Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Freya Stevens & Ira Miller: Coinapult – Locks and Letting the Bit Drop

Episode Date: August 11, 2014

Coinapult’s CEO Ira Miller and marketing specialist Freya Stevens join us for a discussion about their company and plans for the future. We particularly dove into their new Locks feature, which allows people to ‘lock’ the value of their bitcoins to other assets such as US Dollar, Euro or gold from directly within the Coinapult wallet. The goal is to remove one often-named barrier to mainstream adoption: volatility. We also talked about the amazing ‘Let the Bit Drop’ project, which involves sending bitcoin per SMS to every resident of a small Carribean island. A party in Q4 will launch the project and educational materials will be given to residents via government channels. Episode links: Coinapult Coinapult Locks Let the Bit Drop Bitcoin UK Podcast This episode is hosted by Brian Fabian Crain. Show notes and listening options: epicenter.tv/032

Hello and welcome to the episode of Bitcoin episode 32. My name is Brian Fabian Crane and today is August 10th, 2014. Sebastian is still on vacation. He's about to come back, I think tomorrow. So from next week on, we will be back in this original constellation. But this time again, I'm sort of a solo host. And I'm joined today by two people. And they're Ira Miller and Faya Stevens.

Ira is the CEO of Konypult. And Konypult is a wallet provider merchant solution that he founded together with Eric Borges in 2012. So of course, Eric Borges is very well known in the community, I think, primarily for Satoshi Dice, but he's also been involved in other projects and has been kind of a spokesperson for a long time. And then Freya is a marketing specialist for Coinapult.

And she's also the founder of the Bitcoin UK podcast. So I still haven't actually gotten around to listening to one of our episode, but she has great with you. So it's one of my kind of goals to do that as soon as it was. So today we'll be talking about Coinapult and especially about the new feature they launched, which is called Lox. And the Lox features kind of addressing a really key criticism that's often heaped on Bitcoin, which is the volatility. And it's often seen as sort of a roadblock in the way of mainstream adoption. So they're trying to address this with the Lox feature.

And it's really cool and interesting. And we're also talking about a project called Let It Drop. And the basic idea of the project is to bring Bitcoin to Caribbean Island. So it sounds, of course, really cool. So Ira and Faria, thanks so much for joining me today. Hi, you're welcome. Thanks, Brian. By the way, it's Ira.

Oh, I apologize, Ira. Yeah. No worries. So, Ira, are you down in Panama at the moment? I am, yeah. It's a nice sunny day. So let's just perhaps dive in. Can you tell us a bit about how do you get started with Coinipolt?

So Eric and I started Coinipolt in January of 2012, and it was designed just to be a very, very simple wallet to allow people to introduce new users to Bitcoin by sending it to their email or cell phone. And it was really designed as the simplest possible way to do this. So the original Coinipult.com just had a form, that said email address, message, and then it would allow you to deposit some Bitcoins to an address for the recipient. We've taken that concept and turned it into a much more sophisticated wallet service,

now with accounts and some advanced hedging features like you mentioned. So what made you in 2012 decide on starting a wallet service? Did you feel that was a kind of a big gap at the time? It was at the time, actually. We were the first, I believe, the first Bitcoin over email service and also the first SMS-only wallet. So, you know, there are a lot of people that have wallets where you can send somebody an SMS and then it redirects them to a web page where they log in and start using.

But if they didn't have the internet, then they wouldn't be able to use it. Our system is different in that it allows people to use Bitcoin using only SMS messages. But you still have to set up a wallet online then, no? No, you don't. You can simply receive a text message. It says, you know, welcome to Coinipult. You've got some Bitcoin. When you want to send it to someone else, you just text back to us.

You say send it to this number and we send a similar message to them. Oh, that's really interesting. So I guess that's slightly off-talking. just at the beginning, but let's get into that then. Are you familiar with 37 coins? And how does that just compare to the 37 coins service? I am familiar with 37 coins. They've got a great model.

And it's very similar. I said we were the first such wallet, but now there are others popping up and they're very welcome. This is very hard to do because you need telecom partners in various places. And 37 coins is picked an innovative. way of getting around that by allowing their users in various countries to kind of become nodes for their network. Oh, cool.

So did you guys see any traction with this SMS service? We saw some traction. There have been some people using it for, you know, the last two years since it came out. Unfortunately, due to our telecom providers, we were only able to launch it in the US and Canada over the last two years. And it really just isn't a very good fit for those markets. You know, most people in those markets have the internet and have smartphones and can use more advanced Bitcoin wallets. But we think that SMS is a great fit for Bitcoin overall because most of the unbanked people in the world,

well, maybe not most, a lot of the unbanked people in the world don't have internet access. And they do have feature phones. So can you talk a little bit about how coin appropriated? developed. So you originally there was this idea of having a really usable web wallet and the SMS thing. And I guess this was super early for a Bitcoin company. It's like more than two and a half years ago, which is a sort of a dinosaur age in the Bitcoin world. So what has happened since then? And how has your division for CoinAppal changed over time? So we initially launched these consumer wallet services to allow people to send over email and

