A startup called Bonafide has raised $850,000 to build a reputation system for the bitcoin industry.
The funding round, which comes from Quest Venture Partners, Crypto Currency Partners and the AngelList Bitcoin Syndicate, among others, is a step towards creating a scoring system for addresses on bitcoin’s network.
Brian Moyer, the firm's co-founder, said that 500 Startups venture partner Sean Percival saw early on the potential for Bonafide to create more credibility in bitcoin commerce, whether between consumers and merchants, or in person-to-person payments.
“What we’ve found is that people need to identify with something, whether it’s a person or an entity in the bitcoin ecosystem. People need to be able to see what’s out there.”
Following a spate of collapsed companies and notable frauds in the space, reputation in bitcoin is now seen as increasingly important in helping the technology to go more mainstream and overcome fears over the digital currency's pseudonymous nature.
While bitcoin addresses can in some cases be tracked and identified with certain persons or firms, generally it is hard to find out who owns a particular address.
So, for merchants and consumers in the bitcoin space, not having solid information about the person or entity they are dealing with can be a problem – an issue Bonafide aims to solve.
“Bitcoin is desperately in need of having that place for people to be able to demonstrate their validity in the space."
Bonafide does not have a login on its website. Instead, it culls information from social networks and the bitcoin network in order to provide entities, which could be people or organizations, a reputation score.
The company offers an API feed with reputation data that can be used by bitcoin companies, including wallets, exchanges and consumer-facing services.
The long-term hope for Bonafide is that the bitcoin industry as a whole will see so many transactions coming and going from different sources that an independent system will be needed as a source for reputation scoring.
“In the end, identities are going to be the only commonality.”
Providing peace of mind
Identity may also help merchants feel more comfortable about accepting bitcoin if they know there is a scoring system based on who is transacting.
Moyer, who started his career doing signals intelligence for the army and later for the NSA, used cash as an analogy for the way bitcoin is right now pretty much anonymous.
“You know if I bring you a million dollars of cash there is something wrong. The reason is, you have no way of knowing where that money comes from.”
Merchants and other operators in the bitcoin industry are experiencing this issue of having little clue where bitcoin transactions come from. Companies like Bonafide and other identity and reputation systems are looking to alleviate this pain point.
Joe Peters, chief product officer at Bonafide, pointed to open-source identity protocol Onename as a similar product that could also be complementary to Bonafide's service.
“[Onename] is an incredible project. We would love to integrate, so our users can sign in using their Onename account,” he said.
Bonafide plans to launch in open beta in the next month or so.