Blockchain: Blueprint for a New Economy

development as a platform has parallels

with Bitcoin, and it is on the Bitcoin

adoption curve itself. PayPal was

initially an innovative payments market

solution outside of the traditional

financial-services market, like Bitcoin,

but has since become a more formal

business within the regulated industry,

collecting and validating detailed

personal information about its

customers. PayPal had been known for

being on the edge of financial

innovation, but it then became more

corporate focused and lost the

possibility of providing early market

leadership with regard to Bitcoin. Now,

PayPal has been incorporating Bitcoin

slowly, as of September 2014

announcing partnerships with three

major Bitcoin payment processors:

BitPay, Coinbase, and GoCoin.37 Also in

September 2014, Paypal’s Braintree unit

(acquired in 2013), a mobile payments

provider, is apparently working on a

feature with which customers can pay

for Airbnb rentals and Uber car rides

with Bitcoin.38

In the same area of regulation-compliant

Bitcoin complements to traditional

financial services is the notion of a

“Bitbank.” Bitcoin exchange Kraken has

partnered with a bank to provide

regulated financial services involving

Bitcoin.39 There is a clear need for an

analog to and innovation around

traditional financial products and

services for Bitcoin—for example,

Bitcoin savings accounts and lending

(perhaps through user-selected rules

regarding fractional reserve levels).

BTCjam is an example of such

decentralized blockchain-based peer-to-

peer lending. Tera Exchange launched

the first US-regulated Bitcoin swaps

exchange, which could make it possible

for institutional and individual investors

to buy Bitcoin contracts directly through

its online trading platforms. Part of the

offering includes an institutional Bitcoin

price index, the Tera Bitcoin Price

Index, to be used as the benchmark for

trading USD/XBT contracts. 40 In the

same space, startup Vaurum is building

an API for financial institutions to offer

traditional brokerage investors and bank

customers access to Bitcoin. Another

project is startup Buttercoin, a Bitcoin

trading platform and exchange for high-

volume transactions (200,000–500,000

Bitcoin, or $70–$175 million), targeted

at a business clientele who has a need to

complete large-scale Bitcoin

transactions. 41 Buttercoin is partnered

with capital markets firm Wedbush

Securities, itself one of the first security

analysts to cover Bitcoin and accept

Bitcoin payments for its research.

Other ventures are more radically

positioned against artificial unregulated

monopolies in the current stock trading

market infrastructure, like the

Depository Trust Company and the

National Securities Clearing

Corporation, or DTCC, which is

involved in the clearing and settlement

of securities. Overstock CEO Patrick

Byrne and Counterparty created a new

venture, Medici, announced in October

2014, to provide a decentralized stock

market for equity securities in the

blockchain model. 42

Crowdfunding

Another prime example of how financial

services are being reinvented with

blockchain-based decentralized models

is crowdfunding. The idea is that peer-

to-peer fundraising models such as

Kickstarter can supplant the need for

traditional venture capital funding for

startups. Where previously a centralized

service like Kickstarter or Indiegogo

was needed to enable a crowdfunding

campaign, crowdfunding platforms

powered by blockchain technology

remove the need for an intermediary

third party. Blockchain-based

crowdfunding platforms make it possible

for startups to raise funds by creating

their own digital currencies and selling

“cryptographic shares” to early backers.

Investors in a crowdfunding campaign

receive tokens that represent shares of

the startup they support. 43

Some of the leading cryptocurrency

crowdfunding platforms include Swarm,

an incubator of digital currency–focused

startups that raised $1 million in its own

crowdfunding, completed in July 2014. 44

Holding the company’s own

cryptocurrency, Swarmcoin, gives

investors rights to the dividends from the

startups in the incubator’s portfolio. 45

Swarm has five projects comprising its

first class of funded applications:

Manna, a developer of smart personal

drone networks; Coinspace, an operator

of a decentralized cryptocurrency

workplace; Swarmops, a decentralized

organizational management software

platform; Judobaby, a decentralized

gaming platform; and DDP, a

decentralized dance-party entertainment

concept.46 Another crowdfunding

platform is Koinify, whose one project

so far is the Gems decentralized social

network. Koinify is linked with the

Melotic wallet/asset exchange platform

to curate a decentralized application

marketplace. 47 Ironically, or perhaps as

a sign of the symbiotic times, Koinify

raised $1 million in traditional venture

capital finance to start its crowdfunding

platform. 48 Another project is

Lighthouse, which aims to enable its

users to run crowdfunding or assurance

contracts directly from within a Bitcoin

wallet. In Japan, a Bitcoin crowdfunding

site, bitFlyer, has launched as part of the

general crowdfunding site fundFlyer. 49