EB32 – Ira Miller & Freya Stevens: Coinapult, Locks and Letting the Bit Drop

Transcript

[Music] hello and welcome to epis of Bitcoin episode 32 my name is Brian faan Crane and today's August 10th 2014 uh Sebastian is still on vacation he's about to come back I think tomorrow so uh from next week on will be back in the sort of original constellation but this time again I'm sort of a solo host and I'm joined today by two people and they're era Miller and Fa Stevens era is the CEO of coinapult and cool is a wallet provider Merchant solution that he founded together with Eric bores in 2012 so of course Eric Vorhees is is very well known in the community I think primarily for Satoshi di but but he's

also been involved in other projects and been kind of a spokesperson for a long time and then FR is a marketing specialist for coinapult and she's also the founder of the Bitcoin UK podcast um so I I still haven't actually gotten around to listening to One her episod but she has great reviews so that's it's one of my kind of goals uh to do that as soon as possible so today we'll be talking about coinapult and especially about the new feature they launch which called locks and the locks features kind of addressing a really a key criticism that's often heaped on bitcoin which is the volatility and it's often seen as s of a a roadblock in the way of mainstream adoption so they're trying to address

this with this delocks feature and it's a really cool interesting and we're also talking about a project called Let It Drop and the basic project the basic idea of the project is to bring Bitcoin to um Caribbean island so sounds of course really cool so uh ir and fr thanks so much for joining me today hi yes you're welcome thanks Ryan by the way it's Ira oh I apologize Ira yeah no worries um so IA are you down in Panama at the moment I am yeah it's a nice sunny day so uh let's just perhaps dive in can you tell us a bit about how do you get started with

coinapult so Eric and I started coinapult in January of 2012 uh and it was designed just to be a very very simple wallet to allow people to introduce uh new users to bitcoin by sending it to their email or cell phone uh and it it was really designed as the simplest possible way uh to do this so at you know the original qunol.com just had form that said email address message and then it would allow you to to deposit some Bitcoins to an address for the recipient uh we've taken that concept and turned it into a much more sophisticated wallet service now with accounts and uh some Advanced hedging features like you you

mentioned so what made you in 2012 decide on um sorting a wallet service did you feel that was a kind of a big gap at the time it was at the time actually uh we were the first I I believe the first uh Bitcoin over email service uh and also the first uh 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 and uh start using but if they didn't have the internet then they wouldn't be able to to use it our system is is different in that it allows people to use uh Bitcoin using only smss 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 coinapult you've got some Bitcoin uh 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 topic just at the beginning but let's get into that then do you are you familiar with 37 coins and how does that just compare to the 37 coins service I am familiar with 37 coins uh they've got a great uh model and it's very similar I said we were the the first uh such wallet but now there are others popping up and

they're very welcome uh this is very hard to to do because you need Telecom Partners in in various places and 37 coins has picked a Innovative way of getting around that by allowing their users in various countries to kind of become nodes for their their Network cool so did 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 uh unfortunately due to our Telecom providers uh we were only able to launch it in the US and Canada uh over the last two years and it really just isn't a very good fit for those markets you know

most people in those Market 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 uh they do have feature phones so can you talk a little bit about how coinapult 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 Bitcoin company you know it's like more than two 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 the vision for coino changed over time see we we initially launched these uh consumer wallet Services the to allow people to send over email and SMS uh we offered offered these services for free uh so basically we didn't make any money off of it uh to kind of help fund things and and pay the bills uh feed us we started doing uh big businessto business um Services uh so people could sign up with our API and and send to their users over SMS and so on uh after some time we'd also developed some very sophisticated