SMS. We offered these services for free. So basically we didn't make any money off of it. To kind of help fund things and pay the bills feed us, we started doing business to business services. So people could sign up with our API and send to their users over

SMS and so on. After some time, we'd also developed some very sophisticated market-making software that would allow us to buy and sell Bitcoin to basically act as a broker. We did that for quite some time, maybe the last year and a half,

we've been doing that sort of business. For instance, you may have purchased if you're in Europe, Bitcoins from Sefellow. We help them acquire and clear all of their bitcoins. Basically, this market-making software that we used for

liquidity providing turned into our locks technology that we're now allowing all of our consumer wallets to access. So, is that market-making service, are you talking about arbitrage? So were you using different exchanges to trade and basically do arbitrage on them?

Or is that the software service you're providing to exchanges or I guess services like Saffello that directly sell Bitcoin's to consumers? Yeah, we provide services to companies like Sifelo that need to buy and sell Bitcoins for their own business to work. And we do do arbitrage and trade on all the major exchanges. In this way, we feel that we can get to a very well-informed price. We can have a price that is more average and more stable on a global scale than any single given exchange.

Cool. And when you look forward and, and, and, you look forward and, and, to Konypult and I guess two years down the line, where would you like to see the company? I'd like to see our SMS services taking off among the unbanked. I think that this is the most important thing for Bitcoin as a whole is to bring new consumers in and to grow access to Bitcoin. I think that so far Bitcoin has mainly gained traction

among very sophisticated, educated people who have very good internet access, who are not just able to access the internet, but are typically the most savvy people on the internet. And I think that if we really want Bitcoin to succeed, if we want the price to go up and more people to use it, we need to expand our community beyond the most savvy early adopter types.

And we need to reach out to people who just want simple services and aren't necessarily trying to jump on the, the coolest new technology. Okay, cool. So the focus is really kind of on, especially adoption, facilitating adoption, and I guess especially among unbanked people or people that are kind of outside of the privileged,

first world, educated, computerized groups. Exactly. I might just jump in here. And one of the reasons I got involved with Coinapult is because, as you say, they've been in the Bitcoin scene for a while since the early days when there was perhaps more focus on the promise of Bitcoin as the great equalizer. And yeah, just the grand vision for Coinopult to my mind, and one reason I got involved with it, is this expanding access to people who haven't been in the financials.

system, haven't had bank accounts and just, yeah, getting more people involved. So, Freya, how long have you been kind of involved with Bitcoin projects? So I got involved at Christmas last year, so I'm a relative newbie, but one of the things that attracted me to it was the ability for Bitcoin to, you know, introduce more democratic ways for people to get, just it seemed like a more democratic system to me than the sort of, well, I mean, most people know the story who listen to your podcast, you know, the bank's centralization of wealth and, you know, privileged few. Yeah, okay, so you were attracted to that.

side, which I'm sure a lot of us are. And then you saw that kind of in coinapult, the company that's pursuing that kind of vision and trying to realize that potential of Bitcoin. Yeah, you know, they really are involved in the longer game. You know, they're looking at ways to improve the Bitcoin ecosystem, you know, in the long run, you know, not just short-term profit-making, you know, which I don't know, but increasingly, I see companies coming into Bitcoin space that, you know, are seeing short-term money-making opportunities. And, you know, it's nice to be involved with the company that have, you know, see the bigger picture.

Yeah, absolutely. Well, let's kind of dive in a bit more into how coin-a-pult exactly works. So there's the locks thing, which I want to talk about in a little bit. And then there's obviously the web wallet. Are you guys also working on mobile wallets? We're not actually working on a mobile application at the moment. Our main goal is to kind of grow access to Bitcoin ecosystem overall. And there are already a lot of really good mobile apps out there.

In addition, we've mobile optimized our website. So any mobile user can still use our wallet in a, we think, a pretty good interface. this kind of protects them and us from say Apple changes their mind again and decides to kick all Bitcoin apps out of the store. Our users can still access their wallets and their funds and so on. But I'm curious, so is there a QR code scanner when you use it on the web? There is not. That's one thing that's definitely missing.

And we will work on that. Yeah, that seems like that should be also, I guess, something, especially if you do, target and consumer, that will be important in the future. Absolutely. Okay, so there is that. I've also seen on your website that you guys are offering some kind of merchant services. Is that similar to, let's say, BitPay? It is very similar to BitPay.

