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The Chinese Bitcoin Economy: Are the Hundred Flowers Here to Stay?

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The Bitcoin community continues to flourish as new developments are made in the area of wallet security and open source web-based wallet services. As Bitcoin grows in value and utility more users are interested in secure wallets. Just yesterday, the Coinpunk Project released the following announcement of funding from the Bitcoin Foundation.

Coinpunk Project Press Release


Press Contact: [email protected]

Yesterday the Bitcoin Foundation announced that they are funding the development of the Coinpunk project. Coinpunk is a project led by veteran startup founder Kyle Drake to build an open source web-based wallet service that can be run by any user, by developers to build their own wallet service, or organizations wanting to run their own Bitcoin “credit unions”.

The announcement is part of the Foundation’s Q2 Grant Award, which is an ongoing effort to improve the open source ecosystem of Bitcoin by providing funding to help improve the tools available for people to work with Bitcoin. The first grants were for Q1, which included important funding for improvements to Bitcoin testing infrastructure.

“The main tenet of Bitcoin is that decentralization is what drives its soundness”, said Kyle. “But what we’ve seen recently is an ecosystem where web wallets are run by a few US/UK based players. That’s similar to the way GMail works for email, which isn’t a bad thing, but it’s not for everyone. If Bitcoin wants to maintain its goal of being decentralized, there needs to be a rich abundance of choices, and web wallet services need to be available to different organizations and countries.” Kyle added that it is the implications on banking that interests him the most. “Instead of having big banks and financial groups control your money, you get Bitcoin owners being their own banks, investing in only the things they want to invest in, and not being charged with mystery fees or being exposed to fraud and malinvestment of funds.”

Kyle noted there is currently a version of Coinpunk available, but that he’s currently in the process of building a major new version. “I’m providing the option to move the security from the server to the browser side, which makes the server less like a bank that holds your money, and more like a safety deposit box it can’t open, which increases trustability. I’m also focusing on building the tools developers need to make custom wallet services for solving specific problems or running exchanges in non-US countries with this technology.”

Kyle isn’t sure when the project will be finished, noting that he wants the project to be stable before releasing the new version, but hopes to have a release available by the end of late summer. “It’s a very ambitious project that’s going to affect a lot of people, and I want to make sure we get things right. We want to provide a rich set of options and developer tools, so we can enable a web wallet ecosystem for working with Bitcoin that hopefully becomes a strong community resource.”

The next grant deadline for Q3 proposals will be Friday, September 20th. Information on submitting grant proposals can be found on the Bitcoin Foundation blog.

Bitcoin Magazine had the privilege of interview Coinpunk veteran startup founder Kyle Drake.


Bitcoin Magazine : When did you first hear about and get involved in the Bitcoin currency?

Kyle Drake:I first heard about Bitcoin a few years ago, and it immediately made sense to me what it was trying to do, and I’ve been following it pretty closely ever since. I’ve always been fascinated by economics, and have spent a lot of time reading about the effects of commodity money, especially in edge cases (like how cigarettes are used in prisons as a currency, and sea shells were used in antiquity). These edge cases emphasize a natural way that humans tend to deal with resource problems in a microcosmic, decentralized way. Having that background allowed me to quickly realize that Bitcoin was going to be the replacement and improvement for a lot of centralized financial systems, and that got me interested.

The current Bitcoin climate reminds me a lot of the Homebrew Computer Club days in the 70s, when there were passionate idealists working on side projects that ended up creating the most culturally liberating technology in the world: the personal computer. And I see Bitcoin as a logical extension of that pioneering work: Banks are today’s mainframes, and Bitcoin is the financial version of the personal computer. Centralized, versus decentralized. Being a bank stops being this expensive thing only a few large corporations can do – it becomes something everybody can do.