Market making software that would allow us to to buy and sell Bitcoin uh to basically act as a broker uh we did that for uh quite some time maybe the last year and a half we've been doing that sort of business uh for instance you may have purchased if you're in Europe Bitcoins from SE uh we help them acquire and and clear all of their Bitcoins uh basically this Market making software that we we used for uh liquidity providing turned into our locks technology uh that we're now allowing all of our consumer wallets to access so is that market making uh service are you talking about Arbitrage so were you

um were you using different exchanges to you know trade and basically do Arbitrage on them or is that a software service you providing to exchanges or or guess services like saell that directly sell Bitcoins to Consumers yeah we provide services to uh companies like SE that need to buy and sell Bitcoins for their own business to work uh and we do do Arbitrage and uh trade on all the the major exchanges uh in this way we we feel that we can get to a a very uh well-informed price uh we can have a price that is more average and more stable uh on a global scale than

any single given exchange cool and when you when you look kind of forward and and to cool and I guess two years down the line where would you like to see the company I'd like to see our SMS Services uh 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 to grow access to bitcoin I I think that so far Bitcoin has mainly gained traction among very sophisticated educated people who have very good internet access who uh are not just able to access the internet but are 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 and more people to use it uh we need to expand our community beyond the the most Savvy early adopter types and we need to reach out to people who just want uh simple services and aren't necessarily trying to to jump on the the coolest new technology Okay cool so the focus is really kind of on uh 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 uh groups exactly I might

just jump in here um and one of the reasons I got involved with coin Ault is um is because as you say they've been in the Bitcoin scene for a while um since the early days when uh there was perhaps more focus on the uh the promise of Bitcoin as a as the great equalizer and um yeah just the the the the Grand Vision for coin Ault um to my mind and one reason I got involved with it is is this um expanding uh access to people who you know haven't been in the financial system um haven't had bank accounts and um just um yeah getting more people

involved so Freya is how long have you been kind of involved with Bitcoin projects um so I got involved at Christmas uh last year so yeah I'm a relative newbie um but one of the things that attracted me to it was was the uh the ability for Bitcoin to uh you know introduce more democratic ways uh for people to get um does it seem like a more democratic system to me than the sort of well I most people know the story who listen your podcast you know the bank centralization um of of wealth and um to you know privileged view yeah okay so

you were attracted to that side which I you know I'm sure a lot of us are uh and then you saw that kind of in coin 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 in the longer game you know they they're looking at ways to improve uh the Bitcoin ecosystem um you know in the long run you know not just um shortterm profit make making uh you know which I don't know but increasingly I see companies coming in into Bitcoin space that you know are seeing uh shortterm money making uh opportunities and uh you know it's nice to be involved with a company that have

that you know see see the bigger picture yeah absolutely um well let's kind of dive in a bit more into how coinapult exactly works so there's the the lck thing which I want to talk about in a little bit and then there obviously the web wallet are you guys also working on mobile wallets uh we're not actually working on a mobile application at the moment uh our our main goal is to to kind of grow access to the Bitcoin ecosystem overall and there already a lot of really good mobile apps out there uh in addition we've mobile optimized our website so any any mobile user can still use our wallet uh in a a we think

a pretty good interface uh this kind of protects them and us from say apple changes their mind again and decides to to kick all Bitcoin apps out of the store our users can still access their their wallets and their funds and so on um but I'm curious so is there a QR code scanner when you use it on the web uh there is not that's one that's one thing that's definitely missing uh and we will uh work on that yeah that that seems like that should be also I guess something if especially if you tget end consumer know that will be um important in the future absolutely okay so there is that and also 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 to bitpay uh you know we will help your company uh receive Bitcoin and then immediately uh convert it if you wish or uh block it to to gold so that you can spend it later as as Bitcoin again uh we also do the opposite so if you're company that wants to net purchase Bitcoin uh you can sign up with us uh 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 Bitcoins sell them and basically give me um let's say US dollars in the bank

account or do you guys exactly okay so so you can I guess choose either as a merchant either receive the receive the US dollars or like the fiat currency or uh sort of get rid of the volatility through the lock swing or just keep the Bitcoins is that correct exactly oh that's cool I I guess that's a good um segue into into the locks feature that we sort of mentioned a few times but haven't really gotten into can you uh tell us what the locks feature is yes so locks is a volatility reduction Tool uh BAS basically it allows anyone any coold user to deposit Bitcoins into their

