Art by: Jing Jin
When I started writing for CoinTelegraph, Bitcoin was around $800. With my modest lifestyle and three roommates, that was enough for roughly six weeks worth of rent. Today, one Bitcoin wouldn't cover one month's rent. Luckily for me, CoinTelegraph pays in Bitcoin but bases the amount on its current USD value, but still, if it wasn't already obviously apparent to me, I would have quickly learned that Bitcoin was not a safe place to hold money that might be needed for rent or bills.
Writing, contrary to what some may believe, is not a lucrative career. Sure, some people get wealth and accolades from it, but most aspiring writers fail to make ends meet either because they burn out or due to a lack of motivation, discipline or talent, and end up delivering pancakes at IHOP. While the former possibility would be nice, it is rare enough that success is usually measured by simply not falling into the later.
I mention all this not to evoke the writing faux pas of starting this article talking about myself, but to simply point out that I am Halsey Minor's target audience with Bitreserve. If I kept the majority of my savings in Bitcoin, I would be at risk of losing half of my earnings and could easily find myself in the real life hell that is “Kids Eat Free” Tuesdays at IHOP.
Bitcoin evangelicals can scream all day that “one bitcoin equals one bitcoin” and that is how we should think of it, but when one bitcoin also equals either six weeks or less than three weeks of rent, the reality stands in stark contrast to the platitude.
Halsey Minor's Bitreserve is meant to fix that. While I think most everyone would agree that Bitcoin is a better investment than the dollar, a usable currency isn't the same thing as an investment. Any sane Bitcoin advocate will tell people not to invest what they cannot afford to lose, but that ignores the huge number of people who aren't in a position to invest anything. If the Bitcoin community wants the masses to get on board, it has to be financially viable for them to do so.
Bitreserve has many functions. Most of them are by design, but a few of the use cases companies coming up with using the open API surprised even the Bitreserve team. The main function though, the pillar that Minor is clearly most proud of, is the ability to let people use the Bitcoin network and all the advantages that entails, without having to deal with volatility.
When you sign up for Bitreserve, you are presented with six cards, five representing one of the major currencies Bitreserve supports and one representing Bitcoin. Users can deposit Bitcoin into any of the cards and Bitreserve will hold that amount of money in their system and its connecting, transparent “ReserveChain.” Every Dollar, Euro, Yen, Yuan or Pound held by users in the Bitreserve system is backed by real fiat held by Bitreserve. If they say you have $50, they actually have $50 set aside for you, and it can be tracked on the Bitreserve system. It isn't loaned out to another user or invested in some risky derivative like it would be at a bank.
What this means is, someone like myself can hold dollars (or euros or whatever currency I want) on the Bitcoin network. I can send that amount of dollars, regardless of fluctuations in Bitcoin's price, at any time through the Bitcoin network. Bitreserve simply sends the Bitcoin from their own reserves, then buys it back 20-30 seconds later with the money I spent. I tested it out on a merchant that uses Coinbase as its payment processor and noticed no major difference between Bitreserve's transaction times and my normal wallets.
Ultimately, it is about the convenience of being able to use the Bitcoin network without having to make a currency conversion every time you do it, or having to worry about Bitcoin volatility when you have a significant amount of your disposable income in it.
“When I [go] to England, I do what just about everyone does, for the vast majority of purchases, I pull out a credit card and I don't think 'oh gosh, I'm going to swipe this and do a foreign currency exchange' my bank just handles it for me. I keep money in the form I want, I keep it in my home currency and everybody has a home currency.”
If the majority of people are going to start using Bitcoin, they need a way to put a significant amount of money into it without worrying about it disappearing the next day. That is the advantage of holding money in the Bitreserve system.
“[I]f I hold a thousand dollars, and my rent is a thousand dollars, I don't have to worry about being evicted because I held a thousand dollars.”
One could say that people should only put what they can afford to lose into the Bitcoin system, but that kind of barrier to entry does not lend itself to commerce for the vast majority of the population.
“There is a certain amount of elitism [in the Bitcoin community] that I'm not sure people are even aware of, that people around the world can afford to have money in a currency that goes down in value [quickly]. I mean, if you are a working mother of three and you are trying to raise your kids and you live on a budget [you can't afford that]. Most people actually spend more than they make, and there is a sort of thing in Bitcoin that [people feel] like 'well, that's your problem, who cares if it goes up and down? You should use it anyway' and it's not practical. People do need the money they make.”
Bitreserve was born out of Minor's own struggles with finances and financial institutions. His financial past is well documented and there is no reason to re-hash it at length here. But the short of it is he founded C|Net, one of the first profitable publicly traded businesses on the internet. He then was an early investor in SalesForce in 1999 and soon was worth billions. Some bad investments, and two bank failures later he was bankrupt in one of the tech world's fastest and most public richest to rags stories.
While I do not know what Minor's day-to-day life was at the time, I don't know how comparable his struggles were to the struggles of “normal” people trying to make ends meet, it is clear to me, even in our relatively brief hour long conversation, that his fall from grace has a lot to do with what he is trying to accomplish with Bitreserve. Undoubtedly, Bitreserve is his comeback company, but it also seems like a personal crusade for him. While there are salacious stories about art addictions and other contributing factors, it is clear that he blames at least part of his financial issues on the banks, having one fail while they are building a hotel for you will do that and so it isn't surprising to see him use Bitcoin as the rocket ship meant to return him to grace. He made millions by capitalizing when the Internet opened up media to the world, how much can he make as Bitcoin opens up the financial world in a similar way?
