11 ms·

Secretive Bitcoin Startup 21 Reveals Record Funds, Hints at Mass Consumer Play

130 points by yuvadam 12y ago

softdev12 12y ago
This is interesting because it's the first time I've heard about 21 and they have raised $116 million pre-launch. Given that companies who've raised an order of magnitude less are all over the news, it's surprising they have been so stealth. I'm also still not clear what 21 does. According to the article they are building out the blockchain into the internet of things (IoT). That sounds really vague. Plus, the article mentions a contractual twist - like smart lawyer contracts. These two things don't seem to obviously go together.
- zmanian 12y ago
  It sounds like some variant of the hardware Bitcoin bank idea that has been floating around the valley. The rough sketch of the idea is -Hardware device runs a full security bitcoin node in your house -Provides a multisig for your mobile wallet. -Automatically moves savings into cold storage -Provides a basic environment for implementing crypto banking features
  - alvarosm 12y ago
    yeah, another bitcoin pipe dream... what's needed is probably something like integrating a wallet+bitreserve+exchange+payment processor in a single business. And then forking/enhancing btc itself. Some of the top btc companies have got ridiculous investment rounds that could be used towards that goal, easily.
- diminoten 12y ago
  The blockchain ends up being useful as a public secure ledger, so perhaps it's going to be used in that way somehow. Otherwise, I don't know of many companies who've actually worked into the space of the less well-known features of bitcoins that can be used via the embedded pseudo-language.
- giant_squid 12y ago
  Their jobs page provides some hints as to what they're up to: https://21.co/#jobs https://21.co/#jobs
- kordless 12y ago
  They do if they allow you to do seamless software installs and payment chains. More than obvious, if you've been thinking about it.
- sajid 12y ago
  The vision is to use bitcoin to enable automated micropayments between devices. One example that Marc Andreessen has talked about is sharing your network connection with neighbours: http://www.wired.com/2015/03/opinion-bitcoin-may-gets-us-real-net-neutrality/ http://www.wired.com/2015/03/opinion-bitcoin-may-gets-us-rea... 21 aims to provide the tools and build the full stack infrastructure to make that happen.
- phodo 12y ago
  > "These two things don't seem to obviously go together." That actually makes a lot of sense: if you consider some of the security challenges associated with IoT, e.g. an IoT door lock, then a smart contract where you have m of n signatures needed to unlock it (think of them like a modified escrow with policy side, too), then you can see the play here. The transaction to open the door gets signed only if that policy is met at each of the m signatures. You might have a lock device signature, a home signature, and a home owner signature. There are lots of microtransactions in IoT (good and potentially bad). Smart contracts can mitigate / isolate risk and ultimately reduce attack surface vulnerabilities. Block chain is a necessary part of this to work. For more info check out "bitcoin 2.0".
comrade1 12y ago
Are there ways to reduce the size of the block chain? Or will we get to the point where only large service providers can hold the block chain? I ask because I was maintaining my own wallet for awhile but stopped because the block chain database was getting unwieldy - it would take up to a week to resync if I ever turned my wallet software off for a significant amount of time. You know though... I actually don't care. Bitcoin was an interesting curiosity and useful in some situations (transferring money to people in rural areas of 3rd world countries, for example), but it's slow (up to 15 minutes for the transaction to be approved?), has high fees in its transactions and even higher to convert from/to cash, it's unwieldy... To use it from consumer devices would require someone else managing the wallet, and at that point I'll instead just use cash or a credit card.
- wmf 12y ago
  SPV or ultimate blockchain compression can reduce storage requirements significantly.
- alvarosm 12y ago
  Blockchain pruning would drastically reduce the size and it could be implemented relatively easily but it's not on the standard client(or any other afaik). You only need to keep unspent transactions (after you're confident a block reorganisation wouldn't go as deep as the block where you're pruning old tx).
- dollaaron 12y ago
  I believe there are proposals to allow pruning the blockchain, but I'm not 100% sure on the details. To guarantee a transaction goes through you have to wait for it to be confirmed, but most transactions really aren't that important/high risk, so beyond checking that the address does actually have the money, it's instantaneous. Many payment processors (I know Bitpay has this option) actually take the 0 confirmation transaction risk, allowing customers to pay instantly. Transaction fees are not high, with a typical fee of .0001 bitcoin (3 cents), which is small compared to credit card fees. While work needs to be done converting to/from cash, actually using bitcoin (that you already have) to buy things is a better experience than using credit cards. You simply grab your phone, scan the QR code, and hit send. This is much better than entering your credit card for the thousandth time on another website, or being redirected to paypal, entering your password, and choosing your preferred payment option for the thousandth time (stop asking me to use Paypal Credit!). Using an Android wallet such as Mycelium, or a desktop wallet like Electrum doesn't require you to download the entire blockchain, and although that comes at the cost of some trust, I personally don't find that problematic. Basically, bitcoin has some problems, but I think some of your criticisms are no longer applicable to most everyday usage of it.
presty 12y ago
21 Inc was previously 21E6 https://bitcointalk.org/index.php?topic=334759.0 https://bitcointalk.org/index.php?topic=334759.0 who was in the news back in 2013