We will help your company receive Bitcoin and then immediately convert it if you wish or lock it to gold so that you can spend. it later as Bitcoin again. We also do the opposite. So if you're a company that wants to net purchase Bitcoin, you can sign up with us, send us some wires, and we'll help you purchase when you're ready. So you guys are also providing the service of,

I'm a merchant, I get Bitcoin, and then you guys can take those Bitcoin, sell them and basically give me, let's say, US dollars in the bank account. Exactly. Okay, so you can, I guess, choose either as a merchant either receive the US dollars or like the Piat currency or sort of of get rid of the volatility through the locks thing or just keep the Bitcoins is that correct? Exactly. Oh that's cool. I guess that's a good segue into into the locks feature that we sort

of mentioned a few times that I haven't really gotten into. Can you tell us what the locks feature is? Yes, so Lox is a volatility reduction tool. Basically, it allows anyone, any quantipold user to deposit Bitcoins into their account and then tie the value of those Bitcoins to a stable asset of their choice. So let's say that you really like gold. And you think that Bitcoin is very volatile and you wish that you could store some of your value in gold and have it. fluctuate with the price of gold rather than with the price of Bitcoin. You would then go to your locks page on Konypult.com. You would select lock to gold, say how many ounces of gold you wanted to lock,

and you can lock down to a hundredth of an ounce of gold or roughly $10,12. When you click submit, it'll deducts the bitcoins or you can send it in from a different wallet if you want. And then from, so pardon me, from that point on, it's like you have, say, one gram of gold that's spendable on the Bitcoin network anytime you want. And as the Bitcoin and gold prices fluctuate, we will make sure that you always have exactly one gram of gold to spend. So, for example, if the Bitcoin price falls in half and gold stays roughly the same, when you unlock your one ounce of gold, you should get twice as much Bitcoin back. Now, the downside of that is if the price of Bitcoin doubles,

then you unlock your old, you would get half as much Bitcoin back. Yeah, so essentially it's similar to, let's say, I get some bitcoins, and I say I don't want to have the volatility, I put it on BitStamp, I sell it for a US dollar and just hold the US dollars there. Of course, in your case, it's more convenient because it's integrated in the wallet, but it's essentially a similar thing, right? It is a very similar thing, yes. We think that we've basically made this tool just easier and more accessible. You know, you can take weeks to sign up and get approved for an account with an exchange. And then you have to know how to use an exchange. What are limit orders? What are market orders? You know, what does it mean to say that, you know, there's this much volume at this price? Most people don't want to have to learn all these things. And they're not traders. So we really really build locks as a tool for everyday users.

So when you talk about the, let's say I want to lock it to gold, because you guys, of course, I have to charge a fee, you know, because essentially on the back end, you are selling the bitcoins, no? And for example, for US dollars or for gold. Yes, we are. We are, when you lock to an ounce of gold, we sell an equivalent amount of Bitcoin as you gave to us to create the lock and buy one ounce of gold.

And in this way, this is how. we can guarantee that we'll always have the right amount to give you in the future is because we hold 100% of the collateral. As far as the fee we charge, it's just a spread. So there are no fees in the traditional sense, but there is a difference in the bid and ask prices. Typically, the difference between the bid and ask prices is 2%. So if you've locked and unlocked immediately, you would have roughly 2% less than you.

you less Bitcoin than you started with. Clearly, this service isn't designed to be, you know, immediate lock and unlock that doesn't serve you any good. It's for eliminating volatility over time. So we think that over the course of maybe a week or two, this one or two percent is basically wiped out by the natural volatility of Bitcoin. Yeah, I mean, I tested it out last week and it worked exactly the way, the way advertised.

I used like a $1 to lock it or one Bitcoin or $1 worth of Bitcoin to lock it to dollar and then lock it back and it costs exactly two cents in the end to do that. So I also afterwards I went to the blockchain and I checked

what happened with my coins and they never moved from once I paid them in. So how does that exactly work? Do you hold an amount of Bitcoin sort of on reserve with exchanges? Or can you talk a bit about the kind of what goes on behind the scenes when that happens? Absolutely. So as I mentioned, you know, when you create a lock, we sell an equivalent amount of bitcoins and buy the amount that you lock to.

So if you're locking an ounce of gold to continue with our example, and it's costing you 2.2 Bitcoins today, which is just a very rough estimate. We will sell 2.2 Bitcoins and buy one ounce of gold upon locking. And when you want to unlock, we will sell the one ounce of gold and buy however many bitcoins it is at that market price and make those available to you. We do have accounts on numerous exchanges and other liquidity, Bitcoin liquidity providers to be able to facilitate this. And we do keep Bitcoins on reserve for these, our own Bitcoins for exactly for facilitating this sort of liquidity. So the Bitcoin that you sent us initially goes into our shared wallet. And it's not necessarily that exact Bitcoin that we're

promising you back. We're promising an equivalent amount of Bitcoin back. Yeah, absolutely. So if you talk about the silver thing, I think that's interesting, right? So because you offer gold and silver. Now, it makes sense for me that, like, the dollar is very easy because there's a very liquid market there. But when you talk about gold and silver, does that mean you're going to have to trade the dollar for, the Bitcoin for dollar and then the dollar for silver? And does that mean the fees are going to be much higher? Or do you have some other ways of making that work? You hit the nail on the head. We do, because of the liquidity problem with between Bitcoin and silver, for instance. We do purchase the silver using dollars or euros, and similar with gold.

