Iron Bank
SQS
SQS
HTTP
SFTP
GET /payments/:id
ODFI

52. Iron Bank
SQS
SQS
HTTP
SFTP
Batch
ODFI

53. Iron Bank
SQS
SQS
HTTP
SFTP
ACK
ODFI

54. Iron Bank
SQS
HTTP
SFTP
GET /payments/:id
SQS
payment_update
ODFI

55. Iron Bank
SQS
SQS
HTTP
SFTP
Return
ODFI

56. Iron Bank
SQS
HTTP
SFTP
GET /payments/:id
SQS
payment_update
ODFI

57. Iron Bank Details
- Multiple banks
- Quantity and volume limits per bank
- Web scrapers as alternative to FTP

58. Wallace
SQS
SQS
HTTP

59. Wallace: Incoming payments
SQS
SQS
HTTP
Block N

60. Wallace: Incoming payments
SQS
SQS
HTTP
Block N

61. Wallace: Incoming payments
SQS
HTTP
GET /payments/:id
SQS
payment_update

62. Wallace: Incoming Payments
Block N+2
SQS
HTTP
GET /payments/:id
SQS
payment_update

63. Wallace: Outbound payments
SQS
SQS
HTTP

64. Wallace: Outbound payments
SQS
SQS
HTTP
create_payment

65. Wallace: Outbound payments
SQS
SQS
HTTP

66. Wallace: Outbound Payments
SQS
HTTP
GET /payments/:id
SQS
payment_update

67. Wallace: Incoming payments
SQS
SQS
HTTP
Block N

68. Wallace: Incoming Payments
Block N+2
SQS
HTTP
GET /payments/:id
SQS
payment_update

69. Wallace Details
- Transaction generation/UTXO selection
- Maintains separate pool of online & offline funds

70. Recap
- How blockchain integrations differ from banking
integrations
- Evolution of Coinbase payments towards a
unified architecture
- Polymorphic service interface using an
abstraction of payments

71. Ongoing & Future Work
- Rearchitecture of existing integrations around
new abstraction
- Migration of internal accounting to a microservice
- Dedicated microservice for core transaction
processing
We would love your help :-)

72. Thanks for listening!
mailto:jimpo@coinbase.com

73. Watch the video with slide
synchronization on InfoQ.com!
https://www.infoq.com/presentations/
coinbase-blockchain