jboggan 12y ago
What percentage of that funding is just buying and holding Bitcoins? Many of these large rounds have that business model baked into the amount they raise. There's much more profit to be had from buying at current prices and selling at a consumer inflection point than there is in actually building a Bitcoin service.
- malenm 12y ago
  I think building Bitcoin services is the only way to make Bitcoin _reach_ that consumer inflection point.
- IkmoIkmo 12y ago
  It's idiotic to assume an investor will invest in a company to buy coins, rather than coins directly. Maybe if it was expensive art, exotic animals or something difficult and tricky to buy and store without having specialized knowledge, yes then you'd invest in a company to buy and manage these assets. But storing bitcoin is storing private keys... a password. Anyone can buy it and store it. Hell you can even buy it on registered exchanges, or as a security from SecondMarket's bitcoin fund. No. These guys raised money to hire software and hardware engineers, they're looking to build a product. Does that mean the investors aren't buying bitcoin? No, they do so, but outside the company. It's well known that there are a number of VCs (e.g. Chamath) who have bought a few million worth of bitcoins besides their investments in bitcoin companies. I don't any evidence that many of the 'large rounds' have this business model. There are some companies that bought bitcoin, but that's for liquidity, not investments. Circle, Coinbase or exchanges all need bitcoin to sell as they're brokers/exchanges. But they didn't buy it as an investment, they could just buy bitcoin as individuals, as could investors.
  - jafaku 12y ago
    It's not idiotic, that's why there is a Bitcoin fund, and soon there will be a Bitcoin ETF. If being an expert in computer security isn't "specialized knowledge", I don't know what it is.
    - 12y ago
loceng 12y ago
How much Bitcoin do the founders, employees, or investors own? Curious to see what real gains they could realize if they succeed in making people see Bitcoin as a legitimate means of payment.
- humanlike 12y ago
  Interesting to see hidden connections among bitcoin related stocks here http://cymetica.com/recommend/app/hidden_connections?query=bitcoin&db=all http://cymetica.com/recommend/app/hidden_connections?query=b...
- vessenes 12y ago
  LOTS. 21e6 has been mining for some time, and A16z has been funding and involved in Bitcoin for a number of years now, with a very 'winner take all' approach.
  - loceng 12y ago
    Thanks. What's Coinlab? The website is down.
brighton36 12y ago
hopefully, they take me up on the advice I gave Bitpay: http://cointelegraph.com/news/113255/keeping-score-at-the-2014-bitcoin-bowl http://cointelegraph.com/news/113255/keeping-score-at-the-20... (see "The solution")
Animats 12y ago
If they raised over $100M, why do they need Bitcoin? I'd assume they intend to have their own coin. Fewer headaches.
- markkat 12y ago
  It would be very difficult to get another coin to the level of adoption that bitcoin has. Many have tried, and none have come close.
  - shashu10 12y ago
    They possibly could if they create a more secure cryptocurrency
    - wongarsu 12y ago
      What are concrete security shortcomings of bitcoin that could be solved with a new coin?
    - jafaku 12y ago
      That's not really a possibility, it's just your desire to see Bitcoin go down. I don't know why there are so many people so salty about Bitcoin.
      - deeviant 12y ago
        Yeah really, the only other time I saw a group of people so salty about something is Google glass. There is just something about bitcoin and glass that makes people go NaCL.
- kaonashi 12y ago
  A solution in search of a problem.
swamp40 12y ago
Since they're looking for ASIC engineers, I guess they're a mining hardware company. I've been hoping someone will design a bitcoin cash voucher reader/printer, like you see in the casinos. (For use in small retail business and vending machines.)
downandout 12y ago
With this kind of investment capital on the line, I sure hope that they are focusing their efforts outside of the consumer payments area. I think the fact that consumers must purchase Bitcoin in advance, with no clear advantages that average consumers would appreciate (consumers generally don't care about privacy), makes mass-adoption of Bitcoin for payments incredibly unlikely to ever happen. The biggest question in my mind is whether or not they have developed a realistic revenue model. The whole point of the Bitcoin protocol is to relinquish control of the blockchain to the network's participants, which makes it hard to monetize. They could license whatever software/hardware they manage to build for various applications of the technology (voting, research, etc), but $116 million seems like a big bet on a company building solutions on top of open source software. Edit: It appears that they are building both software and hardware, and more interstingly, intend to operate their own datacenters. One of the job descriptions from https://21.co/#jobs https://21.co/#jobs : "21 is seeking a Datacenter Operations Engineer to travel to our datacenters and keep them up and running smoothly. You should like big iron, cutting edge equipment, and firmware. The job description says you will be responsible for "day-to-day operations of 10,000+ server installations". I guess we know where $116M is going.
kordless 12y ago
It may be coincidental, but Qualcomm just announced a massive stock buyback. My best guess is this is an IoT play targeting embedding cheap cell chips into devices which will carry their own wallets. The cell chips connections to the network can be funded with cryptocurrencies the devices carry, but the ultimate goal is likely enabling software delivery into the devices. Devices pay for the software downloads. Users fund devices using credit cards, etc. Think of it as a fancy licensing engine for the trillions of devices that will be hooked up. My second guess would be a decentralized cell network, powered by cryptocurrencies. Either of those is a massive market.

