Freemit Wants to Make Global Money Transfer Free Using Bitcoin Infrastructure

Bitcoin Magazine
Freemit Wants to Make Global Money Transfer Free Using Bitcoin Infrastructure

Fintech startup Freemit is about to launch the next generation of money transfer.

“Money when you need it, anywhere, in any currency, from anyone, in seconds, NO fees,” states the Freemit website in simple and very disruptive terms. “Send, spend and get money anywhere in seconds. Skip the bank with our Bitcoin-powered exchange and pay no fees, ever.”

The Freemit service, which includes a phone app and a (presumably virtual) credit card, is scheduled to start rolling out in 2016 and incentivize users with $10 in their accounts. In the meantime, interested readers can sign up for a waiting list.

“Freemit is a financial travel companion that empowers 3.6 billion travelers, students and others with a digital wallet, giving them financial independence to instantly access their financial resources using bitcoin,” reads Freemit’s Crunchbase profile . “They are creating a streamlined, inexpensive alternative to the current remittance and currency exchange systems. Using the blockchain and a local currency in/local currency out vision, they will make moving money cheaper, better, and friction-free.” The company received $120,000 seed funding in January 2015.

“Our banks are robbing us,” stated Freemit founder and CEO John Biggs as first reported by Crowdfund Insider . “And this doesn’t make sense anymore. Because the world has changed. There is this thing called the Internet, which changed everything … Except banking. And except money transfer. But that is going to change. It has to change. Why has it taken so long?”

That John Biggs is behind Freemit is news in itself, because he is a well-known author and editor. He is the East Coast Editor at TechCrunch – see his Crunchbase profile – and former editor-in-chief of Gawker Media’s technology magazine Gizmodo . Biggs has written for many high-profile general interest and technology outlets, and authored several books .

“What I am interested in are applications which seek to use Bitcoin to supplant our sclerotic, duct-taped global financial plumbing,” says TechCrunch columnist Jon Evans, and mentions as first example “Freemit, headed by TechCrunch ’s own John Biggs.”

How does Freemit get away with providing customers instant cash in any currency with no fees? Of course, an important factor is that Freemit channels transfers through the Bitcoin blockchain, which significantly reduces the service’s costs, but doesn’t explain how the company plans to make money. Bitcoin Magazine contacted Biggs, who said he isn’t ready to talk about Freemit’s business model at the moment, but will be able to say more in a few weeks.

Crowdfund Insider speculates that the company might monetize the service via credit card service fees.

“Bitcoin’s blockchain technology, and the open ledger that all can see, effectively cuts out the need for central banking oversight of transfers,” notes a Freemit blog post . “This makes instant money transfer something that can and should happen in the near future. Instead of complicated transfers between banks, central banks, and receiving banks, Bitcoin creates an easy, entirely digital, transparent and trustworthy system for money transfer.”

“When it comes to foreign exchange transactions Bitcoin is set to shatter the paradigm,” continues Freemit. “Banks charge 3-5% on foreign exchange transfers because they have a monopoly on this system. But the advent of Bitcoin essentially cuts out the middleman on any foreign exchange. Instead of going through banks, Bitcoin exchanges can now function as an instant, automated, and transparent exchange system. With Bitcoin the possibility now exists for the creation of a universal, instant, and cost-free system of international money exchange. Like the introduction of email, the possibility of instant, no cost money exchange is going to revolutionize the future of money.”

It seems likely that Freemit, if actually able to operate instantly with no fees, could seriously disrupt the money transfer sector, including the $583 billion remittance industry. As with all essential technologies, Bitcoin will become part of the backstage.

“As a bitcoin booster I will like nothing better than to watch bitcoin get boring, says Biggs in his 2016 tech predictions . “Bitcoin, like the Internet, is part of our worldwide infrastructure.”

The post Freemit Wants to Make Global Money Transfer Free Using Bitcoin Infrastructure appeared first on Bitcoin Magazine.

Snapcard CEO: 2016 Will Be a Humongous Year for Bitcoin in Brazil

One of the longest-standing questions in the Bitcoin community has been where the technology will take off first. Some have said that Bitcoin makes much more sense in the developing world, while others claim developed nations like the United States have the sort of tech savvy and wealthy population necessary to give this new technology a boost.

