Bitnet vs. Coinbase

Ok, a bit of click-baiting for you today as this isn’t really a post about how Bitnet and Coinbase will be competitive. (It seems there will be ample room for BitPay-Coinbase-Bitnet-GoCoin to compete and differentiate in the coming years.) Instead, think about the recent news from both companies, and the very different paths both teams have taken to bitcoin payments.

Earlier today, Bitnet, a bitcoin payments processing company based in SF and Belfast, Ireland announced it had raised $14.5 million in Series A funding in a round led by Highland Capital and Japanese ecommerce site Rakuten. At first glance, this would appear to be just another addition to the increasingly competitive Bitcoin merchant services landscape. But what makes Bitnet unique is that the team may be the first well-funded venture that is nearly wholly comprised of non-Bitcoin early adopters.

That feels like a big milestone to me.

Ask CEO John McDonnell and his team whether they are bitcoin guys, and they will most likely answer in the negative. Instead, they identify as payment guys who see the potential for Bitcoin technology to shake up payments. (And to be clear, they are very enthusiastic about Bitcoin even if they aren’t early adopter “purists.”) Bitnet has the first of hopefully many teams who are re-purposing their deep legacy industry knowledge and leveraging blockchain technology to disrupt old familiar markets.

The early Bitnet team is one of the most impressive and balanced that I have met. In any industry. And that’s probably because the vast majority of the executives on the 27 person team have already worked together — first with online payments technology company CyberSource, and more recently with Visa, which acquired CyberSource in 2010 for $2 billion. A fully-baked team with one multi-billion dollar exit under its belt? I can’t think of a stronger validation of Bitcoin’s potential.

Expect more of these finance-veterans-turned-bitcoin-enthusiasts to tackle other niches in the coming years.

Which brings me back to Coinbase.

Add together the ages of Brian Armstrong and Fred Ehrsam, and the co-founders of Bitcoin’s only “universal” services company are still younger than the Jamie Dimons and Lloyd Blankfeins they are attempting to force into retirement. Unlike the Bitnet team, they are the (very) early adopters who started building the proverbial airplane in mid-air, and are learning payments as they go with (given the complicated regulatory environment) surprisingly rare missteps.

Armstrong and Ehrsam did a rare AMA last week (I believe their first) in which they somehow found themselves in the position to put a young, friendly face to their serious start-up. The fact that Ehrsam had to answer the question, “Do you ever smile?” and Armstrong had to explain, “If we’ve ever seemed a little reclusive, it’s because we’ve barely been sleeping enough to keep this running,” shows you how Coinbase has already won a major battle — they’re considered serious, in a heavily regulated industry run by graybeards, despite their age. Normally, you see older executive teams do AMAs to appear more forward thinking, young and cool. This felt a little like that, which is weird since Coinbase is already the forward thinking, young and cool company leading the Bitcoin charge.

A good branding problem(?) to have.
I’d argue this bit of unintentional personal branding may be more impressive than what the brothers Collison have accomplished at Stripe. After all, Coinbase is more bank than software company.

Coinbase has a core Bitcoin team learning payments at a deep level. Bitnet has a core payments team learning Bitcoin at a deep level. Which will prove to be the essential ingredient for success? Extensive financial services experience? Or fresh eyes?

If you’re rooting for the industry as a whole, hopefully both.

***

Here’s a link to that Coinbase AMA. Worth watching in full, but here are some highlights in case you get too distracted by the Ewok looking over Armstrong’s shoulder the entire time:

-They pay lip service to the potential of micro-transactions, and explains how they are well-positioned to handle them.
-They like distributed identity systems and reference OneName, and Keybase. “ID is a natural pairing to Bitcoin.”
-They think volatility is a mostly self-correcting problem. [Eh, partly agree and partly disagree.]
-On their rapid growth: “A lot of our jobs as founders comes down to who do we want to disappoint the least?”
-Does Coinbase share all its info with the US Gov. “No. Under grand jury subpoena, we have to, but we take steps to avoid it.” They have also talked to the EFF and look at what other companies do for privacy best practices.
-Armstrong doesn’t like phone support because he doesn’t think it is that efficient. BitLicense might force them to offer.
-Ehrsam does smile. Sometimes.