Not everybody “gets” Bitcoin yet, just like people didn’t “got” personal computers back then, when it was mainly the purview of hackers like Steve Wozniak and idealistic visionaries like Stewart Brand. But I am seeing the potential of Bitcoin for the exact same reasons they had for the personal computer, and in time I think the profound nature of Bitcoin will be obvious to everyone. I think we’re on the ground floor of something very important here, and I want to help contribute to that.

In the United States, the mortgage crisis and the Occupy movement really brought the problems with our banking system to the forefront, and you had people finally starting to look at their banks, that were creating random fines and fees, investing poorly, kicking people out of their homes without giving them a fair chance, and say “I don’t agree with what you’re doing”. I see the opportunity for Bitcoin to help build a more ethical banking system, that gives customers more choice and control over their money, that isn’t filled with arbitrary fees and restrictions, and that deals with the massive fraud problem that our banking system has completely failed to address with credit cards and wire transfers.

BM: When did you first get the idea for Coinpunk and what inspired you to create the site?

KD: I’ve always been interested in the wallet side of the problem, because I see wallets as the natural evolution of a bank account.

I wanted to run my own Bitcoin wallet service, so I looked around for open source solutions and couldn’t find one. This was concerning, because I believed if there wasn’t a good open source option, it might lead to situation where all the wallets become centrally controlled by a few entities, which could bring us right back to many of the problems with our current banking system.

I’m not against commercial wallet services, I think they are good (and play a role similar to that of Google Mail for email). But we need open source alternatives, too, so that we improve upon Bitcoin’s biggest strength: decentralization. If email only worked through Google Mail and Hotmail, it wouldn’t be very good.

BM: Were there any preexisting businesses that inspired you to create Coinpunk?

KD: All of the current wallet services have been an inspiration of sorts, because I was able to see how they approached the problem, and distill that into something that I thought would work well for this project. There’s really nothing wrong with the existing wallet services, most of them are great. They’re just not fully open source, and are based in specific countries.

I wanted to make a project for people wanting to run and build their own wallet service, in the same light as projects like buttercoin (an open source Bitcoin exchange platform). I don’t see Coinpunk as competing with commercial wallet services. In fact, I wouldn’t be surprised if they find parts of the project useful for their work. Everybody’s helping each other out, and that’s a very positive thing for the Bitcoin ecosystem.

BM: Where do you see Coinpunk going in a year?

KD: Coinpunk is going to be a fully-featured wallet service, and I hope to see people start to use it to solve real-world problems.

I’m expecting to see a lot of usage in interesting ways, such as with hardware wallets like BitSafe (which Butterfly Labs is currently working on). I’m also very interested in seeing Coinpunk used in regional exchange and wallet services that help Bitcoin adoption in countries with bad currency problems (like Argentina). Bitcoin could really be a lifeboat for people in countries with high inflation rates like Argentina and Venezuela, and I hope Coinpunk gets to play a role there.

BM: What makes your new wallet stand out in comparison to other wallets for the Bitcoin currency?

KD: Coinpunk is the only fully open-source web wallet service available. That’s its main differentiation right now, but I expect that it will stand out in other ways in the future as we start adding more functionality.

BM: What are your suggestions for individuals hoping to start an open source project like yours?

KD: Just do it! The Bitcoin development community is very friendly, open and collaborative. There is a lot of support for people working on improving the ecosystem and protecting our legal rights with groups like the Bitcoin Foundation, and there’s a lot of important and interesting problems that need to be solved. This isn’t another stupid photo sharing app: We know we’re changing the world, and everybody is excited about it. It’s a lot of fun.

BM: If I am a merchant looking to sell through your site, how can I get started?

KD: Coinpunk might support some basic bitcoin-to-bitcoin purchase services in the future, and will have an API to help facilitate development, but I would strongly recommend using a merchant-specific service like BitPay for now. They have been spending a lot of time working on making it easy for people, are way more affordable (and less fraud prone) than credit cards, and can do conversions to your local currency for you automatically.

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