As you may have seen last week, micro-tipping platform ChangeTip announced a fresh $3.5 million round of funding to scale operations and build a focused micro-payments platform using bitcoin. Yesterday, the company announced the addition of Dan Held (ZeroBlock / Blockchain.info) as VP of Product, a couple of weeks after adding Victoria van Eyk (CoinDesk / Bitcoin Magazine) as VP of community development.
They’re on a roll.
The ChangeTip team is strong and the bitcoin micro-payments market could be massive, which is why I’m thrilled to say I will also be working with the company as an investor along with Barry Silbert. If you haven’t already, you can read more details here, and Pantera (who led the round) also wrote up a good synopsis of the opportunity in their monthly investor letter last week.
Here are my two bits…
First some context: I may be one of the more pessimistic bitcoiners out there when it comes to bitcoin’s current utility in developed economies. I’ve written before about the enterprise applications I believe will drive bitcoin adoption (forex applications especially), and the obviousdeveloping world apps that may already have utility for the unbanked. Other than that, the only proven, legal, developed economy consumer use case for bitcoin right now is in speculation.
In terms of utility, I’m skeptical there are many killer consumer apps we’ll see anytime soon. Remittance is harder than it looks and relies heavily on trust and customer service. And there isn’t much of an incentive to use bitcoin for most e-commerce — even in a world with zero volatility and excellent security / deposit insurance and consumer protections like chargebacks. For the banked, the evil Chase Sapphire card in the centralized ApplePay wallet is simply better for you or me as consumers than bitcoin. This won’t always be the case, but in the near term (2-3 years), it will be.
So where are the “10x better than the status quo” consumer innovations today? I honestly think micro-payments may be the only answer.
It’s not just ChangeTip — Coinbase and Xapo have stepped up their focus on tipping in the past month as well — but I like the idea of a bitcoin micro-payments pure play whose core product is inherently viral. There are a few things ChangeTip could help spawn:
1) Content philanthropy. Tipping is an absolutely massive market in its own right. In the US alone, people donate over $300 billion per year. And that’s just to formally registered charities. Many billions more flow to service providers who rely on optional tips as a large percentage of their income. It’s embedded in our culture to pay for value even when there is no expected tangible or financial return.
But one set of “service” providers has been left out in the cold for quite a while: content providers. It is feast or famine when you’re a blogger or social media starlet. Yes, there are some newplatforms that have been able to make money from online content, but many journalists are finding that there is simply less and less revenue to go around. ChangeTip’s twitter, reddit and other social media plug-ins remove most of the friction of sending tips for content, and more importantly, encourage others to do so: when you tip someone on twitter, it’s public. When others see your generosity, they might be encouraged to follow suit. It’s a virtuous cycle that I think could become the new normal, especially when you consider that there are actual financial incentives to spread bitcoin and convert new users.
2) Contextual payments. Yes, bitcoin balances on ChangeTip can still fluctuate wildly. But I think the company makes it easier than most platforms to hide bitcoin throughout its user experience. And the ability to tip someone a “beer” or “lunch” or “high-five” or any other custom amount is brilliant because it deflects attention away from everything wrong with bitcoin, and instead keeps the focus on everything that’s right. Consider this a precursor to a “super-like” button, where you can tie 100 bits to each “high five” you send. Compelling, especially if you think it might come back around when you yourself post quality or entertaining content. ChangeTip brings new meaning to the term “social currency”.
3) A micro-payments proof of concept: An open question is whether large social media platforms (Twitter / FB / Reddit / YouTube) will build their own closed-loop micro-payment systems themselves and obviate the need for these type of third-party services. That’s why it’s important that ChangeTip scale quickly, demonstrate its value as an interoperable platform with a strong “viral loop”, and kill it on its 1.0 application of tipping.
It isn’t that hard to facilitate cost effective micro-payments using digital currencies. What is hard is scaling a user base. If ChangeTip can hook a few million users on its tipping application — users who would ostensibly be using the service exclusively for micro-payments — it will have the credibility to pitch much larger content providers on the viability and economics of its service. The pay-per-view model starts to work, even the long tail of content. And that’s just one potential product.
This holiday season, I think we would all do well to embrace ChangeTip, and other bitcoin tipping apps like it. I’m planning to make a concerted effort to tip non-bitcoin bloggers and media types in the next few weeks on twitter. It spreads the bitcoin gospel, reinforces the simplicity of a great early use case for cryptos, and forces potential brand ambassadors to actually use bitcoin in some small way.
