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Despite its detractors, the digital currency Bitcoin has continued to grow in popularity. Can you give tell us a little about your personal background and how you became involved with Bitcoin in the first place? I joined the marines at I was in the marines for 6 years and I went over to Afghanistan for a couple years and then I moved to Chile.
When I was living in Chile in , I was importing electronics and was really into finance, economics… that kind of thing. It seemed like one of those things that if everybody used it, it would work great and it could change the world, but I was worried about the network effect.
I was worried that until it got critical mass it would be worthless. In , Bitcoin was starting to take off a little bit more and I was more active in it, so I decided to launch Tradehill. I contacted a friend of mine who was a coder at SpaceX and pitched him on it and he started coding. He worked on it for a while and then we launched on June 8th of It was still kind of an experiment at that point. I expected to get a couple thousand dollars in … and then we had a quarter million come in during the first twenty-four hours, then give or take a million by the end of the week.
It just went nuts after that. We were doing a couple million a month in transactions. So, I ran that for a while and then ran into some problems with Dwolla. They promised to be charge-back free, non-reversible. They deleted transactions in previous statements and took six figures out of our account without even saying anything. I tried to pull the rest of the money and they just deleted it. So we took a major hit and decided it was best to shut the company down and take a look at the regulatory picture, evaluate, get legal help, get more tech guys, raise some money, and do it again.
For legal reasons, we only allow professional traders, accredited investors, and institutions on the exchange. The current Tradehill is a B2B [business-to-business] exchange for larger transactions. As an Exchange, how does Tradehill stack up against the other folks out there? Gox is the big one, right? We have free, two-factor authentication built in from the start.
We brought our CTO from Google and he was a senior privacy guy there, so he has more than twenty years software experience and left Google to work full-time for us. So we built a more serious, professional product from the beginning. Everything from how customers interact to the software. Our batching engine processes hundreds of time a second, sometimes you see seconds or even minutes to do a transaction on Mt.
It seems like most of the other exchanges have had problems with accounts being hacked or technical glitches. How are you making sure there are no technical or security failures… other than just having better people? I represented twenty percent of the market or something like that. I definitely saw it all… fraud, bugs and everything. We thoroughly test everything before we release it.
Also, on the legal front, we have more lawyers than engineers. We make sure everything is legit before we push any new products as well. No, not at all.
As far as currency trading investors, they see me talking on Bloomberg and they feel a lot more confident in that than some guy in Japan. Price volatility seems to be a major criticism. For example, Bitpay already cuts it down to fifteen minutes so when you send it, you get a price and you send it.
You can already use it. Volatility is not a problem for using Bitcoin as intended. And what about as an actual medium of exchange.
If I want to go out and buy a pizza with Bitcoins…? I think it depends. Bigger picture, what do you see as the social, political, and economic impacts of Bitcoin? What does a world where Bitcoin achieves really wide acceptance look like? The government in my opinion has a much easier time tracking Bitcoin than they do cash. If you had all those serial numbers, you could track it down.
I see it as less of an issue for money laundering than actual cash. Do you see Bitcoin ever becoming a constraint on central bank policy by providing a way for ordinary citizens to flee a currency? Maybe in cases where policy has been overly inflationary or like Cyprus where funds were just being seized? What do you see as the biggest hurdle to actually getting wider acceptance?
I think seeing more merchants accepting it. If the average person is on the street corner buying coffee with it, then people will see it. You can pay for your blog on WordPress with it. That was a milestone. It started off with just a few people at colleges and then all of a sudden it just exploded. Or Paypal, only a few people were using Paypal and it just continued to grow.
What I see are things like Ripple. Ripple is completely different from Bitcoin. It allows you to create your own assets. It allows you denominate things in dollars so people are comfortable sending dollars.
I see Bitcoin being great for settlement and continuing to gain acceptance and be used for settlement whereas other currencies like Ripple being used for debt transfer, if that makes sense. Jeff is a Silicon Valley-based journalist who writes about technology and politics. Has it been hard to convince investors to get on board with this?
Yeah, I think so for sure.