account and then tie the value of those Bitcoins to uh stable asset of their choice so let's say that you really like gold uh and you think that Bitcoin is is very volatile and uh you wish that you could store some of your value in in gold and and have it fluctuate with the price of gold rather than with the price of Bitcoin you would then uh go to your locks page on kol.com you would select uh lock to Gold uh say how much how many ounces of of gold you wanted to lock and you can lock down to a 100th of an ounce of gold or you know roughly $10 $12 uh when you click submit it'll uh

deduct the Bitcoins or you can send it in from uh different wallet if you want and then from s 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 uh and gold stays roughly the same when you unlock your 1 ounce of gold you should get twice as much Bitcoin back now the downside of that is if the price of Bitcoin doubles uh then you unlock your gold 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 want to I don't want to have the volatility I put it on bit stamp I sell it for US dollar and just hold the US Dollars there of course in your case it's uh more convenient because it's integrated in the wallet but it's essentially a similar thing right it is a very similar thing yes uh we think that uh We've basically made this tool just easier and more accessible uh you know it can take weeks to sign up and 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 uh you know what does it mean to to say that uh you know there's this much volume at this price

uh most people don't want to to have to learn all these things and they're not Traders uh so we really built locks as a tool for everyday users so when you when you talk about uh let let's say I want to lock it to gold because you guys of course have to charge a fee no because essentially on the back end you are you're selling the Bitcoins no and for example for us or for gold yes we are uh we are when you lock to an ounce of gold we sell an equivalent amount of Bitcoin as uh you gave to us to create the lock and buy 1 ounce of gold and in this way this is how we can guarantee uh the 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 the fee we charge it's just a spread uh so there are no uh fees in the traditional sense but uh there is a difference in the bid and ask prices uh typically the difference between the bid and ask prices is 2% so uh if you locked and unlocked immediately uh you would have roughly 2% less than you less Bitcoin than you started with uh over clearly this service isn't designed to be uh you know immediate lock and unlock that doesn't serve you any any good uh it's for elimin eliminating volatility over time uh so we think that over the course of maybe a week or two uh this one or two% is uh basically wiped out by the natural

volatility of Bitcoin yeah I mean I tested it out last week and uh it it worked exactly the way um the way advertised used like a $1 to lock it to or one Bitcoin oh $1 worth for Bitcoin to lock it to dollar and then lock it back and it costs exactly 2 cent in the end to do that um so I I also afterwards I went to the blockchain and I checked you know what happened with my coins and and they never moved from Once I paid them in so so how does that exactly work do you hold uh an amount of Bitcoin sort of on reserve with exchanges or can you talk a bit about um

the kind of what goes on behind the scenes when that happens absolutely uh so as I mentioned you know when you create a lock we we sell an equivalent amount of Bitcoins and buy uh the amount that you lock to so if you're locking an ounce of gold uh to continue with our example uh and it's costing you 2.2 Bitcoins today which is just a very rough estimate uh we will sell 2.2 Bitcoins and buy 1 ounce of gold uh upon locking and when you want to unlock we will sell the 1 ounce of gold and buy however many Bitcoins it is at that market price and make those available to you uh we do uh have accounts on numerous exchanges uh and other uh

liquidity Bitcoin liquidity providers to be able to facilitate this uh and we do keep Bitcoins on reserve with these uh our our own Bitcoins for uh exactly for facilitating this sort of uh liquidity so the Bitcoin that you sent us initially goes into our 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 um yeah absolutely so uh if you talk about the the silver thing I think that's interesting right so because you offer gold and silver now it makes sense for me that right 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 at the