More than that though, it seems that his personal struggles made him realize how important a stable financial nest egg is. How the vast majority of people out there cannot afford to have their currency drop drastically in value, even if a rebound or massive spike is promised right around the corner. That is something he may have had trouble seeing, if he still had the kind of finances that make rumors of a fine art "addiction” possible. This is something that he is acutely aware of.
“I wouldn't wish [my financial issues] on anybody and I wouldn't wish it on myself. But in the end, that doesn't mean it wasn't extraordinarily valuable to me in some way. This company and many of its innovations are both a collection of things I learned along the way and stuff that I, being 'billionaire Halsey Minor' would have never been able to appreciate.”
But as it turns out, Bitreserve has more functions than just letting people use the Bitcoin network without worrying about volatility. Minor clearly has no love for the banks and doesn't want Bitreserve to become one. To that end, they created the ReserveChain and BitLedger. This allows for complete transparency for users who have their money in the Bitreserve system. Essentially, they are extensions to the Bitcoin blockchain, letting users see how much money they hold, what currencies they hold it in, when they bought it and what exchange rate they got at the time. Eventually, as the reserve outpaces the liabilities, some of it will be invested in low-risk investments like government bonds. But again, users will be able to see exactly what security was bought, how much was paid for it, when it was bought and where it is presently.
This was designed to give Bitreserve users a way to know, unlike the customers of the banks that lost untold billions, what is going on with their money and not just build trust through transparency, but make trust an obsolete construct in the financial world.
It accomplishes that. But what it also has ended up doing is open up a whole slew of tools for companies using the API to make their companies transparent as well.
“We actually have some next generation exchanges. We provide transparency for them, they are able to show that they are holding either dollars or bitcoin inside of us [. . .] [F]or the first time [we] engineered a company whose business processes can be written out in real-time.”
Which could have implications beyond just Bitreserve and Bitcoin. Minor told me that over 100 fiat currencies are coming to Bitreserve over the next year, with the first of those set to roll out “very soon” according to Bitreserve's press representative. This would enable companies, not just cryptocurrency companies, around the world to prove their reserve in an open and transparent way to their customers and investors.
“[O]ne company [that approached Bitreserve,] their business partners wanted to know (A) the money they are putting in is safe and (B) they want transparency [. . .] Investors are using sort of the albatross of the non-bitcoin system, everyone wants to see what is going on, and we actually provide that. No bank does that. There is no bank system for transparency. As it turns out, there are all kinds of businesses that actually want to have transparency as part of their business model.”
Ultimately, Minor hopes that this transparency will be adopted by more companies and will eventually “allow different kinds of financial systems to exist” based on the technology Bitreserve provides.
“This verifiable transparency will enable different kinds of business models than [exist] today.”
In regards to its use case in the real world, as I mentioned, I am pretty much the archetype of the market Bitreserve wants to hit: The person who is interested in Bitcoin and is tech savvy enough to understand it, but lacks the financial stability to go all-in on the currency while being able to sleep at night. I have already begun using Bitreserve, and I am able to keep more money right on the periphery of the Bitcoin market by storing it in fiat in the Bitreserve site. There I can keep my “maybe for savings, maybe for spending” money in dollars where I can feel safe about it, but can easily also use it to buy things with Bitcoin (and all the advantages that brings) or quickly invest it back into Bitcoin when I am feeling more bullish on the market. If an unexpected expense comes up, I can still quickly turn it back into Bitcoin and then sell it through Coinbase and Circle and pay rent or bills with it, but in the meantime, I don't have to worry about it losing value and losing my meager savings.
I am pretty certain that in ten years $100 will be worth less than it is today, but I am more certain that money I save for rent now will still be enough for rent at the end of the month, that can't be said for Bitcoin. Minor wants to make Bitcoin usable for people other than speculative investors and people willing to gamble on the price. These tools do make it possible, the only question is, will the advantages of Bitcoin, other than the speculative ones, be enough to tempt customers away from traditional financial institutions? Minor thinks so.
Halsey Minor is more than just an savvy investor who hit it big in the technology world. He was a pioneer in the internet space and was one of the first people to prove it could be profitable. Entering into the Bitcoin space, he says the similarities to the early internet days are impossible to ignore. I don't normally quote at length but his comparison is worth reading in full.
“I have to tell you, this whole bitcoin thing is deja vu all over again. Everyone said 'oh the internet is for porn' and 'oh credit cards are going to get stolen.' It was just one bad [story after another]. Even in '98, the stories about eBay were 'somebody is selling their kidney on eBay.' It was one salacious thing after another.
The eBay thing was interesting because when that went nationwide, it was the best thing that happened to them because what it says is: no matter what you want to buy, even if it is a kidney, it is available on eBay.
So this has all the same kind of unsettling beginnings where people are drawn to [certain things]. The reality was that the first business model on the internet was porn, but that doesn't mean the internet was designed for porn, obviously. And while people may have used Bitcoin for illegal purposes, it isn't designed for illegal purposes anymore so than the dollar, maybe less so.
It has the same trepidation and same kind of early negativity that the internet itself had, and it shares with the internet that same sort of notion of being indestructible. [With] the internet, no one can shut it down and no one can stop you from getting on it. With Bitcoin, basically no one can shut it down and no one can stop you from getting on it. And it is that same sort of indestructible nature that means it is something that is going to stick around and is something that is worth paying attention to.”
Minor was able to navigate the treacherous waters of the early internet market and its proceeding bubble and came out on top. As this market matures, regardless of the future success or failure of Bitreserve, it is worth paying attention to what he has to say. He left me with one final thought on the Internet and what it can teach us about Bitcoin.
“Cool stuff happens and you generally want to adopt it when it does”
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