Epicenter - Learn about Crypto, Blockchain, Ethereum, Bitcoin and Distributed Technologies - Hans Henrik H. Heming, Jaron Lukasiewicz, Johann Barbie & Tamás Blummer: Inside Bitcoins Berlin 2014 – Conference Floor Interviews II

Episode Date: March 6, 2014

This episode is part of our coverage of the Inside Bitcoins conference which took place in Berlin February 12 and 13, 2014. In this episode, we bring you feature interviews we did with five people bringing innovation to the Bitcoin space. They talked to us about the innovative projects they are working on, their impressions on the conference as well as their outlook on bitcoin’s future. Enjoy Topics covered in this episode: Johann Barbie – 37coins.com Támas Blummer – bitsofproof.com Pamir Gelenbe – hummingbird-ventures.com & coinsumm.it Jaron Lukasiewicz – coinsetter.com Hans Henrik H. Heming – bips.me This episode is hosted by Brian Fabian Crain and Sébastien Couture. Show notes and listening options: epicenter.tv/eb-inside-bitcoins-berlin-03

Hi, I'm Brian Fabian Crane and I'm here with Sebastian Guter. On February 12 and 13, we attended the Inside Bitcoin's conference in Berlin. After two months of podcasting together, it was the first time we met in person. We had lots of fun, interviewing many people from the Bitcoin community, attending interesting talks and capturing Bitcoin at this unique moment in its history. This is one of a series of episodes about this conference. In this episode, we bring you feature interviews we did with five people bringing innovation to the Bitcoin space. You'll hear conversations we had with Yohan Barbie of 37 coins, Thomas Bloomer of Bits of Proof, Pamir Gilenby of Hummingbird Ventures,

Jaron Lucasevich of Coinsetter, and Hans Henrik Heeming of Bips. They talk to us about the innovative projects they're working on, their impressions on the conference, as well as their outlook on Bitcoin's future. Enjoy. All right. Shoot away. Good morning. Introduce yourself.

Yeah. Hi. My name is Johann Barvey. And I'm the founder of 37 coins. 37 coins is your global SMS Bitcoin wallet. Makes sending Bitcoin as simple as sending a text. And where do you guys are? So Songi and I, we are based in Berlin.

We work from here. And yeah, that's what we do. And how far are you in your development? So we started this back last year in September. We came up with the idea at a hacker phone where we developed a very simple SMS-based wallet. And we've driven it and added new concepts and added security. And we launched the whole thing at the end of December.

And it gave us a really awesome feedback, mostly from the Bitcoin community, where we got more than 1,500 page views overnight. And since then, I've... receive like emails every day of people telling me how much they like the idea of the distributed concept and of bringing bitcoin to people that don't have access to internet, they don't have access to the blockchain right now. Yeah, bringing Bitcoin into that space. So can you tell us me more about how it works technically? Yeah. So 37 coins mirrors Bitcoin in a certain way

in that we have a distributed architecture there. We call it the gateway, and the gateway is an application you put on an Android phone. It can be a really old Android phone. And the phone number of this Android phone then becomes a gateway to create and manage your wallet. So you send a text message to it, and it opens a wallet for you. And then you send commands like send amount receiver or balance or price, and you can manage your wallet. And the private keys of the wallet are stored in this gateway.

That's a good question. So, of course, you cannot store private keys on a non-computational device, like a feature phone that only uses SMS, right? We cannot install apps there. So what we do is we hold Bitcoins on multi-signature addresses, and those addresses are created in cooperation between the gateway and a central security system, which we call the voice-pin service. Yeah.

So the voice pin service kind of makes sure that this distributed architecture is not malicious because we cannot trust the single parties. They could alter the app or someone. There is a device which is called Imsycatcher. It intercepts your mobile's connection to the next provider's station. And it can rewrite all the data. So to make sure that this doesn't happen to the gateways, we have a second factor of verification

and that's a system that gives you a call reads the transaction to you and then asks you a voice pin which is the thing you need to remember so what's... How do you... Like how does this actually work when you want to make a payment since it's using SMS and

there may not be a camera device? How does it work? Yeah, so you're scanning to QR code. You have to manually enter the address? Yeah. So it's a real pain to put in a long address into a feature phone, right? It's like a retina. Yeah, man.

So I came up with a simple system to send Bitcoins to phone numbers and email addresses. And that's based on existing RFC from the Internet, which is called Wetfinger. And it allows us to read information from an email address in a secure fashion. And that's what I used to store email addresses behind. human readable identifiers. And that's what you also can use in your SMS. So you do send amount and then either an email address, a phone number, or a Bitcoin address.

And the idea is to use this in a scope where there is people usually don't have internet itself or something like that. So people would simply send money between phone numbers. So I want to ask you again about the gateways and security. So what's the worst that could happen if gateways? way was malicious or they wanted to steal you. What could they do? Well, they have half of the private keys, right? So they can run away with this one part of the private keys. And then they need the second part, which is on the voice pin system. And the voice pin system is running

behind TOR. So it's a hidden anonymous service. And what you would have to do is basically hack this hidden anonymous service, get the second part of the keys, and then you can spell. the money of the customers you have. Can the customers get their private keys? Is there away for them to... What do you say? Is there a way for the customers to get a whole of their private keys? Say they want to have their private keys and take it somewhere else.