Bitcoin for dollar and then the dollar for silver uh and does that mean the fees are going to be much higher or or do you have some other ways of making that work uh you hit the nail on the head we we do uh because of liquidity problem with between Bitcoin and silver for instance that we do uh purchase the silver using dollars or Euros uh and similar with gold but for us uh this is not a significant cost uh you know once we've got the the infrastructure set up to do this and to do the accounting for it then it's very easy it's it's not significantly harder than locking to dollars or Euros or British pounds for us uh so we don't charge anym for it you

get the same 2% spread uh when you're locking silver or gold as you do when you're locking dollars or Euros no that's cool I I I would have expected that this would be uh more expensive no because you'll have more liquid markets Etc but that's really uh cool that you're able to do this for the same thanks yeah I mean we're we're lending our liquidity just to provide the best possible user experience so there's one uh topic I kind of want to touch on I guess before that uh one one more point on this does that what about counterparty risk in this case so obviously you guys are a web wallet so you know anybody who sort of understands how Bitcoin Works they

realize that well there's a counterparty risk there right just the same as with coinbase Etc you know if somebody hacks coinut well there's a risk um but essentially with we're doubling the the counterparty risk no because uh there's a risk on your side I guess in the one hand and there's also the risk uh on the side of the parties that you guys hold those values with is that correct uh that's one way to look at it I I think that that can be uh we we do a lot to to greatly reduce that and in a lot of cases the parties that we're holding for instance uh Euros with those accounts are actually insured uh to to some

degree and we're looking at getting uh more advanced insurance for them so it's not necessarily doubling the risk uh in some ways uh we hope to actually be able to to greatly reduce the risk uh but yes you know anytime you are using a service like this there is some counterparty risk uh we don't want to to mislead people into to believing that you know we're somehow getting rid of that uh and frankly we just want to to uh prove ourselves as a party that's worthy of that through uh good stewardship and uh 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 is what we're really

trying to tackle the people that that aren't in Bitcoin at the moment because they see it as such a great risk um so you know if we can U mitigate that risk um to some extent I mean that's I think that's doing a service to the Bitcoin ecosystem yeah absolutely for 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 in many cases people may be better off to keep their Bitcoins with a company like coin AOL to coin base or a web wallet like that yeah absolutely and as somebody who definitely um didn't come into Bitcoin

with technical knowledge of how it works um I'm a good I'm a good um sort of tester for their system you know if if it makes sense to me and uh and I find it easy and enjoy using the service it's it's always a two thumbs up that um you know the general public will uh will also think the same yeah absolutely um now I'm really curious about something so and and I'm sure you guys have looked into that because one of one of the promises that has been in you know in the air for a long time by projects like mastercoin a lot of these other Bitcoin 2.0 uh projects is to create cryptocurrencies that are essentially uh

tracking or Peck to Fiat currencies so let's say the US dollar and uh I 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 I guess I'm not sure if something like that exists but have you looked into that do you think that is uh is possible do you think that maybe something uh where you could go to in the future yeah we've looked into this pretty extensively and uh 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 uh is that they're going to somehow reduce the counterparty risk but no matter what sort of uh contract you try to do if the other party is betting on for instance gold uh and they don't actually have the gold then they're not going to be able to uh keep good on their end of the contract so for instance you mentioned a contract for difference the cfd if the if you uh making a contract for difference between Bitcoin and gold uh 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 on their side of the contract uh and in a much simpler case than a cfd uh for instance on Ripple now there are people issuing you know gold backed uh Ripple tokens uh and and similar but in these cases it's even more clear where the counterparty risk is it's with who who the token issuer is who actually uh is holding gold and and issuing gold Ripple uh tokens and you know these transact around the Ripple network uh and yet they they all everyone holding one of those or accepting one of those is implicitly trusting the the issuer and the uh continer holder continual holder of the

underlying collateral the gold so really we we see locks as as no different from these uh you know we could easily issue a you know 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 uh you the users would still be trusting coinapult 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 uh cryptocurrency networks uh so an example is with with coin aultz and a gold loock you could go to overstock.com uh and

