One of the big questions about digital currency is whether or not the technology will be utilized on a broader scale by the spending public.
Those who foresee a rise in use by consumers argue that it’s only a matter of time before existing payment mechanisms are supplanted by bitcoin or another digital currency, while those more critical of this area of adoption counter that many spenders will be loath to give up their cash and credit cards for a crypto alternative.
The nature of this debate hasn’t stopped some from betting on the embrace of digital currency by consumers. Over the past two weeks, Ziftr, a US-based e-commerce solutions provider, has raised more than $600,000 during a crowdsale of its own altcoin, ziftrcoin, which the company is pitching as a user-friendly alternative to bitcoin.
Backers of the project include 10x Venture Partners, a seed-stage fund based in Merrimack, New Hampshire, that purchased $150,000 worth of ziftrcoins at the start of the crowdsale and has made previous investments in Ziftr.
Ziftr recently completed work on ziftrPAY, an API that enables merchants to accept a variety of cryptocurrencies as well as traditional payment methods. According to CEO Bob Wilkins, the company is also developing a broader range of services that can help bring cryptocurrencies to the mainstream by facilitating merchant acceptance.
Wilkins said in a new interview that he hopes ziftrcoin will provide a vehicle for more consumers to get into digital currencies, and explained that several elements of the project, including a planned social-mining initiative that incorporates some of the design elements of ziftrcoin, are aimed at achieving this goal.
He told CoinDesk:
“We want to onboard the next 10 million consumers into [digital currency].”
VC interest in cryptocurrency
10x Venture Partners manager John Gargasz said that his firm participated in the crowdsale because it has faith in the project given the developments in digital currency over the past few years, as well as an existing working relationship with Ziftr.
“In the cryptocurrency space, which is highly volatile and forming day by day, a big part of what you invest in is the team and your trust in them. Knowing Bob, we have that trust in him.”
He said that growing interest among the venture capital ecosystem in digital currencies drew his company to look for new opportunities.
“We watched [digital currency] for a couple of years as its been forming up, and feel like it is a fundamentally new network and new market for financial transactions,” Gargasz told CoinDesk. “We felt like now is the time to start stepping into it.”
Gargasz added that 10x Ventures plans on pursuing other projects that involve digital currency and is currently exploring several early-stage initiatives for potential support.
Pitching altcoins to merchants
While a number of both high profile and everyday merchants have integrated digital currency payments, there continues to be a certain level of apprehension among business owners about whether or not to accept them.
Wilkins argued that while merchants are intrigued by the technology, people tend to focus on whether one particular cryptocurrency – whether bitcoin or an alternative – will be successful in the long run. The optimal approach, he said, is giving merchants the option to accept a variety of coins based on the preferences of their customers.
“The hard part [merchants] are having is what coin to bet on. We don’t know which coin is going to be the true coin that becomes stable. What we are able to say is, our API will work with what’s out there now and what’s coming up, so you don’t have to choose one.”
Wilkins explained that Ziftr is taking steps to shore up merchant confidence in the value of ziftrcoin, including a $1 redemption guarantee when purchases are made on ziftrSHOP, the company’s online directory of merchants. The company has also released a branded, multi-coin wallet.
According to Wilkins, plans for the project’s future include building out its merchant-focused infrastructure, which includes inking partnerships with exchanges to provide more liquidity to the system. The company also plans to distribute 300 million ziftrcoins as part of a promotional campaign later next year.
When asked about the project’s 4.5% pre-mine – which includes the 300m set for public distribution – Wilkins said that funds set aside for employees and advisors to the project are locked, with the first tranche of 25m ziftrcoins unavailable for the first year. He added that Ziftr welcomes transparency about the funds.
To support the project, Ziftr is developing a social-mining platform, on which users can form groups and mine ziftrcoins together. Wilkins said that the platform is aimed at providing information to interested parties as well as a means to generate ziftrcoins, explaining:
“The idea around the algorithm we use for ziftrcoin, 'sign-to-mine', was to make it easier for a group of people to say, 'Hey, look, I kind of want to get into this'. We're starting to develop this really easy user interface that's kind of social in nature, where people can come in and mine together.”
Sign-to-mine, according to the ziftrcoin white paper, requires the miner that solves a block to also sign the transaction in order to be able to spend those coins. This approach opens the network up to certain block-processing attacks, including 'selfish mining', the paper explains, but goes on to state that other elements help prevent such attacks.
Wilkins voiced optimism about the future of the project, stating that the goal is to make tools available on the market for merchants to accept digital currencies and electronic payment methods more simply. Wilkins said that his team is focused on reaching out to merchants and has aggressive plans for growth once the crowdsale has concluded.
“After the crowdsale is done, it’s all about rolling as hard and fast as we can and signing up 1,000 merchants before next Black Friday,” he said.