Roger Ver: Blockchain “will continue to dominate” Bitcoin

On Blockchain.info’s past, present and future…

Last week, I sat down with Roger Ver for an exclusive, hour-long interview where we discussed his company Blockchain, its team, and Ver’s own vision for the Bitcoin industry.

We first connected after Ver came across a blog post of mine in which I dismissed Blockchain as “too understaffed” to compete with the likes of Coinbase and Circle long-term. The man, who many have started to call “Bitcoin Jesus”, emailed me because he wanted to let me know that Blockchain had nearly tripled the size of its team since I posted my piece in December, and was continuing to lead the industry in web traffic, wallet users, and bitcoins stored. ”By just about any metric, we are the #1 Bitcoin website in the world,” he wrote.

When Ver offered to set the record straight in a one-on-one interview, I gladly accepted his offer. Below is a partial transcript of our conversation, which has been edited for length and clarity.

Ryan Galt: I’m not sure how many people know this, but you’re actually the majority owner of Blockchain, not just a seed investor. How did you come to acquire the company from [Blockchain founder] Ben Reeves?

Roger Ver: In late 2011 and early 2012, I was busy emailing every single Bitcoin website that had a half-way formed business shaping up and basically asking if they needed any money to expand what they were doing. I was just so excited about Bitcoin and wanted to help grow the ecosystem. Ben replied because I think he already knew who I was because of my investment in BitInstant and some other ventures. He said that he could use some money for additional servers for the website. He named a number and I asked him how much equity would be fair for that. We struck a deal and I sent him the money. Then we didn’t really talk at all for another year or so.

Galt: He was working all by himself at that point, and he didn’t even talk to you?

Ver: I was available, but he just didn’t need me. One thing that cannot be emphasized strongly enough is how absolutely amazing Ben is. He created the entire website by himself, the iPhone app by himself, the Android app by himself, and up until about nine months ago he was also running a service that allowed people to buy bitcoins through wire transfers and cash deposits in the Eurozone. And he was handling all of that including customer support by himself.

The powers that be in the banking system apparently didn’t like the fact that he was using their rails to sell bitcoins, so they shut down his personal bank account, his business bank account and his brother’s personal bank account all at the same time without any warning whatsoever. It was because of his involvement with Bitcoin, and that incident kind of spooked him. He’s an amazing coder and developer, but he simply didn’t want to have to deal with the banks and lawyers and regulators. That’s when I got more actively involved nine months ago.

Galt: I was surprised to learn that you were an active executive with Blockchain. What is your role?

Ver: I still have responsibilities related to some of my other investments, but I am close to full-time at Blockchain at this point. Up until now, I’ve been helping with recruiting and generating revenues from new advertisers. For example, Ben had integrated a couple of partners into our site for free and didn’t even tell them. When I came on board I asked him, ‘how much are we getting paid for this?’ and he said ‘we can get paid for that?’ He was just happy to be building and spreading Bitcoin, he didn’t think like that. There were implementations he did for free that now bring in over $20k per month. And the customers didn’t think twice about paying it.

Galt: With Blockchain, everything seems to be free. BitPay makes money from monthly subscriptions, Coinbase makes fees on its pseudo-exchange, and Circle will likely have a similar model. Does Blockchain make any money outside of ads?

Ver: Right now our goal is to give everything away for free and later on when the whole market develops a bit more, then maybe we’ll start charging for tiered levels of access for things like the data we have about the Bitcoin network. We are and will continue to be a great advertising platform. We are the #1 Bitcoin website on the internet right now with more eyeballs viewing our website than anyone else. One interesting statistic is that today between a third and one half of all transactions on the Bitcoin network are sent through Blockchain, whether that is through Blockchain my wallets or through our Blockchain API. That’s pretty powerful and impressive. We already have advertising revenue well into the six figures per month, and we are cash flow positive, so we’re in a really good position in that regard.

Galt: In some ways, you guys seem almost radically transparent. Is is a good thing to give away so much?

Ver: I think it’s a good thing that all of our client-side code is open-source. Every once in a while, you’ll see a reddit post like “the Blockchain Chrome extension is now closed-source,” and everyone goes crazy! It’s because Ben forgot to push the latest update to Github. But all these people complaining about closed-source, it doesn’t even occur to them that Bitstamp, Coinbase, Mt. Gox, Kraken, every single other online wallet is completely closed-source from day one. We were closed source for a couple of hours because we forgot to push the latest code to the server!

We’re hearing a lot of stories about people signing NDAs and all the information is flowing one way. We’re a contrast to that as we try to be as open as possible. You can see how many users we have, how many transactions, all the charts are there. It’s part of the philosophy that we’re developing at Blockchain: support the community, be open with people and build it out.

Galt: That’s the wallet you are talking about. How about merchant services? Any plans to do anything will respect to payment processing?

Ver: Our merchant services will be focused on advertising. For example, customers like Gyft we’ll make money on referrals or fees per click. But we aren’t planning on working on payment processing solutions because of the regulatory requirements. Instead, we plan to partner with the BitPays and the CoinBases of the world. We will get a cut out of revenues from those relationships, but they are the ones that have to deal with all of the regulatory issues. We just provide a great wallet platform.”

Galt: Speaking of regulatory issues, what is your approach towards dealing with regulators? Do you feel as if you have any responsibility for compliance with anti-money laundering and know your customer laws?