purchase a laptop directly deducting from your gold loock uh 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 uh real coin which is a a dollar backed Master coin that is announced you would have to First convert your uh Master coins or your Ripple tokens to something that Overstock would accept Bitcoins and then you would be able to go and purchase uh your your goods using Bitcoin uh there are some some retailers that accept uh Ripple and uh 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 tot sense say so I I mean I've just always been curious about this you know is is it actually possible um and how will this work but of course if it just sort of shifts the counterparty risk somewhere else um you then that's not necessarily um and that's not necessarily a benefit at all that's that's basically how we feel now um have you looked into whether there's a way of decentralizing this somehow when you say decentralized Iz this uh there are a few there are a few different risks a few different uh steps along the way some of them can be

decentralized some of them can't I think the the biggest question that people have is for counterparty risk like we've just been discussing and I think that a lot of these uh Bitcoin 2.0 systems claim to be reducing their 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 uh simply incorrect uh there are some things that can be decentralized about uh about blcks or a similar sort of service um in Lock's case we are basically just plugging into the Bitcoin protocol uh which as you know is is

already decentralized uh so we're at we're admitting that you know we are the counterparty risk for when you want to use uh to store your value in a centralized asset ass ET 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 uh is our a mechanism for allowing our our customers to decentralize their their assets whenever they choose to uh and the way that we've tried to

connect the two is to make it as easy as possible to go from Bitcoin into a lock and out of a lock uh maybe even without signing up for an account uh you can fund a lock directly from the network you don't have to first deposit it into your coin pult account and then lock it after and similarly you can withdraw directly from a lock to any other address on the network yeah cool no that I think that makes uh that makes sense and it's I mean I think you know the way I guess I look at something like losss 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 something very positive and something I like a lot and I I like a lot that you can essentially stay 100% in Bitcoin uh but get rid of some of the volatility right so if you let's say emergent 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 advantages because if if you know with the High Vol that Bitcoin has and I don't personally don't think it's going to go away no anytime soon you know that's a a real benefit absolutely you know you mentioned businesses we think that this could be very interesting for uh

businesses as they start start to complete their supply chain so for instance there's been some speculation recently as Overstock uh accepts Bitcoin already and recently Dell started accepting Bitcoin uh and Overstock sells Dell products so one one possibility now is that Overstock can start to integrate their Bitcoin into their supply chain uh what we call vertical integration uh and purchasing their stock from Dell using Bitcoin uh this is just a 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 uh 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 uh for purchasing their uh their stock to to refill after purchases uh and rather than converting to Dollars which is uh what they do with most of the Bitcoins they receive today uh they would almost certainly prefer to keep as much of it and Bitcoin as they could uh to to facilitate this 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 uh and at the time when the bill is due they would simply unlock pay over the Bitcoin Network and uh we would have hopefully a new level of integration in the Bitcoin economy yeah it's a it's an additional tool so we that's one use for it but we we expect that Community will find new uses for it that we perhaps haven't thought of yet um you know if a business has an idea where they want to use the Bitcoin network but um you know obviously the price volatility is an issue they can um partner with us and um provide locks to their

users I've noticed when I signed up there was a limit uh it said of like $3,000 that I was able to lock um why is that do you require some kind of kyc to go higher or how does that work yeah we will be raising this uh in the future uh $33,000 is actually per transaction uh so you can lock I think up to $225,000 right now but you can only do 3,000 at a time ah okay no no that changes a bit of course 25,000 is a 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 I guess it depends a lot but I'm sure you would have then sort of individual conversations with those businesses yes absolutely yeah for businesses that are willing to go through our kyc process we can lift all these limits so kyc process brings up something interesting is there does this have any kind of regulatory implications do you guys have to is is this a 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 uh we think that locks is uh basically new service uh it's it's a new type of of Tool uh we

don't necessarily believe that that Bitcoin is uh money or currency uh in a lot of places in the world it's not legally defined that way uh there the landscape around Bitcoin legally is is very diverse though and so we look at it on a country bycount basis and in areas where uh it looks like these Services would be more regulated uh we've taken a waitand see approach and have blocked those markets so indeed in the US uh we have actually blocked the US market uh for the moment as things like the bit license uh 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 that