There’s a six-pack on me for the person who converts the biggest celebrity to bitcoin via ChangeTip this holiday season. Get to it.
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Sorry for the miss yesterday. A few days worth of Tid Bits are below for your enjoyment. :)
Jobs, Jobs, Jobs
BitGo, Palo Alto (VC-backed)
-The leading Bitcoin multi-sig security company
-Open positions: Back-end / Front-End / iOS / Security Engineers, UX Designer
-Check out BitGo (www.bitgoinc.com/jobs) and email jobs@bitgo.com
Bolt, San Francisco (VC-backed)
-Stealth startup focused on consumer applications of Bitcoin.
-Open positions: Security Engineer, Ruby Engineer, UI/UX Designer, Executive Assistant.
-Check out Bolt (bolt.com) and email jobs@bolt.com.
Elliptic, London (VC-backed)
-Vault and enterprise digital currency services.
-Open positions: Software engineers and business development gurus.
-Learn more and apply at elliptic.workable.com
Today’s Tid Bits
Bitcoin Investment Trust Syndicate Wins 48,000 BTC in US Marshals Auction
http://www.coindesk.com/bitcoin-investment-trust-wins-48000-btc-us-marshals-bitcoin-auction/
A bidding syndicate formed by the Bitcoin Investment Trust and the trading division at SecondMarket won 19 of the 20 blocks put up for auction by the USMS, or a total of 48,000 BTC. Tim Draper was revealed as the winner of the remaining 2,000 BTC. Although overall bidder registration was down, Barry Silbert, SecondMarket’s chairman, revealed that 104 bidders participated in the auction group led by the Bitcoin Investment Trust and SecondMarket. As a result, the 48,000 BTC will be divided among the 104 participants.
SEC Fines Another Seller of Unregistered Bitcoin Securities
http://blogs.wsj.com/moneybeat/2014/12/08/bitbeat-sec-fines-another-seller-of-unregistered-bitcoin-securities/
On Monday, the SEC sanctioned Ethan Burnside, an Oregon man, for running unregistered trading venues for securities that used bitcoin and litecoin. The case has been settled with a payment of $68,000 that was comprised of Burnside’s profits and an unspecified penalty. Mr. Burnside’s company, BTC Trading Corp, had two online platforms, BTC Virtual Stock Exchange and LTC-Global Virtual Stock Exchange, where users could buy and sell securities of mostly virtual-currency-related businesses. Mr. Burnside is now barred from the securities industry.
New York State Tax Agency: Bitcoin Buyers Don’t Need to Pay Sales Tax
http://www.coindesk.com/new-york-state-tax-agency-bitcoin-buyers-dont-need-pay-sales-tax/
Bitcoin purchases will not be subject to sales tax, according to the New York State Department of Taxation and Finance. Digital currencies are legally defined as a type of “intangible property,” and, as such, are not subject to a sales tax. The Taxpayer Guidance division also clarified that the treatment of corporate and personal income taxes related to digital currency follows federal regulation, published by the IRS. The IRS taxes bitcoin as a type of property.
Falcon Global Capital Closes Bitcoin Fund Due to Slow Demand
http://www.bloomberg.com/news/2014-12-08/falcon-global-capital-closes-bitcoin-fund-because-of-slow-demand.html
Falcon Global Capital’s bitcoin fund, which began in February, attracted about 25 clients, who contributed form $25,000 to $10 million each to invest in the virtual currency. The fund closed in November due to slow demand, stemming from bitcoin’s price slipping more than 50 percent this year. Falcon refunded the money in November, and will now refocus on consulting about bitcoin. The company expanded its team of four to 10 people to advise institutions, corporations, and governments.
ChangeTip Taps Blockchain Product Manager to Accelerate User Growth
http://www.coindesk.com/changetip-taps-blockchain-product-director-accelerate-user-growth/
A week following its newly raised $3.5m in capital, ChanpeTip has announced Dan Held, product manager at Blockchain and co-founder of the market data app ZeroBlock, will join its team as VP of product management. ChangeTip has been gaining momentum recently, as the company claims to be processing 10,000 transactions per day.
