Coinbase’s Fred Ehrsam says bitcoin still seeks ‘killer app’Bitcoin is still awaiting its “killer app” to catapult the virtual currency into the mainstream, but Fred Ehrsam has a guess as to what it might be: ending spam.
“In 10 years I think we are going to be sitting here and the internet will look a lot prettier because bitcoin came into existence,” says the 27-year-old co-founder of Coinbase, a San Francisco-based bitcoin company that has attracted more than $100m in venture capital.
While some of the attention on bitcoin still focuses on its yo-yoing price, the focus of venture capitalists has shifted to the potential for the underlying technology, known as the blockchain, which validates and records transfers of the virtual currency without any of the costs of having to go through the banking system. It could enable tiny fractions of bitcoin to be embedded, at virtually no cost, into almost any internet activity.
“The internet has never had economics properly embedded into it,” says Mr Ehrsam, a former Goldman Sachs trader. “Say you pay one one-hundredth of a cent to send an email, spam email dies overnight. Who would bulk create a bajillion Yahoo email accounts? It is no longer economically viable.”
Mr Ehrsam is unsurprisingly bullish on the utility of the blockchain, but he is hardly alone. Developers are experimenting with using the blockchain to speed up the settlement of stock trades, to process by-the-second payments for peer-to-peer video streaming, and to create marketplaces or social networks that operate without a central authority, plus hundreds more potential applications.
More than $390m of venture capital funding has flowed to these bitcoin experiments so far this year, according to researchers at bitcoin news site Coindesk, already eclipsing the $360m that was invested last year.
Coinbase can afford to be neutral on what uses eventually emerge. It styles itself as the “on-ramp to the bitcoin world”, providing customers — both ordinary users and merchants who want to accept payment in it — with a way to exchange money into bitcoin and to store and transfer their virtual currency.
The company boasts 2.4m users in 25 countries, and a roster of backers that include leading venture capital firms, such as Union Square Ventures and Andreessen Horowitz, and some established financial institutions including banks BBVA and USAA, and the New York Stock Exchange.
It is a long way from the anarchic chat forums and anti-government rhetoric of the early bitcoin believers to the swanky offices overlooking downtown San Francisco where Coinbase has its headquarters. The company will soon be taking extra space to house its growing army of compliance officers, lawyers and financially savvy developers.
While bitcoin may one day be embedded in all sorts of financial transactions, it is not clear if the currency will ever be a store of independent value or the alternative to fiat currencies that its pioneers dreamt it would be.
Coinbase made a nod in that direction this month, though, in a publicity stunt surrounding the Greek debt crisis. It waived fees for euro-to-bitcoin transactions, and Mr Ehrsam says there was a 300 per cent spike in trading volume.
“With Cyprus and now this, there is a growing awareness and understanding of what it really means to have money in your bank account,” Mr Ehrsam says. “You’ve now had two countries in the eurozone where all of a sudden you actually can’t access your money and somebody could haircut it by 30 per cent and turn it into something else and you have no control over that.”
Mr Ehrsam straddles the financial and the tech worlds, like a human metaphor for bitcoin. His stint on a Goldman currency trading desk smooths Coinbase’s dealings with banks, while his teenage years as a US champion gamer, sponsored by hardware companies to appear at tournaments, give him geek credibility in San Francisco. From his personal stash of bitcoin — the 20 per cent of his salary he immediately converts back into US dollars — he recently purchased a new Dell Alienware computer for playing video games.
Only a couple of years ago, being able to buy computers and holidays and homewares online using bitcoin was difficult, but the excitement around and investment in the blockchain has raised everyone’s sights. Is bitcoin closing in on a killer app?
“It is like asking, in 1992, how the internet was going to affect the way we do data distribution,” says Mr Ehrsam. “Uber was impossible before the internet; eBay was impossible before the internet ... I can’t sit here and tell you all the killer applications but I know that the possibilities are near endless.”
Source: http://www.ft.com/intl/cms/s/0/70245c18-2f86-11e5-91ac-a5e17d9b4cff.html#axzz3gWufqAXS