https://www.youtube.com/watch?v=w3OWzZSr8Nc

Upcoming Events

Money 20/20 (November 2–5 in Las Vegas)

Money20/20 is the world’s largest event enabling payments and financial services innovation for ‘anywhere, anytime’ connected commerce at the intersection of mobile, retail, marketing services, data and technology. With 6,500+ attendees, including more than 500 CEOs, from over 2,250 companies and 50 countries, Money20/20 is critical to realizing the vision of disruptive ways in which consumers and businesses manage, spend and borrow money. The next Money20/20 will be held on Nov. 2–5, 2014 in Las Vegas, and will be preceded by the Money20/20 Hackathon, which runs Nov. 1–2. Register here!

Jobs, Jobs, Jobs

Have a position you’re dying to fill? You can pay to post it here, in the Bit’s new jobs section.

Senior Folks: Check out HoneyBadgr, which introduces top talent to early stage and venture-backed Bitcoin startups. They are a team of ex-Googlers residing at Boost VC in Silicon Valley, with a mission to help grow the Bitcoin ecosystem on a global scale.

Student Bitcoiners: Circle, the Boston-based digital currency venture, is looking for campus reps across the country to participate in a social media marketing program this fall! Each rep will receive a Circle account with $250 in Bitcoin to spend over the course of the semester. Reps are required to post at least five stories about using Circle and Bitcoin to their Facebook accounts (and/or other blogging platforms like Tumblr) and to cross promote these via Twitter, Instagram, Snapchat, and other social channels. To apply, send your resume to reps@circle.com click onthis link to be redirected to the brief application.

Today’s Tid Bits

Kraken to Launch Bitcoin Ops in Japan This Month
http://blogs.wsj.com/moneybeat/2014/10/20/kraken-to-launch-bitcoin-ops-in-japan-this-month/
Kraken, a California based bitcoin exchange, will begin operations in Japan by the end of October, becoming the latest bitcoin service to launch in Japan since the collapse of Mt. Gox. Kracken plans to allow local users to deposit cash in a Japanese bank account for yen-denominated trading. The large bitcoin exchange has been serving Japanese customers via international account deposits, but these are subject to high transactions fees, and opening up services in Japan in cooperation with local banks, will eliminate these fees.
AlphaPoint Raises $1.35 Million to Build Intel for Bitcoin
http://www.coindesk.com/alphapoint-1-35-million-intel-bitcoin-exchanges/
AlphaPoint, a popular digital currency exchange, has raised $1.35m in new funding to expand to new international markets and expand its line of digital currency exchange solutions. Currently, AlphaPoint offers an exchange platform, and an exchange remarketer, which connects exchanges for liquidity. The new funding will go to improving the infrastructure of these programs. VC firms Ben Franklin Technology Partners and Robin Hood Ventures led the funding round.
Robocoin Customers Report Trail of Late Deliveries After Reddit Expose
http://www.coindesk.com/robocoin-customers-report-trail-late-deliveries-reddit-expose/
Robocoin came under fire after an angry customer took to Reddit to publicize its complaints about its delayed ATM order, its defective unit, and slow return process. Eventually the customer, a company called MetaLab Design in Victoria, Canada got its $25,000 back. Other Reddit posts complained about similar delivery problems, increased expenses due to delays, and software malfunctions. After some resistance, Jordan Kelley Robocoin’s CEO, took accountability for the errors.
BTC China Adds Mining Pool and Merchant Payment Services
http://www.coindesk.com/btc-china-adds-mining-pool-merchant-payment-services/
BTC China will expand its services with the addition of a new mining pool and merchant payments processing. The mining pool will implement the PROP (proportional) payout scheme, where blocks are paid out proportionally to the number of shares a contributor has earned. The company’s merchant payment processing currently supports USD, CNY, and Hong Kong dollars (HKD).
Bitcoin Derivatives Platform BTC.sx Partners with Asian Exchange itBit
http://www.coindesk.com/bitcoin-derivatives-platform-btc-sx-partners-asian-exchange-itbit/
BTC.sx, a London-based bitcoin derivatives platform, has partnered with global exchange itBit to integrate a BTC-USD trading currency pair. Traders will now be able to make small deposits in their fiat currency or bitcoin to go long or short on bitcoin, and at that point BTC.sx will then purchase bitcoins on an exchange and confirm the trade with the user. Notably, these trades can take place entirely in bitcoin.
Bitcoin Trader Hacked and Shut Down
http://newsbtc.com/2014/10/19/another-bitcoin-company-goes-belly-bitcoin-trader/
Bitcoin Trader, a bitcoin services company, has shut down operations following theft of the company’s bitcoin wallets through a hacker. On October 6th, users began reporting the ability to withdraw funds from the service, and today the company is officially closed. It is suspected that Bitcoin Trader was in fact a HYIP (high-yield investment program), a type of Ponzi scheme.