130 points by yuvadam 12y ago

This is interesting because it's the first time I've heard about 21 and they have raised $116 million pre-launch. Given that companies who've raised an order of magnitude less are all over the news, it's surprising they have been so stealth. I'm also still not clear what 21 does. According to the article they are building out the blockchain into the internet of things (IoT). That sounds really vague. Plus, the article mentions a contractual twist - like smart lawyer contracts. These two things don't seem to obviously go together.

zmanian 12y ago
It sounds like some variant of the hardware Bitcoin bank idea that has been floating around the valley. The rough sketch of the idea is -Hardware device runs a full security bitcoin node in your house -Provides a multisig for your mobile wallet. -Automatically moves savings into cold storage -Provides a basic environment for implementing crypto banking features
- alvarosm 12y ago
  yeah, another bitcoin pipe dream... what's needed is probably something like integrating a wallet+bitreserve+exchange+payment processor in a single business. And then forking/enhancing btc itself. Some of the top btc companies have got ridiculous investment rounds that could be used towards that goal, easily.
diminoten 12y ago
The blockchain ends up being useful as a public secure ledger, so perhaps it's going to be used in that way somehow. Otherwise, I don't know of many companies who've actually worked into the space of the less well-known features of bitcoins that can be used via the embedded pseudo-language.
giant_squid 12y ago
Their jobs page provides some hints as to what they're up to: https://21.co/#jobs https://21.co/#jobs
kordless 12y ago
They do if they allow you to do seamless software installs and payment chains. More than obvious, if you've been thinking about it.
sajid 12y ago
The vision is to use bitcoin to enable automated micropayments between devices. One example that Marc Andreessen has talked about is sharing your network connection with neighbours: http://www.wired.com/2015/03/opinion-bitcoin-may-gets-us-real-net-neutrality/ http://www.wired.com/2015/03/opinion-bitcoin-may-gets-us-rea... 21 aims to provide the tools and build the full stack infrastructure to make that happen.
phodo 12y ago
> "These two things don't seem to obviously go together." That actually makes a lot of sense: if you consider some of the security challenges associated with IoT, e.g. an IoT door lock, then a smart contract where you have m of n signatures needed to unlock it (think of them like a modified escrow with policy side, too), then you can see the play here. The transaction to open the door gets signed only if that policy is met at each of the m signatures. You might have a lock device signature, a home signature, and a home owner signature. There are lots of microtransactions in IoT (good and potentially bad). Smart contracts can mitigate / isolate risk and ultimately reduce attack surface vulnerabilities. Block chain is a necessary part of this to work. For more info check out "bitcoin 2.0".

