Inside Buttercoin's Drive to Shape the US Bitcoin Marketplace
CoinDesk speaks to Buttercoin CEO Cedric Dahl about his US bitcoin marketplace and its drive to become the Amazon Web Services of the industry.
The way the community thinks about the bitcoin network is wrong, at least in the eyes of Buttercoin CEO Cedric Dahl. Maybe he won’t say it exactly, but it’s there, in the words he uses to describe the US-based “bitcoin marketplace” he heads, and the words he doesn’t.
At face value, Buttercoin’s market approach may seem simple – it’s a place where you can buy and sell bitcoin. But to Dahl, it’s a subtle but sizable change in the way we think about financial services enabled by both bitcoin and the Internet.
Take, for example, the business he most often cites in conversation, Amazon Web Services (AWS), the e-commerce giant’s cloud computing platform for enterprise businesses. Though AWS’ revenue figures are not publicly available, estimates suggests it earns $3bn each year by removing the pain points that used to make the launch of websites prohibitive.
In a new interview with CoinDesk, Dahl explained that he sees Buttercoin as providing a similar service to US bitcoin businesses, only instead of hosting computer servers and supporting infrastructure, it will extend its ability to buy and sell bitcoin to other businesses to form the underlying platform for the bitcoin economy in the same way. Notably absent is any comparison to a business that would perform traditional financial services, with Dahl preferring to keep the conversation in terms of the web.
By achieving its vision, Dahl argued his 10-person company can provide what the bitcoin ecosystem truly needs, a way for new entrepreneurs to quickly launch new businesses.
If Dahl sounds confident, his business’ resume has the credentials to color his conversation. Buttercoin’s investors include Google Ventures, Reddit co-founder Alexis Ohanian, Wedbush Securities and Y Combinator – and figures show it has raised upwards of $1.25m to date.
Moreover, Buttercoin today is operating in a US bitcoin market that has still yet to see the proliferation of trading platforms. With New York’s BitLicense still in limbo, the US is home to just a handful of businesses that provide buying and selling services to other businesses and institutions, including Coinsetter and Mirror (formerly Vaurum).
Rule of threes
The number three seems to reappear in conversation, whether Dahl’s talking about the “three tiers” under which existing bitcoin businesses fall or the company’s own market strategy, which he divides into dinner courses – appetizer, dinner and dessert. Having formally launched in November, Buttercoin is currently in the appetizer phase, he said.
“Appetizer is all about bitcoin marketplace, make sure we’re able to provide a large amount of liquidity to bitcoin businesses and foundational services, really empower businesses to build on top of us,” Dahl stated.
During this phase, Buttercoin is running a variety of what Dahl called pilot programs, where select companies and developers have been allowed into the ecosystem to begin building on its platform.
“It’s a closed garden, we’ve invited about a dozen people, and I know you know them all, and this is part of us just operating quietly,” Dahl asserted.
Dahl explained that Buttercoin has been relatively silent about its partners, but that this is consistent with its goal of falling into the background. Though the interview finds Dahl in the middle of a “press push”, he views discretion as part of his company’s strategy:
Once its place in the US is established, Buttercoin plans to build similar marketplaces around the world, catering to businesses and large institutions while remaining in the background.
Dahl cautions that the company is not there yet, but that should it be able to take the technical and compliance burden off global startups, it is likely to find success wherever it decides to take its model.
“When you think about bitcoin wallets, most of them get the majority of their volume from marketplaces like ours,” he said.
It’s here where the concept of Buttercoin, and other marketplaces, as a foundation comes into play. On top is Buttercoin’s target demographic, the payment processors, bitcoin wallets and mining groups – as well as businesses that are more universal in their market approach.
Lastly, there are more mainstream payment processors, those who have recently sought partnerships with businesses in the second tier like PayPal or Stripe.
But, while in the US the top two layers are already developing, Dahl argues the first layer has been hampered by a variety of factors, leading US businesses to turn to overseas exchanges such as Bitstamp, which most recently suffered a $5m hack that analysts suggest could have been worse.
“If you think about the ecosystem in these three layers, then everyone is dependant on marketplaces and there is no good marketplace in the US,” he said. “What that means is if you’re a bitcoin wallet or a merchant processor, you’re going to have to wait weeks to turn bitcoin into cash or cash into bitcoin.”
By contrast, he said Buttercoin can reduce this timeline to days, removing yet another pain point for its customers.
Proof of work
While Buttercoin will clearly attract interest by providing a stable place to buy and sell bitcoin, it remains unclear just how the company will be affected by the larger questions that still hang over the US sector of the industry.
Though he doesn’t use the same term to describe Buttercoin, he does view the platform as being a competitor to the international bitcoin exchanges that currently serve US entities. Dahl also declined to talk about regulation, an issue that has emerged as one of the major topics of discussion in the industry.
Still, there is evidence Dahl’s interpretation of the bitcoin ecosystem is finding favor with customers. Bitcoin processing giant BitPay and distributed mining company MegaBigPower, for example, have been vocal about their use of the platform.
The development, as well as what Dahl claims is the steady growth the company is seeing, lead him to be confident that, at a time when his competitors are struggling, Buttercoin has found the right combination to thrive in a difficult market.
“Very few companies have figured out how to make this work, and those that have don’t really have a lot of incentive to to enable other people to use what they built,” he said. “Not only have we built something that works, but we have the right incentive position to let everybody build on top of us.”
For the time being, however, Buttercoin’s focus will be on the kind of slow growth that it hopes will encourage the wider development of the bitcoin ecosystem.
“Right now, we’re just happy doing what we can to make sure we have healthy volume on the system and over time,” Dahl concluded.
Cedric Dahl image via GitHub; Featured image via Shutterstock
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