While it’s unclear where Bitcoin will find its place in the daily lives of an entire nation first, Snapcard Co-Founder and CEO Michael Dunworth seems convinced that there is plenty of potential for the peer-to-peer digital cash system in Brazil. In the past, other South American countries have been touted as locations where Bitcoin is booming without much evidence , but Dunworth has been working on the ground to help power a revolution in money and payments in Brazil.

The Snapcard CEO recently visited the Central Bank of Brazil and gave a presentation on Bitcoin and blockchain technology to officials from various government departments.

Bitcoin Magazine spoke with the Dunworth at last month’s Blockchain Agenda Conference in San Diego , and he shared some of the key reasons why, in his mind, Bitcoin simply makes sense for Brazil.

Brazil’s Versions of Square and PayPal Will Integrate Bitcoin

Although there are a number of bitcoin payment processors that operate within the United States, the total number of merchants currently accepting bitcoin is still nothing more than a drop in the bucket.

There have been partial integrations of Bitcoin at PayPal and Square , but the majority of brick-and-mortar payments still take place through devices where Bitcoin is not an option for the merchant.

According to Dunworth, this is also the case in Brazil right now, but that dynamic could change in the near future.

“There’s a lot of companies in Brazil – like the equivalent of PayPal, Square, and all that – that are all very close to moving on Bitcoin,” he said. “I think 2016 will be a humongous year for Brazil. These companies aren’t international brands, but for them, they have something like 35 million users.”

It’s unclear if bitcoin payments would be enabled by default on these payment systems, but it’s clear that accepting the digital currency becomes much easier for merchants when it’s at least included as a possible option. Once it becomes widely available to merchants, it then becomes easier for businesses to reap the benefits of the low-cost, irreversible payment system.

Credit Cards Come with High Fees and Delays for Merchants in Brazil

Dunworth also was able to explain the specific benefits of accepting bitcoin for merchants in Brazil. He started by comparing the costs of accepting card payments in the United States to how things work in the South American country:

“In the USA, you come along, you swipe your card, you buy a coffee at my Square terminal , and I get paid the next day or the day plus one. Within two days, the money is in my bank account. In Brazil, not only am I paying way higher fees – like between 4 to 7 percent for every swipe – but that money that you swipe is not in my account for 30 days.”

While there are still some theoretical benefits to accepting bitcoin as a merchant in the United States, it’s clear there is much more time and money to be saved by businesses operating in Brazil.

Dunworth went on to explain the clear contrast between card-based payments and bitcoin payments for merchants in Brazil:

“You can pay like a 10 percent fee to get [the money from a card payment] within 3 days or whatever, or you can do bitcoin, which we settle next day. And that’s where you start to see real incentives because the merchant realizes he can get the money tomorrow and he doesn’t have to give up 10 percent of it to get it sooner.”

Dunworth also noted that it would make sense for these businesses to offer incentives to customers who choose to pay with bitcoin. He noted a discount of 7 percent to 10 percent for customers paying with bitcoin could make sense in these situations.

Payment Delays Increase Operating Capital Requirements

When talking about the benefits of accepting bitcoin, most people mainly talk about the direct cost savings of cutting out the fees associated with card payments; however, Dunworth pointed out that there is much more to the story. Due to the long delay from the time a customer makes a card-based payment until the money is in the merchant’s bank account, a much larger amount of upfront capital is required for the business to operate.

“In Brazil, they’re sort of like, ‘Bitcoin is more friendly for me and my operation,’ Dunworth explained. “You know, if you have an operation selling T-shirts, and you sell $1,000 worth of T-shirts as a small business – if you sell that much per day, you now need a $30,000 to $40,000 operating capital because you have to get paid every month. That makes your business a damn expensive business to run, so that’s why you can see they are incentivizing people to give them something that works faster than a credit card, basically.”

Bitcoin has long been touted as a savior for lower-cost payments in the developing world, but the peer-to-peer payment system has yet to catch fire in any of these regions. Dunworth seems convinced that 2016 is the year it will happen in Brazil, and his case for bitcoin in the South American nation is quite clear.

The only question left is whether merchants will make the transition to this new digital payment technology and provide the sorts of incentives consumers will likely need to start using bitcoin in the new year.