All right, I see what you mean. So what we have is a functional functionality to restore your wallet on another gateway. And then you can get half of the private keys, right? And then you still have the pin for your voice pin server, and then you would be able

to send away the funds to an address which you control by yourself. So there's no issue whatsoever of getting out of the system, but it's actually not about retrieving the private keys. It's about making a transaction. And so, I suppose this is operating

like, where, what markets are you targeting? Obviously, like, as I said, we want to address those people that don't have access to the internet, don't have access to the blockchain, so there's six billion other people like Andreas Antonopoulos likes to say. And how

How do you go about, I mean, we saw this morning that apparently a third of Kenyans on a Bitcoin address. Yeah, exactly. So there's some sensibility there as to what Bitcoin is and, you know, people are starting to hear about it in those countries. But how do you, how will 37 coin make its product known for those people? And how will you build trust there? Yeah.

Yeah, of course. That's a good question. So 37 points is built on the idea of M-Pays. right it's just an international version of it and what I'm very excited about is that those people have such a high affinity for those kind of services they don't mind like checking it out if you explain Bitcoin to a European he says like

what is Bitcoin if you explain to someone from Kenya hey it's like M-Pesa but international they're like okay got it no more questions and so how are we going to spread the message it's all built in into the gateway concept so when you start a gateway you have an incentive to do so you and choose a transaction fee.

But also, there are other revenue streams in the way that when you get a new customer on your gateway, and might it be through international remittance, a transaction from the internet, actually, you get notified about it. Hey, there's someone who just started using the service. He doesn't know how to do it. So you can go out and reach out to him through his phone number

and offer him to explain him the security and to do additional services like via transfer. So I hope to build this small, world phenomenon out into a like a big scale where the gateways go ahead and they advertise their number and they bring it to the people we don't have this um uh channel through the internet we don't have this luxury of kind of like you know just broadcasting stuff because what we really look at is like rural african communities or something like that and we can only access them to the word of mouth and if we have a system that incentivizes itself like the gateway i think that's the way to go about uh

I think that's the real issue you're addressing, right? So we need to bring Bitcoin into those countries. If they just receive a text message and it's a bloody Bitcoin, they're like, what the hell? If they cannot convert it into Fiat or use it at the next store, then what's the point on this? And I think no startup can solve this by itself. Like we all have to go there together,

and exchanges and those services have to go and build it. So you think that's something that will come with time and then your service will be there and we'll be able to leverage that. It may be helped a bit as well, but primarily it would be like exchanges arising, maybe local bitcoins becoming used more. Yeah, exactly that's what I think will happen. So there are communities of Bitcoin lovers popping up in like every country, right?

Local Bitcoins has gone in like, what is it, one year or a little bit more to like more than 160 countries. And I think if you address those communities and you start from there, then it can grow quickly. So right now we're looking at a country where we can do a pilot, where we can go to and try to build a local community, like using the stuff, be internal remittance or just like using the village. And we found Philippines very interesting so far. They have two new Bitcoin exchanges there.

They have a huge remittance corridor to the United States, so that might be something to look at. And they have a lot of mobile payment solutions already there. So they're... High education as well. Exactly. They speak English. We don't have to do that much localization of those services.

Yeah. It seems to be the good markets to go after would be the markets for the corridors where remittance fees are the highest. Are you targeting specific corridors, or are you going afterwards? How do you targeting there? So there are very profitable corridors,

which are like 25% Western Union would take. So we come in there with our, like, whatever, it takes, like 70 cents to send a transaction on our network. people will love it. But also we have to think about the volume of the corridor. And then there's, for example, the biggest one is Mexico, United States, which is, I think, more than $20 billion a year. But they are pretty efficient already. They are below 5% in terms of how much it takes to send.

So we are not exactly there yet. As I mentioned, you cannot start with remittance right away. You have to have local acceptance and a local knowledge about how the system works before you can get into international scale. So we are really researching so far. which market to go to and which corridor to address to. So the Philippines seems interesting. And so I suppose you have plans for expansion

and bringing local teams to those markets? Yeah. I think what we really have is a business product. So we try to get this app as, like, how do you say, as much of an incentive as possible for people to run the gateway. And then with the gateway concept, everything should be there, right? So we really try to get other people to use it because we don't want to go all those countries by ourselves.

But first we have to test the product with the end customer to make really sure that that's what they want, that it fits in with their local customs and culture, and that's why we look at doing the pilot. So our idea is pilot first, and then conquer the world. And when's your pilot phase? What do you say? When is the pilot phase started?

The pilot, we want to start in about one month when we have the multi-signature set up well and we also have the thing behind TOR so it's more secure than it is right now. Yeah, I think it's a brilliant concept in business model as well that you try to incentivize this decentralized gateways and communities to emerge. So, yeah, I think it's a great project. Thank you. It's been a very successful. Yeah, yeah.

for us. Thank you. Well, I am Thomas Brumme, CEO of Bitsyf Proof. Bitsaf Proof is a software company developing Bitcoin software. We have our own implementation of the protocol, which is our foundation. On top of this foundation, we built applications like we build a web wallet behind Treasor, if you know that hardware device. We built a Bitcoin Exchange and Bitcoin Google Exchange. We have a merchant solution that allows you to operate like BIPPAY.

And we actually announcing today that we merge with a company called Icon Capital in Panama. So we are now a financial services provider. We will be very soon launching digital gold. We will be launching on basis of the colored coin technology. a gold-backed transfer unit, code a rails. Can you tell us a bit more about how that gold-backed currency would work? Well, we will acquire now physical gold in large quantities and will issue these tokens that can be then freely transferred over the Bitcoin blockchain.