brings up the topic that I I've wanted to touch on as well and I since the bit license proposals come out I 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 um yeah I think it's a really has in 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 licens so is is your strategy to to essentially block American users that for the moment is our strategy and and I'll say we definitely

do not want to get a bit license as it's currently proposed uh the current bit license is basically a a free giveaway of the economy to the banks you know they there's nothing in it that's 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 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 uh compliance then tough L get out of the business uh so yeah I mean we we think that the bit license is absolutely the the wrong direction to be going in uh

this technology is so new no one even knows what it's going to be used for in two years or or five years so how can we make rules like this for it that are so incredibly restrictive uh you know the the use of blockchain technology for for messaging for contracts for completely non-monetary things uh is just starting to really take off and in this way New York is 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 they have no real interest in in facilitating this technology and every interest in uh finding ways to to make it unfeasible and unattractive to the users but do you

guys think uh blocking IP addresses is enough because from my from my understanding it probably is not no what do you mean enough enough legally yeah because in the end if let's say a New York user mentioned uh was using the Lock Service while they're not in us so with have a different IP address so let's say use um some kind of proxy or VPN yeah VPN I think that probably wouldn't necessarily protect you guys uh that's that's not what we've read uh and frankly there's there's no there's no technologically feasible way to to make sure that somebody isn't you

know trying to fool us and and uh using a VPN or something like that uh all we can do is kind of our our best efforts uh and that's that's what we've done with this IP blocking and and similar stuff uh now this is just a general problem this isn't a question for us it's a question for for Ben Losi 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 they're how are you going to ask companies to enforce this uh to do all this this what I consider dirty work on on their own customers I the the Bitcoin network doesn't even provide a mechanism in most

cases you know for instance someone sends you Bitcoin to pay for uh some Goods uh at a retail store under the bit license proposal you would be required to gather uh 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 uh to quote uh Stephen uh the CTO of of bitpay why don't they just put up a great firewall like China did if it's on them to to enforce this it's also worth saying that um our goal is to is to um maximize access to our services and and you know we are

looking for ways to um to help the the US um into uh you know help them access our products so it's hopefully this is just a temporary situ ation and then we've got legal teams who are you know helping us navigate sort of the tricky situation that uh The Regulators are put us in really yeah I mean I I completely agree with with both of you guys I mean so in in my view and in my understanding of the bid license thing you know one of the terms in there is that any company on bid license needs to have sort of a complete record of all the parties of all the transactions um but of course that 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 is every if everybody does kyc uh even if you don't want to get a bit license just to exclude the people um just to exclude the New Yorkers so you can say I you know 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 it's Lally impossible but yeah hopefully 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 a burden on the companies that don't want to get a bill license and that's to mention the other customers I mean uh I I'm surprised that there hasn't been more International backlash against this because if you're a customer from uh 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 when you want to do a transaction in the future they're going to be asking for your uh information and so you know businesses are really being faced with this tough choice uh to either start treating all of their consumers everywhere in the world all their customers everywhere in

the world uh like just like uh a bank or even stricter than a bank would uh 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 um if you look at the B license thing the implications kind of are that a any company that's going to comply with the bid license thing they're going to have to make their uh product a lot more less attractive so I mean in my case it seems very likely that if this go 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 like Lobby really hard not to you know not to do that and I think that even is true for companies that are like 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 I don't have faith that all of these these companies are actually lobbying against it unfortunately I think some of them see the opportunity to cut out competition by uh raising the barrier to entry yeah unfortunately I'm afraid you may be right yeah 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 um the marketing of Bitcoin products can you tell us a bit about that uh yeah sure um yeah it's it's interesting it's um it's an emerging market so um there's a lot of um audience Discovery to do um and coming from a previously working in London for an advertising company um and in very well trodden um areas of marketing uh the contrast is is massive you know so it's it's it's quite exciting so it's about finding where people are who who might be potential Bitcoin users and reaching out to those

