Halsey Minor has long experience betting on, and profiting from, the next big thing.
When the financial crisis of 2008 hit, Minor was in the thick of it. He fell off the radar as he suffered the consequences of recalled loans and acute depression, as he told Bloomberg Businessweek. Then he discovered cryptocurrencies, which he believes are the foundation of "the internet of money".
Minor's new startup, Bitreserve, wants a piece of the pie. It promises to let users exchange bitcoin for fiat currencies, and hold them in a system that's radically transparent. Every Bitreserve transaction will be published, along with public quarterly audits. It'll make money from low fees and investments, which will be open to public scrutiny. Effectively, it is Minor's idea of a reserve bank for bitcoin.
He spoke to CoinDesk about bankruptcy, Bitreserve, and how bitcoin can help avoid another crisis.
CD: How did you learn about bitcoin?
HM: I had read about bitcoin but I didn't think about actually starting a company until about a year ago. I had written an email to somebody talking about how the concept of bitcoin was good, but volatile money was not. So I was suggesting to somebody to start a company [in the space]. I ended up writing two full pages, all single-spaced, in the email. It was this long, long email. When I came back to it, I realised I had written that and I'd been so passionate about writing it.
I approached it not with the idea that I want to overthrow any governments or 'stick it to the man', I just looked at it as a consumer. If this is the Internet of money, how do I actually make something useful for the consumer. It's got to have real tangible benefit that's better than the existing system.
What's attractive about bitcoin?
This is the new Internet. This isn't like cloud-based software [for example]. There was an Internet of information, now there is an Internet of value. The new Internet might be bigger than the other one. I truly believe that. What's so interesting is that you can combine the Internet of information with the Internet of money. These two things compound each other. It's the transparency of information with the liquidity of money.
I tell people, 'hold on to your hat, you've never seen anything happen as fast as this is about to happen'. This is the first revolution since the first Internet revolution started. A real, honest-to-god, mind-bendingly transformative kind of thing. It has all the same characteristics. The early Internet, it was just for porn, it was for hate groups. You couldn't send money with it, but it didn't mean the Internet was a bad thing, it meant it was where it started.
You've had some financial troubles, declaring bankruptcy last year. How has that experience informed your involvement with bitcoin?
I know I wouldn't have had transparency as the ultimate business goal [for Bitreserve] if it hadn't been for what I went through. It's one thing if every bank went bankrupt and you're just an observer. It's another thing when you're part of the whole process and it directly impacts your life.
I came away thinking there is no trust system – not only should you not trust the system, it's in everybody's best interest not to trust the system. But the only way to have this is to have transparency.
The block chain is a response to this distrust of financial institutions. Unlike the banks, the government never showed up at my doorstep and offered to pay me off. And everyone says we're headed for the same thing all over again. For me, the bankruptcy wasn't conceptual.
If somebody walked in tomorrow and said they'd guarantee all our reserves, we wouldn't care about transparency. We'd go out and invest it all in super risky stuff and make more money!
So I was going to be transparent from the day I started the business. There is no way I would have started any financial institution knowing what I know now. I was going around collecting quotes from reserve [bank] members who were telling me consumers don't want transparency because it would just confuse them.
My loss is hopefully going to be finance's gain.
What are your plans for Bitreserve?
My goal is to take bitcoin from a fringe thing and turn it into the most disruptive technology that's ever happened. It's 100% consumer-driven, by building a financial services industry that's actually transparent and far less susceptible to the kind of shocks, where we don't know what's going on [in the banks]. We live in a post-trust world, the only trust we have in financial institutions is that the government is standing behind them.
I ask people, 'how much is £200 going to be worth in a week?'. They reply, 'well, £200'. I ask them how much a bitcoin is going to be worth, and they say they have no idea. So people don't want the risk, the anxiety of holding bitcoin. Even if it wasn't as volatile as it is now, even with 2-3% swings a week, it's more than people want to roll the dice with their rent money.
When I was at CNET, I wanted to be able to throw a copy of PC Magazine, which was more than 600 pages thick, under the door of my office. By the time I left CNET, the magazine was a hundred-plus pages, and it could go under the door.
My goal with Bitreserve is, when I go to an airport, I don't want to walk through it and see these places charging 25% for currency conversion. I want to walk through an airport, catch a flight, and be able to move my money from dollars to pounds on my phone, when I hit the ground.
You've said Bitreserve is going to be transparent to the public. How?
Probably the most profound thing we're doing is the 'reservechain'. It will allow you to construct, at any moment in time, an exact balance sheet for the organisation. It will be the definitive record of our obligations to our members.
So for example if we take our funds and buy US government bonds, we will publish that. And people might leave because they don't have faith in the US government. They think it's bankrupt, and so they leave. Because we start out transparent, we have to make certain decisions and we have to get our act together.
From what you've said about Bitreserve, it sounds a bit like a high-street bank for consumers. Is that an accurate description?
Banks give out car loans and home loans. We don't do any of that. We're a reserve, like a classic reserve. Reserves used to hold gold. But we're different in that we can't create money. We can't do anything that the reserves ended up doing, which is setting monetary policy. Our job is to hold something of value, so that when we tell you we have $100, you actually have $100. So we're never going to do car loans and home loans, but people can build all kinds of services on top of ours. Our goal is to make money free and easy to use.
You were involved in several different parts of the Internet economy before they became mainstream. Do you have the sense that you've been here before?
I come from the world of 'on-demand' – as an investor in Salesforce and Rhapsody. With Salesforce, people wouldn't believe that anybody would put any money into the cloud. Nobody wanted to invest in it, except me. Now, we've actually found these cloud services work and everybody's using them.
People want something that does what bitcoin promises to do. They don't want their bank to take two hours to process a transaction. They want to use money quickly and easily with all the fees cut out. But no one wants to cut out the fees and get this intense [price] volatility.
The idea of the Internet of money is incredibly powerful, and it has begun. There are now a set of standards which have been created as a result of bitcoin, upon which you can build things and which can become incredibly useful for consumers.
It's not unusual that all the pieces aren't in place now. At CNET, in order to publish on the web, we had to build a publishing tool to write the content to publish. Now, everyone's on free services, like Wordpress. It's a constant process of building the tools.
We're kind of at the very base level [with bitcoin]. But there's a whole bunch of ideas out there, the idea of people having more control of their money, cutting out fees, allowing people to innovate on top of money, it's an idea that's finally come. It's the last part of the business world that has yet to be touched by the Internet.
What do you think of government regulation of bitcoin?
We're not pushing against regulators, we just want regulations that are based on transparency. The block chain created a way to have anonymity and transparency. That's an amazing thing. Ironically, [bitcoin] creating a transparency system is probably going to be one of its most important legacies. It's all transparent, but the government is going, 'hold on a second, no one knows what's going on [in the bitcoin economy]'.
Where will the bitcoin price end up this year?
Because it's supply and demand based, it will go up. But I don't believe bitcoin will be the last coin we will all be using. We went through a whole bunch of search engines before we got to Google.
This interview has been edited for clarity and brevity.
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