comrade1 12y ago

Are there ways to reduce the size of the block chain? Or will we get to the point where only large service providers can hold the block chain? I ask because I was maintaining my own wallet for awhile but stopped because the block chain database was getting unwieldy - it would take up to a week to resync if I ever turned my wallet software off for a significant amount of time. You know though... I actually don't care. Bitcoin was an interesting curiosity and useful in some situations (transferring money to people in rural areas of 3rd world countries, for example), but it's slow (up to 15 minutes for the transaction to be approved?), has high fees in its transactions and even higher to convert from/to cash, it's unwieldy... To use it from consumer devices would require someone else managing the wallet, and at that point I'll instead just use cash or a credit card.

wmf 12y ago
SPV or ultimate blockchain compression can reduce storage requirements significantly.
alvarosm 12y ago
Blockchain pruning would drastically reduce the size and it could be implemented relatively easily but it's not on the standard client(or any other afaik). You only need to keep unspent transactions (after you're confident a block reorganisation wouldn't go as deep as the block where you're pruning old tx).
dollaaron 12y ago
I believe there are proposals to allow pruning the blockchain, but I'm not 100% sure on the details. To guarantee a transaction goes through you have to wait for it to be confirmed, but most transactions really aren't that important/high risk, so beyond checking that the address does actually have the money, it's instantaneous. Many payment processors (I know Bitpay has this option) actually take the 0 confirmation transaction risk, allowing customers to pay instantly. Transaction fees are not high, with a typical fee of .0001 bitcoin (3 cents), which is small compared to credit card fees. While work needs to be done converting to/from cash, actually using bitcoin (that you already have) to buy things is a better experience than using credit cards. You simply grab your phone, scan the QR code, and hit send. This is much better than entering your credit card for the thousandth time on another website, or being redirected to paypal, entering your password, and choosing your preferred payment option for the thousandth time (stop asking me to use Paypal Credit!). Using an Android wallet such as Mycelium, or a desktop wallet like Electrum doesn't require you to download the entire blockchain, and although that comes at the cost of some trust, I personally don't find that problematic. Basically, bitcoin has some problems, but I think some of your criticisms are no longer applicable to most everyday usage of it.

presty 12y ago

21 Inc was previously 21E6 https://bitcointalk.org/index.php?topic=334759.0 https://bitcointalk.org/index.php?topic=334759.0 who was in the news back in 2013

jboggan 12y ago

What percentage of that funding is just buying and holding Bitcoins? Many of these large rounds have that business model baked into the amount they raise. There's much more profit to be had from buying at current prices and selling at a consumer inflection point than there is in actually building a Bitcoin service.

malenm 12y ago
I think building Bitcoin services is the only way to make Bitcoin _reach_ that consumer inflection point.
IkmoIkmo 12y ago
It's idiotic to assume an investor will invest in a company to buy coins, rather than coins directly. Maybe if it was expensive art, exotic animals or something difficult and tricky to buy and store without having specialized knowledge, yes then you'd invest in a company to buy and manage these assets. But storing bitcoin is storing private keys... a password. Anyone can buy it and store it. Hell you can even buy it on registered exchanges, or as a security from SecondMarket's bitcoin fund. No. These guys raised money to hire software and hardware engineers, they're looking to build a product. Does that mean the investors aren't buying bitcoin? No, they do so, but outside the company. It's well known that there are a number of VCs (e.g. Chamath) who have bought a few million worth of bitcoins besides their investments in bitcoin companies. I don't any evidence that many of the 'large rounds' have this business model. There are some companies that bought bitcoin, but that's for liquidity, not investments. Circle, Coinbase or exchanges all need bitcoin to sell as they're brokers/exchanges. But they didn't buy it as an investment, they could just buy bitcoin as individuals, as could investors.
- jafaku 12y ago
  It's not idiotic, that's why there is a Bitcoin fund, and soon there will be a Bitcoin ETF. If being an expert in computer security isn't "specialized knowledge", I don't know what it is.
  - 12y ago