I think this will be the first demonstration that Bitcoin is not only a payment, network for its own currency Bitcoin, but Bitcoin is capable of transferring any right or value. In our case, it will be gold-boyon. And you're using collard coins, not, for example, MasterCoin or any of these other approaches. Why did he make that choice? Well, Colod Coin is the most simple extension above the network. It is actually just a redefinition of a... certain transaction outputs

so you associate some new meaning to them. In contrast to the other protocols, it is well-funded and very simple. Yeah, I had a question. Unrelated to Cullet coin and

this gold-back currency because I wanted to get back to what you're talking about earlier with the treasure wallet and the software that you're developing for treasured. Can you tell us a bit more about that and some of the security informationations? Yeah. You know, currently web wallets are inherently insecure because the web wallets store the keys on the server side.

Now, with Treasurer, you are able to connect with any computer that you do not trust. You just put in the treasurer and you are able to sign your transactions on that secure device without exposing those keys to the computer. and the server that I built is backing a website which gives you a feeling like in an online banking so you put in the Tesor device, open this web page and you see your account and you can create a transaction, sign it with Treasor

and submit to the network and you can do it very securely even in a machine you don't know. And how easy is this? I had many conversations with people and the general consensus is that Bitcoin will take off and gain message option once the user experience or the service design around all these different ways of paying

and transferring money will become better and easier and more streamlined and have yourself. How technically knowledgeable does one have to be to use one of these devices or is it very simple? Can my mother do it? Well, the aim is here to to create a website which is about as simple to

use as an online banking. It is just much more secure and cheaper. So this is mainly oriented towards storing large amounts of Bitcoin. You wouldn't necessarily use a treasure. No, I wouldn't say it's just

I wouldn't say you require a large amount to do that. The point is this gives you the flexibility to use your Bitcoin anywhere because you can just walk into an internet cafe, put in your treasur device, and transact securely, which you currently cannot do, because you have to trust your machine, that there is no virus on it and so on.

And is this going to be free for the web wallet? I'm sorry, it is? The web wallet is going to be free for Treasar. Yeah, well, this will be a free service provided by the producer of Treasurer. I'm just a technology provider in the back end of it. The reason treasur using my service, because my service is able to process the BIP 32 key generation. So every transaction you do, the change is paid to a new address, which gives enhanced privacy. And my server is able to handle that, which others, like the Satoche implementation, not yet, they're able to do that.

Yeah. That's coming, though, in the situation. Yeah, certainly. It will be coming to the Satoche client, too. No question. What do you think then in that case, sort of the future of, you know, like all this stuff that's coming into this sushi client, like multi-key transaction, multi-key signing? Yeah. Let me give you another example, multiple signatures.

The exchange that I just launched yesterday is an exchange between gold and Bitcoin. What's your exchange shot? It is called Bouillon Bitcoin. Buyon Bitcoin.com. You can visit it. This exchange is facilitating a vault, a secure storage of Bitcoin, that uses multiple signatures. So basically, three individuals have the keys. It is the customer, it is the manager who is managing the exchange,

and an administrator who is an independent auditor. And you need two out of three keys to sign a transaction so it happens. So, for example, the withdrawal out of the exchange, if the customer wants to withdraw money, is happening by the customer does a signature and the administrator does a signature. A fixing is done by the administrator and the manager doing together a signature. So since these three keys are on three distinct physical locations, one is at the customer, one is at the manager and one is at the administrator, it is the highest security storage of Bitcoin currently implemented.

And it's also a segregated storage of Bitcoin. Like every customer has his own address, which is secured by these three out of two signatures. So a customer can basically real-time audit that his holding is there. Recognise that MagGox, the problem we just have. You don't know if the bitcoins are there. In this exchange, you can log in as a customer, click on the link, which is pointing you to blockchain info,

and you see exactly this is your... Three out of two key signature, gold, and your money is exactly there. Do you think this is something that will become standard practice for all exchanges? It has to be. And if it is also combined with treasor, it will really give you an unpranilat advantage. And the proof has bought. That's amazing, actually, yes. Yeah, we had three very big announcements in this conference.

Yeah. I want to come back quickly to this, the gold-backed currency I find is extremely interesting. Will there be some similar capability as, you know, if I own some colored coins that entitled me to a certain amount of gold, to verify that that gold really is there and no one's moved it away, for example, or that it existed in the first place? Well, the gold coins, the issue, are backed by physical gold. Would we purchase in a lot? first place. Right, yeah. But that does require a trust of course that

you are actually buying a hold, you're not stealing it, you're not, there's no fraud? In this case it needs the same kind of trust than you put in any other gold trader. On the other

side, it is the first gold trader, which is again, real-time auditable through the blockchain. since you can exactly see all the issues we do how many of tokens we issue and you can reconcile them with our statements again audited

by in a traditional way to see that the tokens in circulation matched with them I was wondering because there's kind of two ways of going about these assets backed currencies do you think it would also be possible

to take a data feed of a gold price and then design a currency whose value is gold linked but that doesn't actually... Isn't backed by gold? No, that's a fade. That's actually the idea of master coin which is entirely flawed.

