Bitcoin: freeing coffee from the middlemen
A bitcoin startup in Bali helps coffee growers remove middlemen from transactions and link more directly to end customers.
From among the jungles and rice paddies of central Bali, Indonesia, a website popped up last week selling freshly roasted coffee beans from local producers. Technology and travelers have made direct-from-source coffee popular for a while now, but this operation has a unique point: it will trade beans only for bitcoin.
The business is The Roast Station Project and leading it is JB Allen, aka the 'Java Nomad'.
It's not his first e-commerce foray. Allen became internationally mobile by "taking full advantage of the freedom the internet provides ... creating and marketing online educational courses, software and other B2B tools" on the more traditional market. Along the way he dabbled in e-currencies by paying employees in Second Life's Linden Dollars.
Allen's lifestyle has hauled him through 20 countries, living in South Korea, Japan and New Zealand before finding himself in the town of Ubud. Bali's tourist scene is a mixture of Western travel cultures, and Ubud's industry caters more to eco-tourists and yoga instructors than the neon-drenched binge-seekers on the beaches further south.
Allen is one of a growing number of laptop-powered entrepreneurs to make a home, or at least a string of temporary bases, in Southeast Asia.
In 2010s parlance, they're digital nomads, Lifestyle Businesspeople, Tropical MBAs or just location-independent CEOs. Whatever names they choose or reject, this class of adventurers follows a similar path to the hippy backpackers of the 1970s but with a decidedly more entrepreneurial bent.
The Asian tropics provide as many cheap workspaces as beaches, an affordable IT-trained workforce, decent bandwidth and proximity to a large proportion of the world's manufacturing centers. Even for those not producing physical goods, the atmosphere and cost of living are magnetic enough.
They also tend towards a libertarian worldview, tired of the borders and bureaucracies and, above all, local currencies they encounter on a regular basis.
Interest in digital currency
"I've been a follower of digital currencies for years, including earlier gold backed digital currencies like e-gold and convertible game currencies such as the Linden Dollar," said Allen.
"In fact, years ago I'd hire writers from inside of Second Life to create website content for my clients. I would interview, hire and pay the writers all from within the game with the in-game currency, and my real-world clients then paid me in 'real' money. I think this was the first proof to me that an all-digital currency was completely viable."
"I began noticing references to bitcoin pop up on many of the free market/libertarian blogs and websites I follow about a year and a half ago. Soon after, I downloaded my first wallet and started 'playing' with the currency – this is back when it was trading around USD$8 for one BTC. I purchased some, locked them away in a wallet and then just kept up on the news, always keeping an eye open for a way I could make good use of their potential."
Allen found the catalyst for that after arriving in Indonesia and becoming involved with the world of coffee. He saw how middlemen within the coffee trade ecosystem serve as a series of barriers that distance bean growers from their final consumers: coffee connoisseurs like home baristas, specialist roasters and cafes offering high quality, single-origin and estate coffees to their customers.
Loans to farmers by brokers and middlemen from large corporate buyers force them to sell massive quantities of product for a bargain basement price. With time pressures and prices so low, there is little incentive to produce a higher quality harvest. The end result is low-quality, unripe or even rotten beans finding their way into consumer packaging.
Smaller buyers can always find farmers or co-ops willing to raise quality in a portion of their crops for a premium price, and work directly with them. The Roast Station Project sources its Kintamani Arabica beans from one such location. But as Allen says, "there is still a planet full of coffee growers and coffee fanatics who would benefit from fewer middlemen in the way."
Removing the middlemen
One thing bitcoin does quite handily is remove lots of middlemen.
"Bitcoin has opened the door to a whole new level of person to person exchange and individual freedom, which is one reason why I wanted to be involved," said Allen.
"I imagine a world where a large coffee farm or the head of a farming co-op can deal directly with both smaller end-buyers and even the larger multinationals on a much more level playing field if they could sell, trade and auction their coffee directly via bitcoin. If they can accept a 'currency' that's used by buyers from many different countries – and then use or convert that currency in their own area – everyone benefits."
Allen absorbed as much knowledge of the local coffee industry as possible: visiting local farms to learn about production, meeting dealers to learn about processing and pricing, and getting to know roasters and cafe owners to learn about flavor profiles and the retail side of the equation.
He purchased his own small-batch gas roaster (a 1.2kg w600 designed in Indonesia) to begin roasting the different coffees he sourced direct from the farms. That's when his 'hobby' started to become a full-time passion.
"Word got out quick and many people began visiting and sampling my coffees, and I found myself roasting a lot for my neighbors here and also shipping a lot out as gifts to my friends and family all over the world. This wasn't done as a business though – so I haven't yet sold coffee for fiat currencies."
Allen needed something more substantial to convince the locals of bitcoin's benefits, so the Roast Station Project exists now to prove a point. He needed to show them customers would not only pay a premium price for coffee roasted and shipped immediately from the source, but they would also use an unfamiliar electronic currency to make fast, secure transactions.
The Roast Station Project might be only a week old, but a few posts on the bitcoin Reddit feed has seen it ship several orders, all within 72 hours of roasting to arrive anywhere in the world within 12 days, "at the peak of freshness."
"To me it's just natural that a product like really good coffee would be of interest to fellow bitcoiners. Nearly all of the laptop nomads, location-free entrepreneurs and traveling programmers I know are coffee fiends and are familiar with bitcoin," Allen said.
"I'm able to live the way I do because of technologies that encourage international trade, cross cultural communication and individual freedom. Bitcoin helps with all of that – at a whole new level."
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