Ver: We have a world class legal team and we’re working hard to ensure that we don’t fall under any of those regulations. The way that our wallet is fundamentally designed is we never have access to anybody’s bitcoins. We don’t have the ability to freeze anybody’s account or block anybody’s transactions or control anybody’s bitcoins in any way. As the law is written currently, it means we are not a money transmitter or a money services business. From that standpoint, we’re probably the best Bitcoin business there is because we don’t have to deal with any of the regulatory craziness.

Keep in mind, this is a global business. So we don’t want to get bogged down by the regulations of any one country. If we don’t and can’t even touch our users’ bitcoins, how can the regulators regulate anything that we are doing? We are positioning ourselves as a true software company, which provides the software tools that allows other people to download and do what they want with their own bitcoin.

Galt: You and some of the other Blockchain team members, especially Andreas Antonopoulos are outspoken when it comes to the illegitimacy or inefficacy of some government regulators. Do you feel Bitcoin can be regulated?

Ver: At the end of the day, no, Bitcoin the protocol can’t be regulated. Obviously, men with guns wearing costumes are scary, but a gun can’t change the mathematics behind Bitcoin. Our goal with Blockchain is to provide the software tools that everyone on the planet can use to send and receive bitcoins to anyone else on the planet without needing permission from somebody wearing a fancy costume with the gun. (As you can probably tell, the reason that Andreas does a lot of the PR, is that I actually might be a little too extreme.)

Galt: But without regulations and successful integration with the existing financial system, do you think that Bitcoin can grow to a massive scale?

Ver: I do, but it would certainly be a slower process. To be fair, Coinbase and others like them [that offer these regulated services] are incredibly valuable, and offer an incredibly easy user interface to buy and sell Bitcoins. There’s definitely a need for things like Coinbase in the ecosystem, but at the end of the day I sure wouldn’t store my Bitcoins in a system like that.”

Galt: Why do you say that?

Ver: At some point, because of the way that systems like Coinbase are designed (and from what we’ve heard, how Circle will be designed), it’s just a matter of time before the regulators come in and say ‘freeze this account’ or ‘undo this transaction.’ At the instant that people realize that their bitcoins can be seized or frozen while stored in a Coinbase wallet, they are just going to flock to a service like Blockchain where their accounts can’t be frozen. In the long-run we think that will be the strongest selling point of Blockchain. Ok, we can’t help you recover your password, but nobody on the planet can take your bitcoins either as long as you use a secure password and don’t forget it.

This is a big issue. The bad case scenario is for an authority to come along and say ‘give me Roger Ver’s Bitcoins.’ But the worst case scenario, which is the scary one, is for someone to come along and say ‘give us everyone’s bitcoins.’ That’s a real problem with ‘off-blockchain’ systems like Coinbase. We’re totally ‘on-blockchain.’”

Galt: What do you mean by ‘off-blockchain’ versus ‘on-blockchain’?

Ver: We think theworld of bitcoin will be split into two worlds. You will have “on-blockchain” businesses that stay true to the unregulated, decentralized principles of Bitcoin. And then “off-blockchain” businesses with fiat business models that must comply with all local regulations as a result.

Apple’s iOS versus Google’s Android is a good analogy, the “walled garden” versus a truly open platform. The walled garden of Apple is closed, tidy, and sanitized. The open platform of Google disorganized, self-emergent, and messy and a heck of a lot more fun. The marketplace has room for both. We’d put Coinbase and Circle in the Apple category, and Blockchain in Android category. Beyond a purely philosophical approach to organization, this still seems like the right way to build a Bitcoin business. The biggest strength of bitcoin is the decentralized ledger that cannot be seized by any power/money hungry government, and it seems to have worked out so far. We apply those same principles to our company.

Galt: Interesting, but this seems like a niche. Do you think that the mainstream consumer would ever opt for an “on-blockchain” model if it meant there was no way to recover passwords, and if they were 100% responsible for being their own bank?

Ver: When you say “niche”, I disagree. Global market shares for iOS phones are tiny compared to Android. Think about the “other six billion.” Most people outside of the developed world especially would rather “be their own banks”, as you say, than have password recovery options from their local bank. By the way, as a company, we don’t have a bank account, and we have no intention of ever opening a bank account.

Galt: Speaking with some of the team at the Miami conference, it seems like you are all closely aligned in terms of your Bitcoin ‘philosophy’ and political persuasions. That said, the team is spread across four continents. How do you manage that?

Ver: Obviously, the key thing is building the culture and finding the right people who embrace Bitcoin’s openness and decentralization. I think it’s clear that Blockchain is the wallet design that holds truest to what Satoshi’s initial goal and vision was with Bitcoin. Logistically speaking, we also tend to coalesce around one place around the globe and travel as a nomadic tribe, especially recently. Our home bases are all over, but most of us are traveling together. We tend to go from Bitcoin conference to Bitcoin conference. In just the past month, we were in Shanghai, Los Angeles, Panama, Buenos Aires, Las Vegas, Austin, San Francisco, Hong Kong, Shenzhen, Macau, London, Miami, and now we’re in the Caribbean.

Galt: So to wrap up, here’s the million dollar question: why do you believe Blockchain is in a position to continue leading the market ahead of Coinbase and (when they launch) Circle?

Ver: We have a first mover advantage and fundamentally our design is better. Coinbase and Circle will always be at the beck and call of every regulator everywhere because they have ultimate control over their users’ deposits, whereas with Blockchain if any regulator comes to us, we don’t have the ability to do any of the things they would ask us to do. We will continue to dominate the market because of our approach.