I used to be an investment banker for 16 years and I tell you this kind of hedging approach always blows up. It doesn't work. Either you have the stuff or you don't have the stuff. There's nothing in between. Okay. I think I just saw Ron Gross walk by.

He knows my opinion, but everybody should try to stand up for his opinion. And I wish him success. I think what we do is the real stuff. Yeah, no, it's certainly a different quality. I mean, I'm fascinated by the possibility of this. I mean, what I see is a big problem is just the data fee, like trusting the data fee. But I am not sure about the other side of having actually being able to correlate it,

not having being gained somehow. But, you know, replicating an asset is the basis of financial engineering. Yeah. That's called hedging. Hedging has its own limits. You cannot really manage an asset without any price limits to stay in line. with an underlying. There are lots of

instances in the history of finance where these schemes all blow up. So there are schemes that work if financial world is in order, if prices move slowly, if everything is okay. If there is a disruption, all these hedging schemas usually blow up.

One more question. When you do their colored coins, trading out. I think one criticism of color coins is that you can do the simplified payment verification right? Yes. So will there be

exchanges, like different exchanges for these colored coins where they trade them on and they how would that work? Well, simplified payment verification as it was designed by Satoshi is not working with color coins

without proper support in the script language which you don't have at a moment. But there is an area in between simplified verification and full node. By storing the transactions that participate in the transfer and validating these transactions with SPV, you have a state in between the full node

and the simplified payment verification. It's still quite low resource requirement. And this is what we try. to achieve without specification. Okay. Something else? So you want to... Thank you very much.

It was a pleasure to talking to you guys. Thank you. Bye-bye. My name is Pamir Gielandbi. I wear a couple of hats in the Bitcoin world. So firstly, I'm a partner in an early stage venture capital fund

called Hummingbird Ventures. So we do seed in early stage investments in different parts across the world. I've been doing it for 14 years now. And about a year ago, I really caught the Bitcoin bug. So we started looking at the space and learning about the space. And we just recently completed our first investment. So that's one of the hats I wear.

The second hat I wear is I'm the organizer of Coin Summit, which is a conference. The next one will be taking place on March 25th and 26th in San Francisco. And the purpose of Coin Summit is really to get entrepreneurs, and investors together to help build the Bitcoin and cryptocurrency ecosystem.

I've done the first event last summer in London. It's called Bitcoin London. And really building on that, we decided to continue as a series and we've now called it Coin Summit. Cool. And you're going to do these several times a year? Yeah, we'll see.

You know, we're taking it... This is not something we're doing commercially right now, so this has not been the up as a business to make money. It's really been set up because, first of all, I love getting people together. I'm really passionate about that. And it's a great way to get to know a lot of entrepreneurs and investors and others and people who deal with regulation and so on in this ecosystem. So that's why I've decided to go ahead and do that. So, you know, the London one was good. The San Francisco one hopefully will go well too. And I'm certainly hoping we can turn this

into a series or at least an annual rendezvous. Yeah. And as a venture capitalist, what would interest you the most about Bitcoin? So, no, a lot of things. For me, the aha moment with Bitcoin happened a little bit late. So a friend of mine called Zvain Balfels, who's from Iceland originally who lives in London, contacted me in February 2013 because he was raising money for. a startup and you wanted to build something in the Bitcoin ecosystem.

And it was really after talking to him that I became a convert, so to speak. I had heard of it before. I'd read Fred Wilson's blog back in 2011, but I frankly hadn't followed up on those readings. So I came quite late to this space. But what I like about Bitcoin is a number of things. So back in 2007, but as an entrepreneur, and I'm a, you know, my background is as an entrepreneur, so I set up four different businesses in the last 15 years.

But one of the things I was really fascinated by around 2007-2008 was the growth of M-Pesa in Kenya, which is a way to do transactions on top of the Safaricom mobile network. And it became very clear that M-Pesa was becoming very successful. And I started thinking about building a business. business, maybe on top of M-Pesa, maybe offering financial services or financial products that people like insurance or investment products, even that people could buy through M-Pesa. But the more we looked into it, the more we became somehow disheartened because our conclusion at the time was that M-Pesa was an exception, not something that would generalize to other

countries so quickly, primarily because in Kenya, Safaricom has 70% market share, and the regulator in Kenya is known to be quite lax. Yeah. And we couldn't see something similar to M-PESA developing rapidly in, say, India, for example, where you have six major network operators, all fighting for market share, not ever agreeing on anything, and a very tough regulator and slow regulator. So we concluded that trying to build some sort of global business, offering products on top of the mobile banking infrastructure would not necessarily be a very good idea.

Yeah. And when I look at the evolution of mobile banking over the last, six, seven years since I looked at this, I think we were right. So when I've learned about Bitcoin again through my friend's vein a year ago, the aha moment I was referring to earlier was really realizing that Bitcoin is like M-Pesa for the whole world. And by the way, not a single regulator can stop this thing. They can regulate it, and I think they have to, or we have to live with regulation whether we like it or not. Because otherwise this thing will not be successful in the long run.

But the good thing here is that the regulators can't stop it. And that's the critical component. Because if they could, they might. So that got me very, very excited. Because I realized that here was an opportunity, really, to get involved in something where, you know, something that can change the world. And for me, I'm not that interested in investing in products or services that, you know, incrementally make our world better.