But for us, this is not a significant cost. Once we've got the infrastructure set up to do this and to do the accounting for it, then it's very easy. It's not significantly harder than locking to dollars or euros or British pounds for us. So we don't charge any more for it. You get the same 2% spread when you're locking silver or gold as you do when you're locking dollars or euros. No, that's cool. I would have expected that this would be more expensive, no, because you'll have more illiquid markets, et cetera. But that's really cool that you're able to do this for the same fee. Thanks. Yeah, I mean, we're lending our liquidity just to provide the best possible user experience. So there's one topic I kind of want to touch on. I guess before that,

One more point on this. What about counter-party risk in this case? So obviously you guys are a web wallet. So anybody who sort of understands how Bitcoin works, they realize that, well, there's a kind of party risk there, right? Just the same as with Coinbase, et cetera. You know, if somebody hacks coin a quote, well, there's a risk. But essentially, we're doubling the counter-party risk, no?

Because there's a risk on your side, I guess, in the one hand, And there's also the risk on the side of the parties that you guys hold those values with. Is that correct? That's one way to look at it. I think that that can be, we do a lot to greatly reduce that. And in a lot of cases, the parties that we're holding, for instance, euros with, those accounts are actually insured to some degree. And we're looking at getting more advanced insurance for them.

So it's not necessarily doubling the risk. In some ways, we hope to actually be able to greatly reduce the risk. But yes, anytime you are using a service like this, there is some counterparty risk. We don't want to mislead people into believing that we're somehow getting rid of that. And frankly, we just want to prove ourselves as a party that's worthy of that through good stewardship and falling through on our promises. You've also got to weigh it up against the risk that people perceive in entering the Bitcoin space in the first place, which is what we're really trying to tackle the people that

aren't in Bitcoin at the moment because they see it as such a great risk. So, you know, if we can mitigate that risk to some extent, I mean, that's, I think that's doing a service to the Bitcoin ecosystem. Yeah, absolutely. That's a good point. And of course, another point is that, you know, even if you hold in your own computer, it takes a considerable expertise to do that in a way that's actually safe. So in many cases, people may be better off to keep their bitcoins with a company like

Coin a poll to Coinbase or a web wallet like that. Yeah, absolutely. And as somebody who definitely didn't come into Bitcoin with technical knowledge of how it works, I'm a good sort of tester for their system, you know, if it makes sense to me and I find it easy and enjoy using the service. It's always a two thumbs up that, you know, the general public will also think the same. Yeah, absolutely. Now, I'm really curious about something. And I'm sure you guys have looked into that because one of the promises that has been in,

you know, in the air for a long time by projects like Mastercoin or a lot of these other Bitcoin 2.0 projects is to create cryptocurrencies that are essentially tracking or peck to fiat currencies. So let's say the US dollar. And I think I get one way of doing that is having some sort of contract with differences or I honestly haven't never looked very deeply into how exactly they were thinking of doing that. And I guess I'm not sure if something like that exists, but have you looked into that? Do you think that is possible?

Do you think that maybe something where you could go to in the future? Yeah, we've looked into this pretty extensively. And we think that most of these systems are still very early, and they're not actually addressing the counterparty risk, which is kind of their main claim is that they're going to somehow reduce the counterparty risk. But no matter what sort of contract you try to do, if the other party is betting on, for instance, gold, and they don't actually have the gold, then they're not going to be able to keep good on their end of the contract. So, for instance, you mentioned a contract for difference, so CFD.

if you're making a contract for difference between Bitcoin and gold, and you're on the Bitcoin side, and the other party doesn't actually have the gold or have an equivalent amount of gold, they may not be able to make good on their side of the contract. And in a much simpler case than a CFD, for instance, on Ripple now, there are people issuing gold-backed Ripple tokens,

and similar. But in these cases, it's even more clear where the counterparty risk is. It's with who the token issuer is, who actually is holding gold and issuing gold ripple tokens. And, you know, these transact around the ripple network. And yet, everyone holding one of those or accepting one of those is implicitly trusting the issuer and the continual holder. continual holder of the underlying collateral, the gold.

So really, we see locks as no different from these. You know, we could easily issue a gold ripple or master coin, a colored coin, something like that. But we wouldn't actually be solving any problems. There would still be the exact same counterparty risk. The users would still be trusting coinipal. And what's more, our users then wouldn't be able to use the Bitcoin network. they would be stuck on one of these smaller, less well-connected, less supported cryptocurrency networks. So an example is with coinipults and a gold lock, you could go to overstock.com

and purchase a laptop directly deducting from your gold lock. So it's almost as far as you're concerned, like you're purchasing a laptop for gold. Whereas if, you know, you were using ripple or real coin, which is a dollar-backed master coin that is announced, you would have to first convert your master coins or your ripple tokens to something that overstock would accept Bitcoins, and then you would be able to go and purchase your goods using Bitcoin. There are some retailers that accept Ripple,

and hopefully soon there will be some that accept master coins. But it's just a much smaller community, and therefore we think less valuable to our customers. Yeah, absolutely. No, no, I think that makes total sense. I mean, I've just always been curious about this. You know, is it actually possible? And how will this work?