Why Marc Andreessen is Long on Bitcoin and Short on Apple Pay
http://www.coindesk.com/marc-andreessen-long-bitcoin-short-apple-pay/
Twenty years ago Marc Andreessen created Netscape Navigator, and now he sits at the helm of the venture capital firm Andreessen Horowitz. Yesterday, Andreessen sat down with Bloomberg West anchor Emily Chang for a discussion, where he mentioned two major drivers of the payment space in the future: Apple Pay and bitcoin. Andreessen believes Apple Pay will be have an impact in the next three years, while bitcoin will have a big impact over the next twenty years. Andreessen Horowitz has invested almost $50m in bitcoin companies to date.
Moolah CEO Resigns Amid Growing Public Outcry, Criminal Allegations
http://www.coindesk.com/outcry-fraud-allegations-moolah-resignation/
Alex Green, CEO of Moolah, has resigned following the release of evidence allegedly tying him to fraud and past criminal activity, along with the company’s withdrawal of a proposed bankruptcy plan. After declaring bankruptcy, it was later announced that Moolah had secured outside funding and would continue operations. Green will step down, as he blames himself for poor management, but claims, “there is no scam here, no matter how you look.”
Digital Rights Advocacy Group Launches Campaign Against BitLicense
http://www.coindesk.com/eff-campaign-against-bitlicense/
The Electronic Frontier Foundation (EFF), a digital rights advocacy group is launching an email campaign against the proposed BitLicense. The EFF has a pre-written letter for support to sign and send to Ben Lawksy, the Superintendent of the New York Department of Financial Services. The EFF claims the BitLicense stifles overall innovation, invades privacy, and they also warn bitcoin users that proposed exemptions from the license may not be guaranteed.
Australian Police Seize Bitcoin ATM in $2.6 Million Drug Bust
http://www.coindesk.com/australian-police-seize-bitcoin-atm-2-6m-drug-bust/
Australian police have raided a Brisbane coffee shop with ties to a biker gang, named Bandidos, and have seized $2.6m worth of drugs along with a bitcoin ATM. The biker gang was involved in high-level drug trafficking, and the raid in the Brisbane was one of a series of 19 raids, and the culmination of a two-year investigation. It has yet to be confirmed whether gang members used the ATM as a part of their drug trafficking network.
Winklevoss Twins Launch Bitcoin App, the WinkDex
http://www.nbcnews.com/tech/mobile/winklevoss-twins-launch-bitcoin-app-called-yes-winkdex-n227306
The Winklevoss twins have launched their iOS app, the WinkDex, which monitors the price of bitcoin, as averaged from several bitcoin exchanges. The app can also convert bitcoins to US dollars and displays charts mapping the volatility of the digital currency. In 2013, the Winklevoss twins told the New York Times the owned around $11m worth of bitcoin.

Tips Are Always Appreciated

Financial tips: https://coinbase.com/twobitidiot

News tips: email 2bitidiot@gmail.com