I'm really interested in things that have the potential to very fundamentally change the world. And I think in the Bitcoin ecosystem, there's certainly a lot of opportunities to do that. So, for example, the things we're interested in are, I think it's a little bit early for that right now. And we haven't invested in that theme yet, but the theme I'm very interested in is emerging markets and, you know, enabling unbanked people to carry out financial transactions. So that for me is a major motivation in the Bitcoin ecosystem. As a venture investor, as a fund, we've done a lot in emerging markets. So we invested in Morocco.

We've invested in the Middle East. We invested in Turkey. We invested in other places as well. So we have some experience of emerging markets, and we like them. We like the growth. We like the change. We like the fact that they're oftentimes not getting stuck to some of the legacy that we have in more developed markets. but when it comes to Bitcoin, I still think it's a little bit early.

So our first investments, which hasn't been an ounce yet, so I won't disclose it now, but is in an exchange. And we believe that there is a need for, you know, an exchange is for structure to be built across the world. Now, I don't know whether there's going to be an exchange in each country or if there are going to be a few global exchanges, they're going to pool liquidity. I really don't know how that's going to evolve over time. Who knows? I don't know. But we certainly see the needs for that. Generally, what excites me about Bitcoin right now are opportunities to make it easier to use because Bitcoin remains extremely fiddly and difficult and stressful.

So the pain points are the risk of losing your coins, safety. In 2014, I expect there will be a lot of very sophisticated attempts. to steal coins from people who don't necessarily secure them sufficiently. So those are all themes we're interested in. Basically anything that solves today's problems. But in the long run, what I'm much more interested in is enabling the worlds unbanked with a very solid financial infrastructure. So are you also looking at, for example, hardware wallets in that context?

So our expertise in hardware is very, very limited. we've always done software or services. Yeah. And so, you know, I would have to say that I'd have to probably learn quite a lot about the hardware industry before going to hardware. I know hardware has become a big thing again for venture capitalists in the last two years, you know, especially with Kickstarter, helping fund a lot of hardware companies. But this is not something we've done yet ourselves. similarly we had you know purchase we invest in some of the ASE companies in the bitcoin space and we fast so far simply because we have very limited understanding experience in the semiconductor space

yeah and when you talk about the emerging markets i guess one thing everyone you know has on the mind is remittances do you what are the kind of prime use cases you see for bitcoin there You know, if you talk about the kind of near-term future. So in order for the remittance business to work at scale, you need to be able to convert Bitcoin back into Fiatz in the destination country. Yeah. So you need a local exchange of some shape or form. Or you need to make an assumption that all the merchants will be happy to accept Bitcoin at some point in the future.

Which will take a while. Which will take a while, exactly. So I think it's going to make sure of both. And so that's why I think, you know, if you want to play remittances right now, don't play remittance, play the exchange business. Yeah. Because you need that infrastructure, going back to my earlier point. Without that core infrastructure, you have nothing. So I think as a corollary, you need something like Coinbase in each country, which is kind of a, you know, very easy to use, you know, integrated into the banking system, system that lets you, you know, buy or sell coins.

in a very simple way. I'm necessarily the best price, but something that just works. Yeah. And when you look at, I guess you look at a lot of Bitcoin startups, kind of what stage do you see a lot of them? Are they very early on?

Or do you also have more mature companies? So for us, we're a seed in an early stage fund, and it's much harder for us to play in the more mature companies. Now, what's fascinating about the Bitcoin space is that some companies have never needed any kind of early stage fund because either the founders were Bitcoin millionaires and they decided to plow some of their gains into building their companies

or some companies just got funded through pre-orders, like the ASE companies. So it's a fascinating space in that sense where I think the role of an early-stage investor may have to be redefined somehow. And I have more thoughts on that that I'd like to share maybe later in this interview. So for us, we're really trying to focus on seed and early stage opportunities

where we can maybe also add more than money and we can help companies with their go-to-market approaches. There's a lot of discussion, you know, and work at the moment in these protocols like MasterCorn Ethereum. Is that something you, I'm sure it's something you're interested in, but it's also something you look at with your company? Yeah, I mean, I think that's a fascinating space. And so, you know, I know the founders of Ethereum, you know, fairly well.

I think they're great guys. I know the MasterCoin team quite well, too. Also, I think they're great guys. I'm also following counterparty. I think their execution has been quite impressive. Yeah. And looking at a whole bunch of others. So there's Next as well, as you know, and others.

And so it's a fascinating space. So a couple of thoughts there. One is that as an early stage investor, you could also argue that what you'd want to do there is instead of investing in actual centralized companies, which is the old model, you may want to consider taking stakes in the currencies themselves. So this is something I'm actually actively discussing with my partners. Our current fund charter does not allow us to do that in the existing fund. So we're raising a new fund right now to invest in Bitcoin opportunities. it's going to be our fifth fund. I hope and expect that will...

Specifically for Bitcoin. That's right, only for Bitcoin. And this is something I hope will have closed by September or so. So, you know, raising funds takes some time usually. I mean, at least for us it does. Maybe for others, it's a matter of weeks for us. It takes a bit longer. But I'd like to carve out the possibility in a new fund to do exactly that.

Yeah, I've been thinking about this quite a bit. And it seems it's something, because Bitcoin works a bit like an ETF, no, on the Bitcoin ecosystem. So in a sense, it makes a lot of sense to invest in that. But then if you think of the fee structure of a VC, from a limited partner perspective, it's like, why would you pay at 20% of a performance thing if they're buying the currency which you could really do yourself?

