Last week Coinbase, the five year-old digital currency startup, announced it had raised $100 million in Series D funding, valuing the company at $1.6 billion. This funding round represents a major milestone not just for Coinbase, but for the digital currency industry as a whole.

Coinbase’s business strategy is to make it easier for people and companies to buy, sell, and transact in digital currencies. It does this though two broad business lines: its digital currency exchange, called GDAX, and software applications that allow businesses and consumers to connect the traditional financial system to the new digital currency world.

GDAX, which makes money by charging a small percentage on each trade, has been experiencing phenomenal growth over the last 12 months, as both trading volume and prices of digital currencies such as bitcoin and ether (this digital currency built on the Ethereum blockchain) have soared. The second part of its business has seen more qualified success. While Coinbase was successful in signing up merchants to accept bitcoin on its e-commerce site, the overall transaction flow has been low because most consumers have not yet accepted digital currencies as a payment mechanism.

For digital currencies to fulfill their promise of an open, decentralized financial system, they need to achieve mainstream acceptance….