One Less Customer for Western Union / Moneygram / etc.

Yesterday I decided to see how easy it would be to convince an EU citizen with family in the Philippines that she should no longer be using Western Union / MoneyGram or even smaller companies like Sigue or Ria to remit money to her brother.

Many people won’t have heard of Sigue or Ria. They are more reasonably priced (around 1% transfer cost + margin on the currency exchange for larger amounts >€500) but they also require her to turn up in person, fill out the forms, bring cash, provide ID, etc. … every time!  This family are happy to go to the trouble of shopping around as every Peso that arrives matters a lot.

As an experiment, I sent a small amount of Bitcoin to her e-mail address via Coinbase. I then told her about Coins.ph and asked her to try sending some Philippine Pesos to her brother as quickly and cheaply as possible.

western-union-moneygram-bitcoin

Within a few minutes, she had registered with Coinbase and Coins.ph, moved the Bitcoin across and arranged for about $30 worth of Pesos to be sent directly to her brother’s bank account the next day.  In reality nearly all remittances to the Philippines from Europe are next-day due to the time difference.  Many companies take two days to send funds across.

Using Coinbase and Coins.ph for small remittances is something none of the traditional services available can compete with.  They are roughly equivalent with Sigue and Ria for larger amounts, but so much more convenient (everything can be done from home/office, setup is done just once, etc.).

No more saving up a large amount to send to the Philippines simply to minimise fees.  No more hunting around for the best deal because they are constantly changing.  No more form filling each and every time.

“Tell everyone”, I said.  “Absolutely!”, she replied.

What is 21 Inc Developing?

21 Inc (www.21.co) continues to be in stealth mode, despite its record breaking $116million in financing which makes it the best-funded Bitcoin startup we know about. The most detailed explanation of what they are working on came from 21’s co-founder Balaji Srinivasan who stated they will build the equivalent of “56-KB Internet modems, international fiber cables, and wireless Internet towers” which took the Internet mainstream.

Many people have speculated what this means, using 21 Inc’s recruitment adverts as a guide.  Positions include ASIC designer, PCB designer, Datacenter operations engineer, among others.

Clearly 21 Inc will be engaged in some pretty large-scale Bitcoin mining (one job description states there will be day-to-day operation of 10,000+ server installations).  However, this is doesn’t add much in terms of mainstream adoption, so why? One answer could be that they’ve found a way to be more profitable than most miners.  More likely, in my opinion, is that they want to become/create ‘trusted nodes’ within the Bitcoin mining network permitting merchants & machines near-instant confidence that their transactions will be 100% confirmed.  This is something of a missing piece given the 10-minute average block confirmation time, although several parties are working on different solutions.  If this is the case, 21 Inc may be happy to mine at break even, profiting from adoption instead.

There has been speculation around a ‘hardware wallet’ given Qualcomm’s strategic investment in the company.  Certainly a competitor to Apple’s “secure element” would tick all the right boxes.  It would enable better security for the mainstream and non-Apple majority, ensuring any private keys were kept disconnected from the Internet even on smartphones or tablets.  Coming to a Qualcomm mobile chipset sometime soon?  I believe so.  One job advert does refer to “tiny embedded devices”.  Secure elements of some sort would also be necessary for machine-to-machine transactions … essentially allowing devices to carry around a signature/key without knowing what it was or being able to be hacked.

It follows, then, that 21 Inc would develop a software wallet to use their own secure hardware element and perhaps broadcast transactions to their trusted nodes first.  Merchants might pay a little more or simply prefer access to 21’s trusted network? Certainly machines transacting would need instant confirmations.  If I am right about the above, then merchant solutions (e.g. PoS) will be on their roadmap as well.

That is an ambitious programme of products and services, but somewhat distinct from the other well-funded Bitcoin startups which are already grabbing market share in the spheres of centralised cloud-based wallets, online merchant processing, etc..  Many Bitcoin purists may hate the idea of a network of trusted nodes within the ecosystem, however it may be a commercial necessary.  A vendor is unlikely to allow someone to walk out of their shop with a $1000 laptop without (near) certainty that they’ve been paid!

Looking forward to 21’s future announcements!

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If I Have Seen Further …

“If I have seen further, it is by standing on the shoulders of giants” – Isaac Newton B-HlwKQIIAAUfdY

Bitcoin: We Are Here

This all feels so familiar. A new technology, huge media attention, hysteria … followed by a price collapse and the majority saying ‘this is the end’.

Let us consider Amazon. Floated in 1997 at ~$2. One year later, the price peaked at nearly $17. Even with stock splits, Amazon’s price per share reached a peak of $106 in 1999 … without stock splits it would have been 12x that. $1272 … 636x its floatation price in 1997.

Amazon All-time Stock Chart

Following the dotcom crash, when most decided the Internet was a fad and not a business opportunity, Amazon shares crashed to just under $6 ($72 adjusted for splits). This was still 36x its floatation price. Many people got severely burned by investing and then panic selling.

There is little point going on at length about what happened next.  It soon became clear how powerful the Internet was and the opportunity for Amazon as a first-mover and household name.  In Dec 2013 Amazon hit $400 per share, or $4800/share when adjusted for stock splits. 2400x its 1997 float price!

Therefore, Bitcoin’s journey so far feels very familiar.  I believe we can expect everything to happen far more rapidly as all the infrastructure and Internet penetration already exists.

What should we consider Bitcoin’s “float” price? I’ll let you decide!

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