But of course, if it just sort of shifts the counterparty risk somewhere else, then that's not necessarily a benefit at all. That's basically how we feel. Now, have you... looked into whether there's a way of decentralizing this somehow? When you say decentralized this, there are a few different risks, a few different steps along the way. Some of them can be decentralized. Some of them can't. I think the biggest question that people have is for counterparty risk like we've just been discussing. And I think

that a lot of these Bitcoin 2.0 systems claim to be reducing the counterparty risk. And we think that's pretty misleading because there's always another party to transactions like this. And to say that you're not trusting them is simply incorrect. There are some things that can be decentralized about blocks or a similar sort of service. In Locke's case, we are basically just plugging into the Bitcoin protocol, which, as you know, is already decentralized. So we're admitting that, you know, we are the counterparty risk for when you want to use to store your value in a centralized asset, as there is no other, there is no other way, aside from trusting some counterparty. Our goal is then to be a trusted counterparty to allow you to do this when you want to, but when you don't want to, to give you immediate access to the decentralized network where you then take full control again.

So really, the Bitcoin protocol is our mechanism for allowing our customers to decentralize their assets whenever they choose to. And the way that we've tried to connect it to is to make it as easy as possible to go from Bitcoin into a lock and out of a lock, maybe even without signing up for an account. You can fund a lock directly from the network. you don't have to first deposit it into your coin-a-pult account and then lock it after. And similarly, you can withdraw it directly from a lock to any other address on the network. Yeah, cool. I think that makes sense. And it's, I mean, I think, you know, the way I guess I look at something like locks,

I think it's just a really, really nice and useful service that deals with, you know, deals with an obvious problem in Bitcoin. And, you know, yeah, I mean, I think so. I think that's something very positive and there's something I like a lot. And I like a lot that you can essentially stay 100% in Bitcoin, but get rid of some of the volatility, right? So if you, let's say, a merchant and you accept Bitcoin and you don't like that volatility, but you still want to be 100% in Bitcoin, you know, then that's something you can basically do with this at, you know, pretty reasonable cost, you know, 2%. It's obviously not cheap, but it has a big advantage is.

Because if, you know, with the high volatility that Bitcoin has, and I personally don't think it's going to go away anytime soon, that's a real benefit. Absolutely. You know, you mentioned businesses. We think that this could be very interesting for businesses as they start to complete their supply chain. So, for instance, there's been some speculation recently as Overstock accepts Bitcoin already. And recently, Dell started accepting Bitcoin. and Overstock sells Dell products. So one possibility now is that Overstock can start to integrate their Bitcoin into their supply chain, what we call vertical integration, and purchasing their stock from Dell using Bitcoin. This is just, I don't think either company has talked about this,

but it's just a clear possibility at this point that people in the community are talking about. If that happens, then overstock may wish to use something like locks in that case, because they know that they're going to need some Bitcoin in the future for purchasing their stock to refill after purchases. And rather than converting to dollars, which is what they do with most of the Bitcoins they receive today, they would almost certainly prefer to keep as much of it in Bitcoin as they could to facilitate this future. future transaction. At that point, though, they're exposing themselves to risk for, let's say, the one month in between, you know, when they sell the last laptop and when they need to pay for the next one that they're buying to replace it in their stock. They would, they could use a lock for that period to protect the profits that they have. And at the time when the bill is due, they would simply unlock, pay over the Bitcoin network. And we would, we would,

have hopefully a new level of integration in the Bitcoin economy. Yeah, it's an additional tool. So that's one use for it, but we expect that the community will find new uses for it that we perhaps haven't thought of yet. You know, if a business has an idea where they want to use the Bitcoin network, but, you know, obviously the price volatility is an issue. They can partner with us and provide lots to their users. I've noticed when I signed up, there was a limit.

It said of $3,000 that I was able to lock. Why is that? Do you require some kind of KIC to go higher? How does that work? Yeah, we will be raising this in the future. $3,000 is actually per transaction. So you can lock, I think, up to $25,000 right now, but you can only do $3,000 at a time.

Ah, okay. No, no, that changes. changes a bit. Of course, 25,000 is a lot more than 3,000. That's actually per asset. So there are five assets, gold, silver, dollars, euros, and pounds. So you can do $25,000 worth of each. Yeah, true, right. But of course, if you're targeting businesses, then I guess it depends a lot, but I'm sure you would have been sort of individual conversations with those businesses to have. Yes, absolutely. Yeah. For businesses that are willing to go through our KYC process, we can lift all these limits. So K-YC process brings up something interesting. Is there, does this have any kind of

regulatory implications do you guys have to, is this financial service, this locks thing? I mean, you guys are in Panama. I have, you know, I have no idea how this works down there, but can you talk a little bit about that? Sure, absolutely. We think that locks is basically a new service. It's a new type of tool. We don't necessarily believe that Bitcoin is money or currency. In a lot of places in the world, it's not legally defined that way. The landscape around Bitcoin legally is very diverse, though. And so we look at it on a country-by-country basis.