Venezuelan Politician Buys Out HashFast’s Assets
http://cointelegraph.com/news/113077/venezuelan-politician-buys-out-bankrupt-hashfast
Guido Ochoa, Venezuelan congressman and the president of the country’s Science Technology and Innovation Commission has bought HashFast, a bankrupt bitcoin mining equipment manufacturer. Ochoa purchased all the remaining assets of the company. HashFast was reportedly more than $40m in debt to customers from all over the world due to unfilled orders. Ochoa, who was one of HashRate’s largest customers in the past, having already spent $800,000, purchased the company’s remaining inventory (excluding the remaining chips) for $420,000. The entire affair is raising questions from judges, debtors, and bitcoin mining enthusiasts.
CEO Nicholas Cary: ‘Around 250 BTC Gone’ in Blockchain.info Security Lapse
http://cointelegraph.com/news/113074/ceo-nicholas-cary-around-250-btc-gone-in-blockchaininfo-security-lapse
Blockchain.info has lost an estimated 250 bitcoins following a security lapse during an update yesterday. The issue has affected less than 0.0002% of its database and all users potentially involved have been alerted via email. The security weakness was a rare lapse for the company who used to have Andreas Antonopoulous as its chief security officer.
6,000 Merchants in Romania Can Now ‘Opt In’ For Bitcoin Payments
http://www.coindesk.com/6000-merchants-romania-given-opt-bitcoin-payments/
Netopia mobilPay, one of the biggest online payment processors in Romania, is integrating a bitcoin option into its services for its 6,000 partner retailers giving them the ability to process bitcoin payments, with no additional development costs. The company has partnered with BTCXChange, a Romanian bitocin exchange, and Coinzone.com, a Dutch-Romanian company to make the integration possible. Netopia mobilePay, currently processes around 50% of all mobile payments in Romania, and will charge a “very low” percentage fee per bitcoin transactions.
Tim Draper Wins 2,000 BTC in Second US Marshals Bitcoin Auction
http://www.coindesk.com/tim-draper-wins-2000-btc-second-bitcoin-auction/
Tim Draper, successful entrepreneur and bitcoin enthusiast, once again submitted a winning bid in a bitcoin auction held by the US Marshals Service. Draper confirmed to have won just one block of 2,000 BTC, in total 50,000 BTC was sold in ten blocks of 2,000 BTC and 10 blocks of 3,000 BTC last Thursday. Draper declined to comment on the exact figures of his winning bid.
Boost VC to Invest Additional 300 BTC in Each Tribe 5 Bitcoin Startup
http://www.coindesk.com/boost-vc-invest-additional-300-btc-tribe-5-bitcoin-startups/
Boost VC, the Draper owned California-based bitcoin startup accelerator, will use the 2,000 BTC Tim Draper won in Thursday’s USMS auction to fund each company in its accelerator with 300 BTC upon completion of the program. The 300 BTC comes in addition to the $10,000-$20,000 in capital each company will receive upon admission to the accelerator. Boost’s next batch of bitcoin startups is expected to include 15-25 startups.
Bitcoin Foundation Hires Developer Sergio Lerner for Full-Time Security Role
http://www.coindesk.com/bitcoin-foundation-sergio-lerner-security-role/
Sergio Demain Lerner will become the fourth full-time core developer funded by the Bitcoin Foundation serving as a new core security auditor. Previously, Lerner has been involved with the core development of bitcoin, identifying a number of vulnerabilities in the bitcoin code; he currently works for Coinspect, a security consultant bitcoin startup. Gavin Andresen, chief scientist also indicated that the core development team is preparing for the released of bitcoin version 0.10 in January.
California Becomes the Second State to Try to Regulate Bitcoin
http://cointelegraph.com/news/113059/california-becomes-second-state-to-try-regulate-bitcoin
California’s Department of Business Oversight has concluded that they have the authority to regulate digital currencies. This department is responsible for regulating money-transfer businesses, such as Xoom and Western Union. California regulators have taken a favorable approach to digital currency; recently, California Governer Jerry Brown signed a bill, making virtual currencies officially legal in the state. California and Colorado are the two states currently attempting to build a regulatory regime for digital currencies based on consumer protection.