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Unlimited, Classic and ‘BitPay Core’: Bitcoin’s New Kids on the Blockchain

Referred to as the Satoshi client, Bitcoin QT, Bitcoin Core , or simply Bitcoin’s reference client, the original Bitcoin implementation as introduced by Satoshi Nakamoto has always set the standard for Bitcoin’s consensus rules. While alternative implementations were launched over the years, these were programmed to follow or even enforce existing conduct.

Bitcoin XT , the Bitcoin implementation by recent R3CEV -hire Mike Hearn, was a first attempt to break with that concept. Regarded a controversial move by many, Bitcoin XT is programed to break existing consensus rules in order to increase Bitcoin’s block-size limit from 1 megabyte to 8 megabytes, set to double every other year until it reaches 8 gigabytes. So far, Bitcoin XT has failed to gain sufficient adoption among the mining community.

But its intended strategy does seem to have started a trend. Over the past weeks and months, three additional Bitcoin implementations were introduced, all with the intention of breaking Bitcoin’s existing consensus rules in order to set a new block-size limit.

Bitcoin Unlimited

Bitcoin Unlimited , a fork of Bitcoin Core, was the first of three new Bitcoin implementations set to increase the block-size limit, and is maintained by lead developer Andrew “thezerg” Stone. Dr. Peter R. Rizun, aspiring managing editor for Ledger , the first peer-reviewed academic journal dedicated to Bitcoin and cryptocurrency research, is prominently involved with Bitcoin Unlimited as well.

Rizun, in particular, rose to fame within the Bitcoin community as one of the loudest voices in favor or a block-size limit increase, after publishing a controversial paper claiming a block-size limit is not required to establish a fee market.

Bitcoin Unlimited’s main differentiator, as the name suggests, is the absence of a hard-coded block-size limit. Instead, it allows users to manually set this limit on their own nodes; the Bitcoin Unlimited team expects consensus on a limit to emerge naturally at a so-called Schelling point . (Though it should be noted that setting the limit above 160 megabytes would be pointless, as the implemented message-size limit will invalidate blocks larger than this.)

Bitcoin Unlimited does include a default maximum block-size setting, or rather, two. The block creation limit, which is used by miners, is set at 1 megabyte. As such, miners will not create blocks that break existing consensus rules, unless they manually choose to do so. (Additionally, Bitcoin Unlimited nodes will not forward blocks larger than 1 megabyte to other nodes.)

The block acceptance limit is also set at 1 megabyte, but with an important exception. If a block up to 16 megabytes manages to be included in the longest chain at four blocks deep – meaning it has four confirmations – Bitcoin Unlimited nodes will consider these blocks (hence, the chain) valid. This number of required blocks is configurable by users as well, and is intended as a fail-safe to ensure Bitcoin Unlimited users accept only larger blocks if a significant amount of hashing power supports it.

This means two things. First, Bitcoin Unlimited will not break existing consensus rules by default, even if it were the only Bitcoin implementation people would even run. After all, miners would never create blocks larger than 1 megabyte. And even if one or several miner(s) manually increased their limit but were unable to find four blocks in a row, nothing would change for these miners exept that they would waste resources mining blocks no one accepts.

Second, if one or several miners create blocks larger than 1 megabyte (but smaller than 16 megabytes), and find four in a row, all default Bitcoin Unlimited nodes will consider these blocks valid. But since all nodes still adhering to a 1 megabyte block-size limit would consider these blocks invalid, the blockchain would split into two irreconcilable versions. This situation would last as long as the Bitcoin Unlimited chain remains longer, or until all non-Bitcoin Unlimited nodes switch to accept larger blocks.

Other than the default settings, Bitcoin Unlimited does not include an automated solution to make sure all nodes apply the same block-size limit. The implementation will, however, include methods for miners and nodes to signal the limits they have set.

Lastly, Bitcoin Unlimited intends to introduce a level of democracy into development and management of the implementation. Most importantly, the Bitcoin Unlimited lead developer is to be elected every other year by Bitcoin Unlimited members, and can be removed through a vote of no confidence. Bitcoin Unlimited will also have an elected president in charge of high level management, and an elected secretary to deal with administrative issues. No position has yet been elected, with first elections on January 15.