Absolutely. I think that the fee structure of a traditional hedge fund or VC fund doesn't really make sense if all you're going to be doing is just buying some coins and going along and not touching them. in that case the more appropriate fee structure is probably just a yearly management fee in exchange for which you trust an asset manager to secure your coins and allow you to withdraw whenever you want effectively and typically what asset managers do there is they have a withdrawal fee as well some kind so i think that's the way the bitcoin investment trust works yeah so i think

you might find some hybrid situations where and that wouldn't be us because that's not really our expertise, but you might find some hybrid situations where some hedge fund managers may actively trade in and out of old coins through various arbitrary strategies and may also play some of the decentralized autonomous applications by buying into those coins as well. And there, I think you could justify the traditional hedge fund fee structure because that's a much more active asset management strategy. Yeah, I think that's interesting because if you think of, like, let's say something like Ethereum and if you bought into Ethereum, but then you could do a similar thing like a VC,

which would be supporting the team. And so then you have this weird hybrid between a traditional VC thing and this new currency stake. Absolutely. And one of the things I should say also with the new fund, we also want to have the ability to invest in coins in companies. Okay. So we'll definitely have that built into the new fund. So you'll be accepting Bitcoin deposits to the fund?

We'll probably be doing that as well. The question is whether we compute the ROI on the fund in Fiat or in Bitcoin. My preference is to do this in Fiat because I think you're setting up, you're setting yourself up against a pretty steep mountain climb if you're trying to generate BTC returns. Yeah. I think we've seen that with Eric Forhease's venture, Satoshi Dice. Yeah. Where, you know, in Fiat terms, the returns were.

fantastic. Yeah. But in BTC terms, they were okay. Yeah. And I think we'll see that again and again in the ecosystem. And I generally think, you know, when we're talking to investors who are looking at investing in our fund, our advice to them is to also put some money in the coins themselves directly

or through one of the vehicles that are out there. I think the right asset allocation strategy is to put, you know, a chunk in the coins and maybe another chunk in the ecosystem and see which one plays it. are the best. So there's also this tendency in Bitcoin and in the kind of things that are built now to do decentralized. So I'm really curious if for example something like exchanges could be decentralized in the future and whether the Bitcoin Protocol and this

kind of movement towards decentralization actually is kind of a conflict is in conflict with building large scale companies that have proprietary position, you know, like let's say something like Dropbox or... Yeah, sure. I mean, look, I love decentralization. Like I'm sure, you know, a lot of us in the Bitcoin community love decentralization. And I think whatever you can decentralize, you should

decentralize. Yeah. You know, for obvious reasons. So the exchange business, you can decentralize if you do something like local bitcoins.com. Yeah. Which is also, you could argue, decentralized, but there's still centralized server that lists the buyers and sellers and so on. So it's

only decentralized up to a point. So, my view of the future is that there's going to be room for decentralized applications and there's going to be a room for centralized as well. Okay. Well, thanks very much. Thanks. Thank you. Can you introduce yourself briefly? Tell us what you do.

Yeah, I'm Jaron Lucaseditch, the CEO and founder of CoinSetter. I based in New York City, and we have a low-latency, high-performance, Bitcoin exchange targeted towards Wall Street and active Bitcoin traders. So when is it going to go live? We're already live. We're in a growing public beta right now, and we've seen actually quite a bit of growth in our volume over the last four weeks since we integrated BitSamp into our order book.

So, you know, it's been very exciting. I'm really happy with where the product's at. And now we're really taking a lot, continue to take user feedback, make the platform better. And we're also in the final stages of building a fix API, which turns us into a plug-in-play option for many traders in Wall Street institutions. And you exclusively accept accredited investors or its institutional traders? Right now we're open to everyone.

It's hard to say what regulation may do to us. but our goal is to be open to as many people as possible. And right now we accept all users who want to join. And what kind of requirements? How long does it take if a normal person wants to be able to trade on your platform? We're pretty quick. So, you know, the average person can sign up for an account. You know, as soon as we send them a beta code and they submit user,

kind of like know your customer documents. You know, we will usually approve those same day. And, you know, get them, you know, trading as quickly as possible. If they make a Bitcoin deposit, you know, you can be trading the same day. You guys are also working on derivatives, no shorting, and how far is that? And what exactly are your plans with that? Yeah, we haven't said too much publicly about it. And I definitely don't want to over promise, but we do have exciting things going on behind the scenes that would turn us into a regulated entity that is licensed to offer an options and futures market in the Bitcoin space.

I think it's super important. A huge demand for that. Huge demand. Everyone's talking about right now. I think, you know, if we can do it, I'll be really excited. A few people are talking about creating futures markets and derivatives markets for Bitcoin. And a lot of them are maybe focused on the technology behind it. But what they don't realize is how difficult it is to get licensing for this.

So while a lot of people, I think, are maybe naively excited about creating this market, we're taking what we've learned over the past year in the space and really talking to regulators ramping up on our knowledge of regulation. and applying that to this potential market that we can create. And so you spoke about regulation. So I suppose you're regulated in all, registered in all 50 states in the U.S. or is it an ongoing process? It's almost a process that, you know, it's sort of an ongoing question for us.