Ernst & Young: “Cryptocurrencies Are a Great Innovation”
http://cointelegraph.com/news/113061/ernst-young-cryptocurrencies-are-a-great-innovation
Jan Bellens, a Singapore-based Ernst & Young LLP Partner, believes, “cryptocurrencies are a great innovation with great upsides for the long-term.” Bellens, indicated this his company believes cryptocurrencies have lots of potential, especially in emerging markets, but did point out its security risks. Overall, Bellens concluded that himself and his company would be paying close attention to the development of cryptocurrencies.
UCF Football to Play NC State in Bitcoin St. Petersburg Bowl
http://www.orlandosentinel.com/sports/ucf-knights/os-ucf-football-bitcoin-bowl-post.html
UCF Football will play NC State in the Bitcoin St. Petersburg Bowl on December 26th. The UCF Knights, won the American Athletic Conference this past weekend, while NC State finished 7-5 overall this season. UCF will be looking for its third straight bowl game win, while NC State will be looking for its first bowl game win since 2011.
Interview with Align Commerce CEO Marwan Forzley
http://cointelegraph.com/news/113052/the-blockchain-as-a-settlement-rail-for-payments
Marwan Forzley, CEO of Align Commerce, a payment service provider, turned heads at Money 2020 in Las Vegas when he discussed using blockchain technology as a transport payment rail. Forzley discussed the advantages of using the blockchain as a payment rail because it is secure, there is not distinction between domestic and global payments, and you can attach all types of conditions to the network. Forzley also responded to the Western Union ad, which claimed that transferring money through bitcoin was actually more expensive, by mentioning the costs of both and that Western Union is more reputable. However, Forzley still believes the blockchain will soon make payments simple, frictionless and inexpensive.
Proposed US Law Calls for Five-Year Moratorium on Bitcoin Regulation
http://cointelegraph.com/news/113052/the-blockchain-as-a-settlement-rail-for-payments
HR 5777, the Cryptocurrency Protocol Protection and Moratorium Act, calls for a five year moratorium on digital currency regulation within the US. The bill would hold off any “statutory restrictions or regulations” with bitcoin for a five year period. The drafted bill also calls for digital currencies to be classified as traditional currencies under US tax regulations. The five-year moratorium is needed to fully assess and examine the potential benefits of digital currencies, according to the bill.
MasterCard Executive Argues Bitcoin Can’t Be Trusted
http://www.coindesk.com/mastercard-executive-argues-bitcoin-cant-trusted/
Matthew Driver, MasterCard’s president for South East Asia, released a video where he rebuked digital currencies suggesting that they carry too many risks to be successful. Driver was critical of the anonymous nature of bitcoin, its price volatility, and ultimately declared digital currencies “serve a purpose that’s not necessarily completely clear.”
UK Treasury Committee MP: Bitcoin Doesn’t Need New Laws
http://www.coindesk.com/uk-treasury-committee-mp-bitcoin-doesnt-need-new-laws/
Steve Baker, a member of the Treasury Select Committee and a bitcoin user, believes government should not regulate alternative currencies, including bitcoin. Baker believes that the UK should do everything possible to regulate bitcoin under ordinary commercial law. Baker previously served as the chief architect of global financing and asset servicing platforms at Lehman Brothers. Ultimately, Baker claimed the less government intervention in the digital currency world the better.
Ripple Partners With Global Payments Service Earthport
http://blogs.wsj.com/moneybeat/2014/12/04/bitbeat-ripple-partners-with-global-payments-service-earthport/
Ripple Labs, a payments network provider, has partnered with Earthport, a UK-based cross-border payments firm in an effort to improve its international money transfer service. Ripple has been trying to win over the business of regional banks and remittance services, arguing that the Ripple platform allows for cross-border transfers to take place securely and directly by passing large banks. Earthport handles the technological, regulatory compliance and security needs of these transfers while Ripple allows for a faster, cheaper means of payment transfer.
US Marshals Complete Second Auction of Silk Road Bitcoin
http://techcrunch.com/2014/12/05/us-marshals-complete-second-auction-of-silk-road-bitcoin/
Yesterday’s US Marshals auction of 50,000 BTC had a reported 11 registered bidders who placed 27 bids for the bitcoins. Down from the 45 bidders who registered for the first auction in June. The bidders had a six-hour window to bid verses the 12-hour bidding window that was given in June. Bitcoin’s price was unaffected by the sale, and it is now at about $380.
Have a tip or feedback? Email me! (2bitidiot@gmail.com)