Getting mobile with Bitcoin

Learn about how you can work with Bitcoin currency via mobile apps and read some insights from a leading Bitcoin organization.

If you haven't heard of Bitcoin, you might be living on another planet. It's a cryptographic-based currency which isn't actually printed or minted but exists solely in electronic (digital) form.

The advantages to Bitcoin are that it is internationally-based (no currency exchange or other fees) and used, it is not subject to laws or regulation from one individual entity, and it can purchase goods or services from businesses and fellow consumers. Bitcoins can be converted into any local currency via exchange rates (at the time of this writing one bitcoin is worth $237.47 in U.S. dollars). You can even generate your own bitcoins through a process called "mining" whereby special high-speed computer systems run software to verify a set of bitcoin transactions (known as a "blockchain"). The more work these systems contribute to this effort, the more bitcoins can be earned (however there is a finite number of bitcoins that the world can generate; approximately 21 million).

Bitcoins are generally stored in and utilized by an application or mobile wallet. Two such examples are Bitcoin Wallet for Android and Bither for iOS, either of which can be used to obtain, use, sell and track Bitcoins:

Image: Google Play

The concept of Bitcoin Wallet is the same as any other mobile payment system; Bitcoins are accessed via a centralized account (not actually stored on the device per se, meaning your device isn't required nor must be powered up for someone to send you Bitcoins). The app is just a front end to manage the Bitcoins.

As it enters its sixth year of existence, the Bitcoin has rolled forward with steady momentum and its popularity continues to grow. As is usually the case with technological advancements, new possibilities are also arising for those savvy enough to stay ahead of the curve. Entire industries are springing up around Bitcoin and one such example involves a merger between two companies called The Bitcoin Shop and Spondoolies-Tech.

The Bitcoin Shop (aka "BTCS") provides Bitcoin (and other digital currency) transaction verification services. It's goal is to build a universal platform for digital currency to provide a single point of access for users to engage in their ecosystem. Consequently, BTCS is investing $1.5m in a transaction verification server manufacturer named Spondoolies-Tech Ltd (aka "Spondoolies"). The motivation behind the merger is to "create the world's first publicly traded company to produce Bitcoin transaction verification equipment and deploy Bitcoin mining resources."

I spoke with Charles Allen, CEO of BTCS to find out more about Bitcoin and the details of the BTCS-Spondoolies merger.

Scott Matteson: "How do Bitcoin mobile apps work (specifically via Bitcoin Shop's context)?"

Charles Allen: "Bitcoin Shop ("BTCS") does not currently have a mobile app. However many digital companies offer iPhone and Android compatible apps most of which are bitcoin wallets or price feeds."

SM: "What is the advantage of Bitcoin over traditional currency?"

CA: "There are many advantages of Bitcoin compared to fiat currency. Below are some key differentiators:

Highly divisible compared to fiat currencies

Globally transferable - e.g. in the current system, money can be sent around the world in a matter of days via wires but this is costly for small transactions and slow in today's age. With bitcoin, for example, one can send their bitcoins from anywhere (e.g., from the Japan to the U.S.) instantly for free.

Scarce - the supply of bitcoin is predetermined so inflation is factored in.

Not government issued - with fiat currencies in a fractional reserve system there is a real risk that a country will make poor decisions over time and devalue their currency."

SM: "What security controls are in place to protect customers and vendors/suppliers/businesses (ties into the transaction verification equipment)?"

CA: "Apart from sourcing servers and building our data center, customers / suppliers / vendors are not directly involved in the BTCS' operations so I'm not sure the question is relevant to our transaction verification services operations."

SM: "Can you elaborate on what to expect from the Bitcoin Shop/Spondoolies merger?"

CA: "The digital currency ecosystem is similar to the Internet in 1995, i.e. very few companies are generating revenue. As a combined company, we plan to build a fully integrated transaction verification services business, which will be our revenue and profit engine (similar to Google with advertising) as we explore and develop other blockchain technologies. Spondoolies recently announced 2014 revenue of $28 million, and we believe our fully integrated mining efforts should allow us as combined company to continue to grow revenue and earnings and capture additional margin. Further BTCS has an 83,000 square foot facility to expand mining operations into."

SM: "What is the future of Bitcoin?"

CA: "Bitcoin - and more importantly blockchain technologies - have the ability to fundamentally change the world in the same way the Internet did. The 'genie is out of the bottle' and it is likely not going away."

SM: "Why are hackers/ransomware/cyber-criminals so interested in being paid in Bitcoin?"

CA: "Bitcoin is essentially digital cash, and once you have it, you own it. The downside is that every transaction is recorded on the blockchain, so identities can be associated to public addresses, meaning owners of stolen bitcoins can be found. In the long run, bitcoin is a poor means for cybercrime, as there is a public ledger of who owns what."

SM: "Can you elaborate a bit more on how BTCS performs transaction verification services?"

CA: "Please watch video #1 and video #2 for the best details. BTCS runs ASIC servers (see video #1) in a repurposed 83,000 square foot manufacturing facility in NC - see video #3 (it is now filled with servers, so we are working on an updated video). 93% of our equipment is currently manufactured by Spondoolies."

SM: "Can you also elaborate on the Spondoolies server product and how they are specifically tailored towards transaction verifications?"

CA: "Currently we do not manufacture ASIC servers. Spondoolies is one of only 4-5 companies that manufacture ASICS servers. There are many companies that run data centers with ASIC servers but very few that manufacture them. The big competitors to Spondoolies are Bitmain, Bitfury, and KNC Miner. However, all of these companies are involved in the design, manufacturing and deployment of ASIC servers. Pre-merger, BTCS is engaged in the deployment of ASIC servers and not the design and manufacturing of them, while Spondoolies is engaged in the design and manufacturing of ASIC servers and not the deployment. As a merged entity, we will be fully integrated similar to Bitmain, Bitfury, and KNC Miner and be able to capture the margin on both sides. To put this in perspective, Spondoolies achieved $28m in revenue in 2014 and many of their customers have had a tremendous return on investment (depending on when they started and their cost structure)."

SM: "Can you walk me (briefly) through how a transaction involving Bitcoin via BTCS will work at present? Same question for after the merger (if different)?"

CA: "The transaction verification services process is not a business-to-consumer endeavor. We simply maintain the network and are rewarded by the network for doing so. Consumers / users of bitcoin never directly engage with us."

SM: "Can you tell me a little more about blockchain technology and how it applies to BTCS?

CA: "Bitcoin is based on blockchain technology ( see video #2). Many technologies are being built upon Bitcoin's blockchain and we are a participant in securing the blockchain through our transaction verification services business (or often referred to as mining). In our opinion, this is the core of the technology as well as the cash cow in the business. Many bitcoin companies are "pre-revenue" and will be for years to come. To draw a parallel, Google's cash cow is advertising, hence, they have yet to pollute the elegant and simplistic search interface. Yet they experiment with all sorts of other technologies many of which fail i.e. Glass, Answers, iGoogle, etc. and some that succeed i.e. Maps, Android etc. We believe as a merged company, fully integrated mining / transaction services will be our cash cow which catapults our business to the next level and allows us to venture into other

Hopefully you've found this discussion engaging and it has helped advance your understanding of the Bitcoin environment. I'd like to thank Mr. Allen for the time he spent on the topic with me.

See also:

5 Bitcoin and finance startups to watch from DEMO 2014

Pay with Bitcoin: 10 of the most interesting places to spend it

10 things you should know about Bitcoin and digital currencies

10 mobile payment systems you need to know