And in areas where it looks like these services would be more regulated, we've taken a wait-and-see approach and have blocked those markets. So indeed in the US, we have actually blocked the US market for the moment as things like the Bit License are kind of flushed out and we see really what the rules of the road are going to be going forward. So you do this by blocking the IP address? Exactly. I guess that brings up a topic that I wanted to touch on as well

And since the BIT license proposals come out, I think everyone who's been on, who has some kind of startup, I've asked about the bit license thing. Because I've read it with a lot of attention. And I think it's really has crazy implications if one thinks through all the, at least if it goes through the way it's been drafted. So I guess I'm sure you guys don't want to get a bit license. So is your strategy to essentially block American users? That for the moment is our strategy. And I'll say we definitely do not want to get a bit licenses that's currently proposed. The current bit license is basically a free giveaway of the economy to the banks.

There's nothing in it that's really reasonable for a Bitcoin business. certainly not a Bitcoin startup. You know, and as this is a very new space, we hope that there are many more startups and much more innovation that will continue to go on. It shouldn't just stop at this point. And if you don't have $10 million to spend on licensing and compliance, then tough luck get out of the business.

So, yeah, I mean, we think that the Bit license is absolutely the wrong direction to be going in. This technology is so new. No one even knows what. what it's going to be used for in two years or five years. So how can we make rules like this for it that are so incredibly restrictive? You know, the use of blockchain technology for messaging, for contracts, for completely non-monetary things is just starting to really take off. And in this way, New York is basically trying to just crush it.

That's the only reasonable explanation I can see for why they would propose something like this. They have no real interest in facilitating this technology and every interest in finding ways to make it unfeasible and unattractive to the users. But do you guys think blocking IP addresses is enough? Because from my understanding, it probably is not. What do you mean enough? Enough legally?

Yeah, because in the end, if let's say a New York user mentioned was using the lock service while they're not in US. So we have a different IP address. Let's say to use some kind of proxy. VPN.

Yeah, VPN. I think that probably wouldn't necessarily protect you guys. That's not what we've read. And frankly, there's no technologically feasible way to make sure that somebody isn't trying to fool us

and using a VPN or something like that, all we can do is kind of our best efforts, and that's what we've done with this IP blocking and similar stuff. Now, this is just the general problem. This isn't a question for us. It's a question for Ben Loski and those who would wish to regulate Bitcoin is, okay, you've got these rules. Now, how are you going to enforce them?

You know, how are you actually going to, well, they're not going to enforce them at all. How are you going to ask companies to enforce this to do all this, what I consider dirty work on their own customers? The Bitcoin network doesn't even provide a mechanism in most cases. You know, for instance, someone sends you Bitcoin to pay for some goods at a retail store. under the BitLith's proposal, you would be required to gather, you know, KYC information on this user. But the Bitcoin Protocol doesn't provide a mechanism for doing that. So it's really just an unenforceable silly rule. To quote Stephen Pair, the CTO of BitPay, why don't they just put up a great firewall like China did?

It's on them to enforce this. it's also worth saying that our goal is to is to maximize access to our services and you know we are looking for ways to to help the US into our you know help them access our products so it's hopefully this is just a temporary situation and then we've got legal teams who are you know helping us navigate sort of the tricky situation that the regulators have put us in really yeah I mean, I completely agree with both of you guys. I mean, so in my view, and in my understanding of the bill license firm, you know, one of the terms in there is that any company under a bid license needs to have sort of a complete record of all the parties of all the transactions. But of course, that is just insane, right? Because the only way, in my view, to be truly compliant with this

if it goes through the way it's proposed, is if everybody does K-Y-C, even if you don't want to get a bit licensed, just to exclude the people, just to exclude the New Yorkers, so you can say, I don't have to get one. And then you'd also have to sort of prevent transactions

from unknown addresses. Because, of course, if it's an unknown address that's, let's say, paying money into your wallet, how would you know it's not someone from New York? And then that's completely absurd, right? It's literally impossible. But yeah, hopefully they will sort of come around to something at least a little bit more reasonable that then would at least not put as much of burden on the companies that don't want to get a bill of license.

Not to mention the other customers. I mean, I'm surprised that there hasn't been more international backlash against this. Because if you're a customer from Europe, for instance, that uses a service that also does business in New York, all of a sudden it's your privacy. It's when you want to do a transaction in the future, they're going to be asking for your information. And so, you know, businesses are really being faced with this tough choice to either start treating all of their consumers everywhere in the world, all their customers everywhere

in the world, just like a bank or even stricter than a bank would, or block New York. And for us, it's a very easy decision. We don't want to treat our customers like that. Yeah, absolutely. I mean, I think if you look at the license thing, the implications kind of are that any company that's going to comply with the bid license thing, they're going to have to make their product a lot less attractive. So, I mean, in my case, it seems very likely that if this goes through Coinbase,

let's say, starts doing bit license. well, I probably will stop using Coinbase, right? So it seems to me that even the companies that would have to get one should lobby really hard not to do that. And I think that even is true for companies that are really well-funded and have lots of money and for whom the legal costs are not such an issue. I think that your analysis is very logical, Brian, but I don't have faith that all of these companies are actually lobbying against it.