who already are um and you know we've come up against um some hurdles as in where where is there to advertise I mean the bit Bitcoin Community is still quite small uh and the number of places to actually put adverts up in and uh yeah I mean it's it's it's exciting stuff for me as a marketeer so what are some of those core is between um advertising in an area that's I guess well established versus something like Bitcoin I mean you mentioned the I guess lack of outlets media Outlets but what what else is there um well I guess um one of the big differences is that you're you're not fighting a million companies to for

visibility as well which is pretty nice um so you know there's there's the potential to um you know get seen um by the people that matter very quickly and um and that's nice too um yeah I mean it's a lot of it is um I think social media marketing based um because of the lack of uh media outlets and you know I mean you must know with your show uh your there's there's your podcast and a handful of other podcasts that are sort of globally facing um and uh you know it's kind of like that across the board really in the different areas so that the sort of there the less

PL there's less places to be seen I I guess a big challenge must also be to just figure out how to communicate with know like how how do you explain something like locks because it's you know it's it's new now yeah absolutely yeah and we've um you know we've we've had talks about uh how to reach out about our products in um and get people to kind of understand what we're doing and um yeah we're hoping to do a series of webinars so uh people can if people are interested but they perhaps don't quite understand you know how it works then we can uh we're hoping to have some onetoone sessions um with people and um

you know and uh get people to kind of come along to a webinar and uh we can explain a bit more yeah that's not great although that being said I think you guys actually have done a really good job I think it's really intuitive and and easy to use and you know I I I didn't have a lot of difficulties figuring out you know how to use the cool wallet and then 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 um in before putting before going to launch um to get the product being really simple to use um and you know and Visually really easy to navigate through um you know and and I I definitely had some things to say about that coming coming

into the space as a non- teie you know it was I think it was quite helpful to have that um perspective on things and say you know this needs to be we need really big clear buttons that's that's one of my my favorite things when I go to a website I need to see big buttons um but yeah I mean it's it's all those things um so you know we 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 for the general public cool uh well I think it was really cool talking about um the coino stuff and I I really urge people to check it out so cool.com and I think it can be especially interesting especially interesting if

you hold a lot of money in Bitcoin know or if you receive your salary in Bitcoin if you get paid in Bitcoin if you sell things for Bitcoin then I think things like uh the Box Thing can be super relevant so you know i' urge anyone to check it out and you know give it a try um so before we kind of wrap up let's you guys have mentioned a really exciting uh project and and I'm super excited to talk about it so it's called let the bits drop can you give us a bit of background on it yes so we've been working on the bit drop for over a year now um the basic ideas that we are going to send every single person in an island nation some

Bitcoin uh 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 uh we're going to do this in in Q4 we're uh hoping in the next week or or maybe two weeks to announce the the specific date and the name of the islands uh we are uh we're going to throw away party at the same time on the island where we'll have educational materials uh Bitcoin ATMs uh we're talking to local vendors to to get them to come out and sell drinks and and snacks and things like that uh and we're

just hoping that it'll be a big Smash and and that these people that you are mostly unbanked will find some use for it um what kind of um what amount will be given to the people uh we are just starting to fund raise so really it depends on on how much uh the community is willing to to send to us uh if you go to letthe bit drop.com uh there's a donation address uh 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 uh enjoy the party on our our beautiful Caribbean island uh the the because it's it's been so so

long in the making uh we haven't really set a final budget yet you know we kind of figured that whatever the community is willing to give uh we'll we'll distribute that to the Islanders uh with some some amount set aside for making the uh for the educational materials for getting the ATMs and all that stuff down there and just kind of operations for the the party I think one interesting scenario of course should be right so like you're giving out this money to the island and let's say it ends up being you know $3 per person you know then the question is what what's going to happen with that right is 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 have thought about whether you may have like totally different exchange rate in in that local I I guess the I guess that would only happen unless you have a a liquid Market of the local currency to bitcoin that's very fascinating yeah we're we're just curious I guess as to to how people are going to use this uh you know most of these people don't have any access to financial services right now so it it may be so foreign that it takes a while to really spread the knowledge of of how to use it and what the potential is to spread amongst the people uh but we do think there are