We're working really hard on a couple of things. One, we're in talks on potential partnerships right now that give us, us the licensing we need to be, have the appropriate licensure in all 50 states. So I think a lot of these would include some sort of exemption from money transmitter licensing and we would report to a federal agency. At the same time, you know, if none of those relationships pan out, we're going to be going after 50 state licensing. We're based in New York. So I would say that, you know, We, it's taken a long time to really find attorneys that we want to work with and that we trust. Now I think we're starting to get to that point in finding people who we may want to help us go get licensing in New York State at the very least.

And what about international for the company? Is that something you're thinking about? International is a much easier place to operate in as a Bitcoin company. So we, you know, currently have a number of users who are located outside of the U.S. They have a wider array of features that they can access on our platform. And, you know, at the same time, you know, I think we're definitely a U.S.-based company. A lot of people who would be interested in us are based in the U.S. You know, a lot of our sign-ups, the majority of our sign-ups are people based in the U.S.

And I think we do a very good job of communicating to that market because it's the one we understand best. So how are these BitLicense or New York hearings or upcoming regulations affecting you? What are your expectations about that? Well, I think a lot of people are asking themselves this right now. It's very hard to say what a bit license will be. We're, I think, going to be very proactive in trying to figure that out with them. but, you know, I mean, it's tough because it's more uncertainty in the space, you know.

Do we need a bit license? Can we just go file for a money transmitter license? You need both? Do, yeah, we probably won't eat both. I pray to God. But, you know, that uncertainty tells you that it might even be longer to operate in your home jurisdiction than it normally would take. just because you don't know if the license you would file for, you don't know what license to file for, period.

So that definitely adds a layer of complication. Most states haven't even come as far as New York State, so they've been less transparent, and they haven't been proactive, and they're not giving licenses, and they haven't really spoken about the potential that traditional money transmitter licenses don't fit the Bitcoin space, don't fit Bitcoin companies.

And adding to that, saying Bitcoin, that's a very broad term. So there are a number of players in the space that all have very different business models and regulatory likely outcomes. So just to call something a bit license is very vague because, you know,

like we don't expect to have the same regulation as payment processors or as miners or companies who are purely, dealing in crypto. So, and especially companies that are, can completely remove the necessity for a trusted third party. You know, companies become regulated, generally speaking, because they handle customer funds in some fashion. And, you know, I think part of this whole revolution in the Bitcoin space and the digital

currency space is the removal of trusted third parties, anytime you're dealing with fiat, that's impossible. But as you start to see new technologies come out that have exchanges that are not controlled by any one person, that's also going to change the need for licensing. And there will be a learning process for regulators to understand that. Do you think that's going to be a realistic possibility in the next few years that you'll see a kind of exchange that's decentralized, maybe uses some kind of decentralized S-pro system, so it can completely circumvent regulations? I think it's only possible in the crypto world.

So once money's in crypto, you can definitely create those systems. When you're dealing in Fiat, Fiat, it sits in bank accounts. And most of it's digital, too, but it's digital and sits in bank accounts. And bank accounts are controlled by the government who regulates companies that have bank accounts that include customer funds. So I don't think you can ever change that unless the US dollar becomes some sort of cryptocurrency.

But, you know, I don't necessarily see that as happening. Yeah, no, I don't know if that's a very likely new term, but 2014 prediction. Yeah, I'll make that one. I'll make that prediction. Do you have anything else you want to... Um,

um, um, maybe what's, apart from regulation, which I guess is your biggest challenge. What else is sort of, you know, what are the biggest hurdles you're facing going forward?

Um, well, I would just say that, uh, one of the big things I've learned over the past year is, uh, not to limit our product. So,

uh, you know, regulatory, uh, potential regulation. gives you cause to have concern in the product you offer customers. You want to be sensitive of consumer protection laws. You want to be sensitive to money transmitter laws.

And that often causes you to create a watered down version of Bitcoin. And the thing I've really learned is to fight those battles and not dilute Bitcoin itself. So the thing that I've been very enlightened and excited to see recently is that I think regulators are also in agreement on that, that the technology needs to remain pure, and companies will have certain responsibilities in that. But a Bitcoin exchange or a Bitcoin payment processor doesn't necessarily need to fit the same regulations, especially in regards to chargebacks, reversals of funds, as, you know, fiat, money transmitters and other, other companies. So I think the regulators see benefit to what Bitcoin has to offer. Certainly in a practical level, you can never build a Bitcoin company if reversals are forced upon you.

And so it's been surprising to me, but very nice to see that regulators are coming on board with that message. Thanks so much. Yeah, thanks. My name is Hansenak Heeming, and I'm the CEO of BIPS. Bips is a payment processor that makes it possible for merchants to receive Bitcoins as payment. Cool. Could you tell us about some of your solutions for merchants, different solutions you offer? Yeah, we have a totally, you know, a whole array of plugins for the most well-known e-shop solutions that is known out there. That could be Prestas Shop, Mugento, Shopify, those type of solutions.

And what about for brick and mortar merchants or small merchants? We do also have a solution for, you know, fiscal jobs where we have done, you know, a solution where it's possible for them to just use their point of sale, whatever tool they have already. Or we can implement our solution on a smartphone for them or an iPad or something like that. Those are solutions that exist today? They exist and we implement a few of them every week in fact and we do a lot of buzz around that of course because the crowd loves that.

