UPDATE (30th December 12:55pm GMT): Professor Emin Gün Sirer has responded to Changetip CEO Nick Sullivan’s comments in a new blog post on privacy, profit and the future of the micropayments industry.
“I feel like we’re a charity getting yelled at.”
That was the initial, emotional reaction of founder and CEO Nick Sullivan to a wave of criticism launched yesterday against his micropayments startup, ChangeTip, a company that has emerged as one of bitcoin’s most buzzed-about businesses for its efforts to promote bitcoin as a force for fun and social good.
In just a few short weeks, ChangeTip has raised $3.5m in seed funding, hired a former product manager from Blockchain and reported a surprising surge in user metrics as high as 10,000 transactions in a single day. The developments were seen as not only a validation of ChangeTip, but as the startup contends, proof that online tipping could become a powerful use case that helps propel the technology out of the early adopter phase.
This lengthy praise period, however, has given way to backlash, as members of the bitcoin community reacted to an article entitled “ChangeTip Must Die“, authored by Cornell University computer science professor and noted bitcoin observer Emin Gün Sirer.
The polarizing post took aim at ChangeTip for everything from the candor of its users to its plans for monetization, though it was perhaps the criticisms of the company’s data collection policies that carried the most weight among privacy-conscious bitcoin users. The piece speculated that “the only way” for ChangeTip to make money would be for it to sell the information it collects about bitcoin users by observing their social media accounts.
Speaking exclusively to CoinDesk, Sullivan acknowledged that ChangeTip hasn’t been as clear with its users amidst its recent surge in attention, a factor he believes has led to confusion among users about the company and its policies.
The former mentor at bitcoin-friendly startup incubators Plug and Play Tech Center and 500 Startups cited his long-time advocacy for privacy as evidence against this claim. In particular, he noted his time as VP of technology at Krux Digital, where he helped form a do-not-track policy aiming to empower users.
“I’ve spent a good chunk of the last five years opposing this,” he said.
In the interview, Sullivan opened up about his vision for ChangeCoin, the parent company for which ChangeTip will be just the first product, as well as how he plans to become the “Yahoo of bitcoin”, the tool that finally makes bitcoin approachable for everyday consumers.
“I’m envisioning a world where instead of a grandma sending a check in the mail for her grandson’s birthday, she actually goes on Facebook and leaves a tip that says here’s $5 on ChangeTip,” Sullivan added.
Plumbing for micropayments
Though taken aback by the recent criticism, Sullivan said that the more inflammatory Internet comments don’t paint a detailed picture of his vision for ChangeCoin.
To understand how ChangeCoin will monetize and grow, Sullivan said, users need to see the full breadth of its goals, which envision building a new “micropayments infrastructure for the web” on top of bitcoin. While careful not to provide too many details about the company’s plans, Sullivan hinted at how an emphasis on technology could empower ChangeCoin.
“If we become the easiest way for money to move around online over social media, there’s going to be a lot of ways to monetize that,” he asserted. “We’re not going to have to resort to selling user data in order to live up to the financial projections that I laid out in our recent round of funding.”
Sullivan, however, kept the focus on ChangeCoin’s potential broad. Technology, he said, will be the company’s focus and the best way for it to not only monetize, but create a whole ecosystem of products and services that want to harness micropayments.
“The technology team is building an API that people can build on top of our platform,” he said. “We’re not trying to own the whole piece, we just want to enable the plumbing.”
A charitable focus
That isn’t to say that ChangeCoin won’t seek to monetize ChangeTip in the near term.
Sullivan framed charitable donations as a big part of the company’s focus for 2015, suggesting that he will seek to encourage major charities to pay for using ChangeTip as another way to collect donations.
“For charities where we’re able to funnel newfound money into their hands, they’ll be glad to give us a percentage fee from that,” he said, noting that this could in turn help distance bitcoin from its associations with fraud and crime.
Such an idea would appear to be timely. US charities have shown an increasing interest in bitcoin, with the American Red Cross, Greenpeace USA and the Wikimedia Foundation, all striking partnerships with major bitcoin payment processors.
Sullivan also indicated that he sees these organizations as more likely to work with a young company like ChangeCoin through any friction during the payments process.
“The hungrier you are, the more likely you are to go through some friction or some pain,” he added.
Sullivan also touched on the planned 1% transaction fee that ChangeTip has discussed implementing on withdrawals this January, stating that while the company doesn’t want to set the precedent that its service is free, such a charge on users could be postponed again.
A need for abstraction
Yet another criticism levied against ChangeTip by Sirer is that the company has built a centralized tipping service similar to ones already marketed including Beenz and Flooz, though on top of the bitcoin blockchain.
In his remarks, Sullivan didn’t shy away from describing ChangeTip as a centralized service, though he stressed that this is largely due to the current technological implications of bitcoin, as well as the needs of a service like ChangeTip.
“Microtransactions on the bitcoin network aren’t really feasible. We have a minimum bitcoin transaction fee, 10 minutes for the average transaction and a total capacity within the bitcoin network of seven transactions per second,” he said, adding:
“We felt architecturally we were going to overwhelm that in a short amount of time and we wanted to build a platform that scaled, so we’re off-chain with our tips, that enables our tips to be free and instant.”
He further argued that centralizing the control of certain aspects of ChangeTip accounts, including the control of user public and private keys, currently creates the most usable end product for consumers.
“It’s nice to be able to send somebody money over GitHub, Reddit and Twitter, without having to think about what a public key is, what a QR code is or having to worry about cold storage. In our efforts to make it an easy onboarding process for bitcoin, I think there needs to be a little bit of a abstraction on some of the more technical pieces,” he said.
Notably, Sullivan also expressed a willingness on behalf of ChangeCoin to embrace change as bitcoin’s technology becomes more sophisticated with the launch of now-proposed projects such as the sidechains initiative.
In the meantime, Sullivan also alluded to the company’s decision to use multisig bitcoin wallet provider BitGo to secure all of its offline storage, a move that he said will ensure no single person has access to user funds held by ChangeTip.
With the partnership, ChangeTip has become one of an increasingly varied set of bitcoin businesses and service providers that have sought to partner with BitGo as a means to bolster security.
“While I’d love to keep everyone happy, I’m not sure we’re going to be able to do that,” Sullivan conceded. “I think that we can agree around the common point that there is a balance between security and convenience.”
Sullivan went on to encourage those who have found fault with this company to see ChangeTip as just one of a number of bitcoin services that could one day become part of everyday life.
“I think it’s a little misguided for folks to hold ChangeTip to the same thought processes they would a paper wallet when its different use cases,” he said.
Sullivan noted that the company plans to reach out to the community for feedback on how it could decentralize its model in the coming days.
Image via ChangeTip, Shutterstock
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