Unfortunately, I think some of them see the opportunity to cut out competition by raising the barrier to entry. Yeah. Unfortunately, I'm afraid you may be right. We certainly haven't seen a lot of backlash from any of the big companies. So, actually, let me briefly, let's briefly go into a topic that, you know, you've been dealing on Freya as kind of in your work for Coinapult, which is the marketing of a Bitcoin product. Can you tell us a bit about that? Yeah, sure. Yeah, it's interesting.

It's an emerging market, so there's a lot of audience discovery to do. And coming from previously working in London for an advertising company in very well-trodden areas of marketing, the contrast is massive, you know. So it's quite exciting. It's about finding where people are people. finding where people are who might be potential Bitcoin users and reaching out to those who already are. And, you know, we've come up against some hurdles as in where is there to advertise. I mean, the Bitcoin community is still quite small and the number of places to actually put

adverts up. And yeah, I mean, it's exciting stuff for me as a marketeer. So what are some of those core differences between advertising in an area that's, I guess, well-established versus something like Bitcoin. I mean, you mentioned, I guess, lack of outlets, media outlets. What else is there? Well, I guess one of the big differences is that you're not fighting a million companies for visibility as well, which is pretty nice. So, you know, there's the potential to, you know, get seen by the people that matter very quickly.

And that's nice too. Yeah, I mean, it's a lot of it is, I think, social media marketing based because of the lack of media outlets. And, you know, I mean, you must know with your show, there's your podcast and a handful of other podcasts that are sort of globally facing. And, you know, it's kind of like that across the board, really, in the different areas.

so that there's the less place there's less places to be seen I guess a big challenge must also be to just figure out how to communicate with no like how do you explain something like blocks because it's you know it's new now yeah absolutely yeah and we've you know we've had talks about how to reach out about our products and get people to kind of understand what we're doing and yeah, we're hoping to do a series of webinars. So people can, if people are interested, but they perhaps don't quite understand, you know, how it works, then we're hoping to have one-to-one sessions with people and, you know, and get people to kind of come along to a webinar and we can explain a bit more. Yeah, that sounds great.

Although that being said, I think you guys, actually have done a really good job. I think it's really intuitive and easy to use. And, you know, I didn't have a lot of difficulties figuring out, you know, how to use the coin-a-bould wallet and including the locks thing. So I think, I think you've done a good job there. Yeah, great. Thank you. I mean, we did do a lot of work before going to launch to get the product being really simple to use and, you know, and visually really easy to navigate through. you know and and I definitely had some things to say about that coming coming into the space as a non-techie you know it was I think it was quite helpful to have that perspective on things to say you know this

needs to be we need really big clear buttons that's so one of my my favorite things when I go to website you need to see big buttons but yeah I mean it's it's all those things so you know we didn't we didn't go to launch until we were happy that our product was going to you know, was going to be usable for the general public. Cool. Well, I think it was really cool talking about the Coinapult stuff. And I really urge people to check it out. So coinapult.com.

And I think it can be especially interesting, especially interesting if you hold a lot of money in Bitcoin, know, if you receive your salary in Bitcoin, if you get paid in Bitcoin, if you sell things for Bitcoin, then I think things like the Lox Wing can be super relevant. So, you know, I urge anyone to check it out and, you know, give it a try. So before we kind of wrap up, let's, you guys have mentioned a really exciting project.

And I'm super excited to talk about it. So it's called Let the Bid Drop. Can you give us a bit of background on it? Yes. So we've been working on the Bid Drop for over a year now. The basic ideas that we are going to send every single person in an island nation some Bitcoin all at once. So when we're done, there will be tens of thousands, at the end of that day, there'll be tens of thousands of new Bitcoin users, and it will instantly become the largest, highest density population of Bitcoiners in the world. We're going to do this in Q4. We're hoping in the next week or maybe two weeks to announce the specific date and the name of the island. We are, we're going to throw a party at the same time on the island where we'll have educational

materials, Bitcoin ATMs. We're talking to local vendors to get them to come out and sell drinks and snacks and things like that. And we're just hoping that it'll be a big smash and that these people that are mostly unbanked will find some use for it. What amount will be given to the people? We are just starting to fundraise. So really it depends on how much the community is willing to send to us. If you go to let the bit drop.com, there's a donation address. And if you donate more than 0.1 bitcoins, then we'll enter you into a raffle.

and you can actually win tickets to come down and enjoy the party on our beautiful Caribbean island. Because it's been so long in the making, we haven't really set a final budget yet. We kind of figured that whatever the community is willing to give, we'll distribute that to the islanders with some amounts set aside for making the educational materials, for getting the ATMs and all that stuff down there and just kind of operations for the party. I think one interesting scenario, of course, should be right? So, like, you're giving out this money to the Islanders, and let's say it ends up being, you know, $3 per person.