loceng 12y ago

How much Bitcoin do the founders, employees, or investors own? Curious to see what real gains they could realize if they succeed in making people see Bitcoin as a legitimate means of payment.

humanlike 12y ago
Interesting to see hidden connections among bitcoin related stocks here http://cymetica.com/recommend/app/hidden_connections?query=bitcoin&db=all http://cymetica.com/recommend/app/hidden_connections?query=b...
vessenes 12y ago
LOTS. 21e6 has been mining for some time, and A16z has been funding and involved in Bitcoin for a number of years now, with a very 'winner take all' approach.
- loceng 12y ago
  Thanks. What's Coinlab? The website is down.

brighton36 12y ago

hopefully, they take me up on the advice I gave Bitpay: http://cointelegraph.com/news/113255/keeping-score-at-the-2014-bitcoin-bowl http://cointelegraph.com/news/113255/keeping-score-at-the-20... (see "The solution")

Animats 12y ago

If they raised over $100M, why do they need Bitcoin? I'd assume they intend to have their own coin. Fewer headaches.

markkat 12y ago
It would be very difficult to get another coin to the level of adoption that bitcoin has. Many have tried, and none have come close.
- shashu10 12y ago
  They possibly could if they create a more secure cryptocurrency
  - wongarsu 12y ago
    What are concrete security shortcomings of bitcoin that could be solved with a new coin?
  - jafaku 12y ago
    That's not really a possibility, it's just your desire to see Bitcoin go down. I don't know why there are so many people so salty about Bitcoin.
    - deeviant 12y ago
      Yeah really, the only other time I saw a group of people so salty about something is Google glass. There is just something about bitcoin and glass that makes people go NaCL.
kaonashi 12y ago
A solution in search of a problem.

swamp40 12y ago

Since they're looking for ASIC engineers, I guess they're a mining hardware company. I've been hoping someone will design a bitcoin cash voucher reader/printer, like you see in the casinos. (For use in small retail business and vending machines.)

downandout 12y ago

With this kind of investment capital on the line, I sure hope that they are focusing their efforts outside of the consumer payments area. I think the fact that consumers must purchase Bitcoin in advance, with no clear advantages that average consumers would appreciate (consumers generally don't care about privacy), makes mass-adoption of Bitcoin for payments incredibly unlikely to ever happen. The biggest question in my mind is whether or not they have developed a realistic revenue model. The whole point of the Bitcoin protocol is to relinquish control of the blockchain to the network's participants, which makes it hard to monetize. They could license whatever software/hardware they manage to build for various applications of the technology (voting, research, etc), but $116 million seems like a big bet on a company building solutions on top of open source software. Edit: It appears that they are building both software and hardware, and more interstingly, intend to operate their own datacenters. One of the job descriptions from https://21.co/#jobs https://21.co/#jobs : "21 is seeking a Datacenter Operations Engineer to travel to our datacenters and keep them up and running smoothly. You should like big iron, cutting edge equipment, and firmware. The job description says you will be responsible for "day-to-day operations of 10,000+ server installations". I guess we know where $116M is going.

kordless 12y ago

It may be coincidental, but Qualcomm just announced a massive stock buyback. My best guess is this is an IoT play targeting embedding cheap cell chips into devices which will carry their own wallets. The cell chips connections to the network can be funded with cryptocurrencies the devices carry, but the ultimate goal is likely enabling software delivery into the devices. Devices pay for the software downloads. Users fund devices using credit cards, etc. Think of it as a fancy licensing engine for the trillions of devices that will be hooked up. My second guess would be a decentralized cell network, powered by cryptocurrencies. Either of those is a massive market.