You know, all of a sudden they can buy a beer or a hot dog or whatever with the Bitcoins. Cool. So you gave a talk today. You were part of a talk with Eric Benz from Zipzap. Could you just give us a little summary of... Yeah, well, the topic was... about how the future can be shaped by Bitcoin. And my major take from that was that right now we only dig into Bitcoin as a currency

or a virtual payment method, and that is okay. But I think, you know, there are other possibilities within the development of Bitcoin as a protocol. There's a layer or you could put additional applications on top of the protocol, which I think is pretty interesting. and which will, you know, maybe not disrupt, but it will force innovation into industries that is well known today as, you know, banks or other financial institutions.

Can you tell us a bit more about some of those implementations? Like what are some of the things that can be developed in thought about it? I'm very keen on, for instance, how you can deal with contracts. The whole contract area where you can use the blockchain as a kind of confirmation of those contracts, I find pretty interesting. I come as I chat, the e-commerce foundation in Denmark for almost 12 years. And in the e-commerce foundation in Denmark, we are trying to build trust within how you do e-commerce.

And when you look into how you deal with bitcoins, the merchants are pretty assured that they receive their money, but you as a consumer or customer, you are pretty lost because when your money has left the wallet, the money has gone, your Bitcoin is gone. So in terms of the contract thing, you could build an escrow service, for instance, where as a layer on top of the blockchain, where you make sure that if you don't trust the merchants, you can have a third trusted party where you can transfer your Bitcoin too.

Is this something Bips is working on? Are you, is Bips entering this space? For the time being, no, we're not. No, we're not. It's a personal interest. Definitely a personal interest. Okay. So, just briefly, what are your impressions on this conference?

I think, you know, awesome to meet with the in-crowd of Bitcoin. And, you know, I don't have any issues with that Because I think it's very interesting to bond with people who are like myself. But I would say, you know, if we need to reach or if we should do something good to reach mass adoption, we should make sure that we cross this internal bubble somehow and be able to talk to just the average consumer outside. That's interesting because, I mean, you develop payment solutions. So that's usually the most user-facing.

aspect of payment and where ultimately people are going to see Bitcoin, I think, over the next year is through acceptance. We've seen in the U.S., notably Overstock.com and Tiger Direct accepting Bitcoin. I'm not sure what solution they use. I think they use BitPay. Anyway. And now we're just waiting for some of the other big merchants to come in. So would you agree that merchants accepting Bitcoin payment

and making that payment easy and seamless is going to be... Yeah, I think, you know... Definitely. Definitely. I see, you know, the major issue that Bitcoin has is about usability. It's too complex to understand what's all about. You know, the ordinary consumer, he or she don't care about hash rates or mining or, you know... Addresses. Or addresses or anything, right?

In fact, they don't understand, you know, know a QR code. And if you ask them, okay, now you need to scan your QR code, they wouldn't know where to find the scanner on their smartphone, right? So there's a lot of usability issues that we need to find workarounds around to make sure that it's easy to use Bitcoin. Yeah, I mean, you're talking to a user experience designer by day, so I know exactly what you're talking about. Yeah, and you know, you need to... We need to make, we need to create services. Definitely.

Really work on the service design of Bitcoin. Yes. Yes. Now, I thought it was interesting. during your talk, you pulled out a Samsung smartwatch and said that this could be another way for people to use Bitcoin. I thought that this could make it more complicated because nobody has this watch. Yeah, well, you know, exactly. It is an example. And, you know, the point that I wanted to make was that we need to look beyond the smartphone.

To diversify it. Yeah, we need to diversify how we can, you know, just get in contact with, you know, our bitcoins. as a case. So we need to work on these different touchpoints, you could say. And so what do you think, I mean, where do you think this is going in two, three, five years? What is that user experience going to be like for regular consumers that we just want to pay with Bitcoin and have a Bitcoin wallet and be able to spend it? And I'm not talking about holding it or having cold storage. That's another issue. Just having your daily cash on them so that they can spend in stores and have it be a seamless experience.

I think, you know, nowadays we have, you know, we got used to use our credit cards. A credit card can be lost, right? But, you know, the experience by having your credit card or something alike would be maybe something that we should look into. In Denmark, we have a solution from one of the biggest banks, Denski Bank, the Danish bank, who's done a mobile pay solution as they call it and it's a very, very nice implemented. It's so easy to use. I could just send you whatever value to your mobile phone

and you need to accept it. If you don't have the mobile pay application, you just download it to receive my payments. Very, very seamlessly a way to do payments and the viral effects, you know, the friend of the friend kind of concept applies here very, very much. So the network effect is pretty high.

Yeah, but I think that wherever this is going, there needs to be standards. So much like there's an SMS standard, much like there's an email standard, or if different proprietary private solutions start popping up, and everybody's using

a different solution, I mean, this is the same problem we've seen with certain credit cards. You can't use American Express everywhere. You can't use chip cards everywhere. I mean, here in Europe. I agree. So I think you really need to have standards that are widely accepted across the board

for mass adoption to occur. Right, right. And I don't know from where that standard will come from, but I totally agree with you that we need that to not just create a login, a system login, but we need to have an open architecture to make sure that, you know, whoever wants to build services are able to do so and share that with the rest of the community. Well, thank you very much for talking to me.

It was very interesting. And I hope you have a good conference. Thank you very much. Thank you. We hope you enjoyed this episode about Inside Bitcoins Berlin. If you liked our coverage of the conference, please consider tipping us at epicenterbidcoin.com slash tips. You can also subscribe to a weekly newsletter at epicenterbidcom.com slash newsletter.

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