Austin Kimm, co-founder of the cryptobank, talked with TechRepublic about why his company wants to replace traditional banking and payment solutions.
Austin Kimm, co-founder of Crypterium, spoke with TechRepublic's Dan Patterson about his company's credit card-like solution for cryptocurrency.
Watch the video, or read the full transcript of their conversation below:
Patterson: You may have cryptocurrency that might be worth something. But how are you going to spend it? Austin, tell me a little bit about how your technology works.
Kimm: Hi Dan. Yes, thanks. Actually, it's very simple. If you've got any experience right now having used an Apple Pay or a Google Pay inside your mobile phone, what actually happens then is you're attaching a virtual payment card to your Apple Pay or your Google Pay service. And effectively we do exactly the same. But in addition to that, we add an extra layer. We add the layer of buying and selling in cryptocurrency behind the scenes that enables you, as a customer, to go to Starbucks, you put your phone to the Starbucks, they charge you $10. You look at your phone, you say, "I'd like to pay with bitcoin, please." You press "pay with bitcoin." The process takes places that Starbucks goes to the bank, the bank says, "We don't know. We'll ask Crypterium." Crypterium says, "Yes, we'll authorize it. We know how much money you've got in your wallet." We pay the bank effectively the $10, but then we buy and sell that cryptocurrency behind the scenes whilst all of that transaction is taking place. And you as an individual just paid with cryptocurrency and Starbucks just received $10.
Patterson: So if I understand you correctly, much like how a bank will put the money ... When you put the money in the bank, it goes into the float and the bank is able to make money from the interest and you are able to spend your cash. Is that a reasonable analogy for what you are doing with cryptocurrency?
SEE: Quick glossary: Blockchain (Tech Pro Research)
Kimm: No, not really. Because we can't ... unlike a traditional bank ... A traditional bank, once you put your money into the count, you know it's a digital number and they can do what the hell they like with it. They can lend it to someone else, they can do all sorts with it. Well, when you put your money inside our crypto wallet or any crypto wallet, nobody has access to that except you. However, we are happy to have a second sort of relationship with you that says, "If you'd like to spend some of that, we'll facilitate it." And we can't touch that money in any shape or form unless you go to Starbucks or wherever and say, "I'd like to spend $10 please." And when that happens, we use the block chain to put a digital marker inside your wallet that says, "No problem. We'll pay Starbucks $10 for you, but you now, out of that digital wallet, have to give us $10 worth of bitcoin." And we do that transaction as a separate transaction.
Kimm: You as an individual don't see that. You as an individual don't see anything other than you paid.
Patterson: That's a fascinating use of the technology. How do you manage the volatility of cryptocurrency right now?
Kimm: Volatility, of course, is a big issue, and that's why I think we're still 10 years away from actually seeing a store starting to charge in multiple ... First of all, you've got 1,500 tokens out there, so have what you actually choose to pay with. And secondly, the volatility is huge. Now what we are able to do, is because we can actually deal with a million transactions a second. So of course when you start off and you're doing a few transactions that we don't have that type of volume. But when you potentially could be doing millions of transactions, maybe not a second but in a minute, then of course that volatility issue is not really an issue, because we are sending that to the exchange almost instantaneously.
Now what's also very, very important to understand is, if you were doing a transaction in Bitcoin today, you'll pay a Bitcoin fee, your transaction fee. It's $5 or whatever it is for a transaction. That's $5 whether you did a $5 Starbucks or $5 if you do $1 million Starbucks. Now, it's still $5. So for us, what we are able to do, we scrape all of those transactions into one transaction, and we use something called the master wallet that scrapes everything into one transaction. So instead of doing 5,000 $5 transactions, we do one $25,000 transaction and we still only pay one fee. And that's how we effectively eliminate the fee out of the process as far as the customer is concerned.
Patterson: Crypterium co-founder Austin Kimm. Austin, I wonder if you could forecast, say, the next 18 to 36 months in ... not just blockchain technology, but cryptocurrency technology. Will the market be validated? Will the volatility die down? Where do you expect us to be in the next, say, year and a half to three years?
SEE: Blockchain: A cheat sheet (TechRepublic)
Kimm: Yeah, I don't think you're going to see a significant fundamental shift in, let's say, the Bitcoin Ethereum, the Ripples, the Dashes. All of those things are going to carry on doing what they're doing. So let's say the cryptocurrencies, those that were designed specifically to be a cryptocurrency, I don't think we're going to see a fundamental shift. The values will go up and down. I can't guess what they're going to be. But you are going to see a fundamental shift in what is an understanding of a cryptocurrency. So right now, what we're talking about is effectively people who are betting on the future. They're buying and selling cryptocurrency but can't spend them, can't use them.
But tomorrow, that loyalty program that currently gives out air miles is going to be a crypto token. That gaming website that you're on that you pay $50 to play some special game is going to be in a crypto token. And if you imagine the scenario whereby every person on the street who's a member of a loyalty program or a member of a gaming site now has a cryptocurrency, but they don't really understand it's cryptocurrency. But actually it is a cryptocurrency that they can either trade-on and exchange, or through an application like Crypterium could go to Starbucks and spend it. So if you imagine today, you've got Avios air miles, that has a much wider use than it did 20 years ago. And in two years time, that is going to be money. Avios points are going to be money that actually are exchangeable in any shop in the world if you're using something like Crypterium.
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