going to be a core of people who do get it uh maybe some of the business owners that we're reaching out to now will uh you know continue to to support it you know we're we're leaving ATMs on the island so it will be a relatively liquid Market uh it can't trade too far outside of the global range or else the ATM operators will uh pull pull the islands Market back towards uh the the kind of international standard uh but really yeah we don't we don't know uh no one I don't think anybody knows because there hasn't been there hadn't been this kind of Outreach to the unbanked communities yet with Bitcoin uh and so far we what we've seen with Bitcoin is uh technically Savvy

wealthy people and how they use it and and you know they may think oh do I want to pay with Visa today or do I want to pay with Bitcoin uh but that simply isn't isn't even an option for for these people so we're just looking forward to to watching and observing and you the the drop is planed to happen this at the end of towards the end of this year right or yes in Q4 Q4 cool I mean I think this would be super fascinating to see what comes out of that like I I really I can't wait I think it's an amazing experiment I think that the MIT thing is is a bit similar right of course totally different uh audience um so so it's it's quite

hilarious that you know two similar so kind of like drw from projects are happening at a similar time and one is you know targeting some of the best educated uh well off most technologically savvy uh intelligent people and then you have uh another projects that's targeting really like low Tech um poor and unbanked people so it would be super cool to see you know how what what kind of different uses we will see with Bitcoin I'm I'm excited to see um what what how this will be different from that in terms of because the government have got behind it um the local government um you know

whether the fact that they will be sending out educational um materials to to the the people whether that will have an impact you know impact differently on how the public kind of take a Bitcoin um that that for me is kind of the fascinating thing to to wait and watch yeah absolutely um yeah it's cool that you guys managed to kind of get the government behind that that's I think uh of course that makes it easier also the like the smaller the place you go right they're more refusive 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 uh you know I think in addition the smaller the governments

and the smaller the place uh the more open they are to Innovation and trying new things uh and that's kind of what we're seeing here you know this is a a relatively poor country and they are willing to try new things to improve uh the economic conditions that they have and and frankly I think that they're going to succeed cool well um 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 I we're still working at some of the the finer details so the best way to participate is to go to letthe bit drop.com uh you can there donate and uh watch for more details you can follow us

on Twitter our Twitter handle is the bit drop uh and as I mentioned earlier in the next couple of weeks we'll be coming out with uh much more details about the project uh the name of the island the the date uh hopefully some of our musical guests and things like that uh that are going to be attending the party uh so yeah just follow us on Twitter uh check out our website letthe bit drop.com and we'll keep you up to date cool well thanks so much for joining us uh today guys perhaps before we uh wrap up um Freya do you want to talk a little bit or tell us a bit more about the podcast you've been doing um yeah I can do so yeah I've just been running a

podcast for about four months now um and I I was I got into Bitcoin listening to uh podcasts that were coming out of the the USA and um and and they really got me fired fired up and excited about Bitcoin and so um yeah know I just thought perhaps it' be good to have uh different voices in the mix so uh yeah so I thought doing my podcast which is a Bitcoin UK uh podcast and would would be a good idea to kind of yeah just to expand uh you know the the number of places where can go to get information and and you know Focus um on what's happening in the UK as well um there's a

lot of good stuff going down yeah absolutely and I think there's a very few podcasts in Europe and I mean there's you know me and were both in Europe and there yours I don't know if there are any other well no there's there's some more there's one in Austria and there's another one in Germany I know at least but uh there's yeah there's definitely not as much as in us so I think it's great to see another European focused podcast as well absolutely and then there's room for more even still yeah absolutely well uh thanks so much for joining us today guys you know it was really great to talk about the coino talk about you regulations and let the bit drop project so yeah thanks so much for joining pleasure thanks for having

us Brian yeah uh 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 do that enter Bitcoin /ps you can also follow us on Twitter at EP Center BTC and uh if you 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 we could you know what you like about show and what we can do better so thanks so much for listening and we'll be back next [Music] week