You know, then the question is, what's going to happen with that, right? Does that mean people are going to start using it and then they have to use it as a sort of, to give it a different value for it actually to be used in transactions, you know? Is that something you guys thought about, whether you may have like totally different exchange rate in that locale? And I guess that would only happen unless you have a liquid market of the local currency to Bitcoin. That's very fascinating. Yeah, we're just curious, I guess, as to how people are going to use this.

You know, most of these people don't have any access to financial services right now. So it may be so foreign that it takes a while to really spread the knowledge of how to use it and what the potential is to spread amongst the people. But we do think there are going to be a core of people who do get it. Maybe some of the business owners that we're reaching out to now will continue to support it. We're leaving ATMs on the island, so it will be a relatively liquid market. It can't trade too far outside of the global range or else the ATM operators will. pull the island's market back towards the kind of international standard. But really, yeah, we don't know.

I don't think anybody knows because there hasn't been this kind of outreach to the unbanked communities yet with Bitcoin. And so far, what we've seen with Bitcoin is technically savvy, wealthy people and how they use it. And, you know, they may think, oh, do I want to pay with Visa today or do I want to pay with Bitcoin? But that simply isn't even an option for these people. So we're just looking forward to watching and observing. And the drop is planned to happen towards the end of this year, right? Yes, in Q4. Q4. Cool.

I mean, I think this will be super fascinating to see what comes out of that. I really, I can't wait. I think it's an amazing experiment. I think the MIT thing is a bit similar, right? Of course, a totally different audience. So it's quite hilarious that, you know, two similar sort of like drop projects are happening at a similar time. One is targeting some of the best educated, well-off,

most technologically savvy. intelligent people and then you have another project that's targeting really like low-tech poor and unbanked people so it would be super cool to see you know how what kind of different uses we'll see with bitcoin i'm excited to see um what how this will be different from that in terms of because the government have got behind it um the local governments um you know whether the fact that they will be sending out educational materials to the people, whether that will have an impact differently on how the public kind of take to Bitcoin. That for me is kind of a fascinating thing to wait and watch.

Yeah, absolutely. Yeah, it's cool that you guys manage to kind of get the government behind that. Of course, that makes it easier also, the smaller the place you go, right, the more reclusive, I think you will have less of a kind of influence of banks and the paranoia that perhaps makes this difficult in other places. Absolutely, and the government's been very, very nice to us. You know, I think in addition, the smaller the governments and the smaller the place, the more open they are to innovation and trying new things.

And that's kind of what we're seeing here. You know, this is a relatively poor country, and they are willing to try new things to improve the economic conditions that they have. And frankly, I think that they're going to succeed. Cool. Well, I'm super... So if people want to check this out, and if they want to participate,

what are the best ways they can do that? At the moment, we're still working out some of the finer details. So the best way to participate is to go to let the bit drop.com. You can donate and watch for more details. You can follow us on Twitter. Our Twitter handle is The BitDrop. And as I mentioned earlier in the next couple of weeks, we'll be coming out with much more details about the projects,

the name of the islands, the date, hopefully some of our musical guests and things like that that are going to be attending the party. So, yeah, just follow us on Twitter. Check out our website, let thebitdrop.com. and we'll keep you up to date. Cool. Well, thanks so much for joining us today, guys.

Perhaps before we wrap up, Freya, do you want to talk a little bit or tell us a bit more about the podcast you've been doing? Yeah, I can do. So, yeah, I've just been running a podcast for about four months now. And I got into Bitcoin listening to podcasts that were coming out of the USA. and they really got me fired up and excited about Bitcoin.

And so, you know, I just thought perhaps it would be good to have different voices in the mix. So, yeah, so I thought doing my podcast, which is the Bitcoin UK podcast, and would be a good idea just to kind of, yeah, just to expand, you know, the number of places where people can go to get information and, you know, focus on. what's happening in the UK as well. There's a lot of good stuff going down. Yeah, absolutely. And I think there's a very few podcasts in Europe.

I mean, there's, you know, me and last year, we're both in Europe. There's yours. I don't know if there are any other. I'll know. There's some more. There's one in Austria and there's another one in Germany, I know, at least. But there's, yeah, there's definitely not as much as in the US. So I think it's great to see another European-focused podcast as well.

Absolutely. And then there's RIMS for more, even still. Yeah, absolutely. Well, thanks so much for joining us today, guys. It was really great to talk about the Konypals, talk about regulations and let the BitRoproth project. So, yeah, thanks so much for joining. Pleasure. Thanks for having us, Brian.

Yeah. And of course, also thanks for listening to the show. If you want to support us, you can do so by donating. And you can either the epcentadobitcoin.com slash tips. You can also follow us on Twitter at EpicC and what's also very helpful is leaving us an iTunes review so people can find the show and you can also let us know what you like about the show

and what we can do better. So thanks much for listening and we'll be back next week.