Anyone who wants to become a Bitcoin Unlimited member can do so, anonymously if they so please. The Bitcoin Unlimited team intends to limit vote manipulation, but is still considering possible solutions.

Bitcoin Classic

Bitcoin miner and developer Jonathan Toomim, FinalHash CEO Marshall Long and former Bitcoin Foundation board member Olivier Janssens launched another Bitcoin implementation this week. Named Bitcoin Classic , the Bitcoin Core fork intends to increase the block-size limit to 2 megabytes later this year.

Two megabytes was picked based on data collected by Toomim, who forked the Bitcoin testnet earlier this year to test global block propagation with large blocks. Additionally, Toomim talked to many Bitcoin miners and – particularly – mining pools, and believes the consensus among them also is to increase the block-size limit to 2 megabytes.

Similar to Bitcoin XT, Bitcoin Classic will probably increase the block-size limit to 2 megabytes once 750 of the last 1,000 blocks include a message in favor of such an increase. If that happens, a grace period of several weeks will commence, after which all Bitcoin Classic software will automatically accept blocks up to 2 megabytes. If, at that point, other Bitcoin nodes have not changed their software to accept 2 megabyte blocks as well, the blockchain might split into two incompatible versions.

Like Bitcoin Unlimited, Bitcoin Classic also intends to establish democratic decision-making on code changes, using miner and user input. To establish preference topics, Bitcoin Classic has collaborated with Consider.it to establish bitcoinclassic.consider.it . Anyone can create an account on the website, open polls on development topics and vote. If a majority of both users and miners (the latter will need to provide proof they are indeed a miner) supports a change, it should be implemented.

That does not mean, however, that votes on bitcoinclassic.consider.it are binding. If there are signs of vote manipulation, Toomim will judge whether the voting procedure was conducted fairly. Furthermore, neither Toomim nor other developers are obliged to write code they don’t want to, even if the poll shows a preference for a specific solution that requires coding. And since an automated process to merge code has not been installed (yet), Toomim will still need to manually approve of any change as well.

According to its website and this GitHub page , Bitcoin Classic is so far endorsed by former Bitcoin Core lead and Bitcoin XT developer Gavin Andresen (who has done some code review), mining pools AntPool (24 percent of hash power) and BW Pool (6 percent of hash power), companies Coinbase and OKCoin and more.

‘BitPay Core’

Lastly, major payment processor BitPay released a fork of Bitcoin Core . In a series of blog posts, CEO Stephen Pair announced that the company will experiment with an adaptive block-size limit, in an implementation we will dub “BitPay Core” for now. BitPay might soon start to officially convince others (most importantly, miners) to adopt this proposal as well.

In his fourth and last blog post of the series, Pair laid out his belief that Bitcoin could essentially work without a fixed limit. However, he believes that would leave a lot of uncertainty for miners – presumably because other miners might reject blocks of a certain size even without a set limit. As such, he prefers there to be a clear and simple consensus rule for it that all miners follow.

Pair essentially wants to implement two types of block-size limits. One “hard limit,” which is the real limit: the maximum block size miners will accept as valid. According to the initially proposed parameters as described by Pair, this limit might be set at twice the size of the medium block size of the last 2016 blocks (about two weeks – like the difficulty adjustment).

Additionally, Pair proposes to implement a “soft limit,” which miners could manually increase or decrease if they choose to. This soft limit is the default limit miners will use to create blocks themselves. Like the hard limit, it will be based on the median of the last 2016 blocks (or so), but with a smaller multiplier – such as 1.5 instead of 2. As such, blocks miners using the default setting could produce bigger blocks than average.

BitPay Core is currently still in an experimental phase. BitPay is (presumably) not using the implementation for their services quite yet, and the company is not yet actively promoting it either.

Thanks go out to aspiring Bitcoin Unlimited secretary “Aquentin” and Bitcoin Classic lead developer Jonathan Toomim for providing additional information.

Note: Bitcoin Magazine has not tested or reviewed the code of any of these implementations. Breaking Bitcoin’s consensus rules prior to network-wide consensus, as well as other potential bugs, could cost users money.

Photo Idaho National Laboratory / Flickr(CC)

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