This past summer for Bitcoin was a bit of a roller coaster. Significant investments poured in and massive financial institutions admitted that they are finally taking this Blockchain thing seriously, but that was countered with inner community fighting that put a dark cloud over the entire industry. Industry veterans will likely be able to point to events in our history that were closer to the edge, but finding a more all encompassing debate that seemed to grind everything else to a halt? Anyone would be hard pressed to come up with a suitable example. Things have calmed down a bit after the Scaling Bitcoin conference in Montreal. While we aren’t completely out of the woods yet, there is a sense of optimism in the community.
Gyft has been a pillar of stability in Bitcoin. It wasn’t long ago that you couldn’t buy much of anything with Bitcoin outside of dark markets and a few select forward-looking merchants. When Gyft and its primary competition (in the Bitcoin space at least) eGifter, started accepting bitcoin, an entire new economy was suddenly opened up for the Bitcoin community. Now, not only can items from hundreds of merchants be purchased with gift cards obtained in exchange for bitcoin, but there was a built in advantage for users as the two companies were able to offer bitcoin users a discount thanks to Bitcoin’s near nonexistent transaction fees.
Guillaume “Giyom” Lebleu has been around bitcoin for longer than most. Having got in around two years after its invention, he isn’t quite part of the founding group or the first few community members, but he is a part of the next group, the first post-Satoshi group.
As such, he has seen Bitcoin’s meteoric rises, its drastic drops and everything in between. For the past year he has served as “the head” of Gyft for First Data according to his LinkedIn page, before that he co-Founded Credibles, a business that promised a “Starbucks card app for any food business.” We talked to him about the health of bitcoin, the blocksize debate, what he makes of private blockchains and the future of what we now call gift cards. Giyom is not a spokesman and his opinion represents no one’s but his own, a point worth stressing because Gyft is in a quiet period in advance of First Data’s IPO. That did hamstring our conversation slightly, but what we did manage to have what I feel is an important discussion that paints a fascinating and entirely reasonable picture of one possible future for what they have called “Gift cards 2.0”.
Ian DeMartino: How long have you been with Gyft and how long have you been in Bitcoin?
Guillaume “Giyom” Lebleu: I’ve been with Gyft since the beginning of the year, and cryptocurrency for five years. Not Bitcoin directly but more how do we actually use bitcoin technology to do other things than Bitcoin. [Gyft co-founder and CEO] Vinny [Lingham] and I met, I told him what I wanted to do, he told me ‘you should join us and do it here.’ That is how I got involved with Gyft.
Gyft is a very exciting company because it has a lot of merchant relationships. It is now owned by First Data which is one of the largest payment processors in the world, so they do have the connections to change the industry, which is very difficult [to obtain] if you are just a start up.
DeMartino: Your recent blog post was about using the blockchain instead of PIN numbers how do you think that would change the industry specifically, other than the trust factor?
Giyom: Merchants really love the idea of being able to print their own currency. Ultimately, merchants or anyone with some corrective capacity has the ability to do that. It has been very difficult to do, but the idea that they could do this in a cryptographic fashion has very interesting potential for the economy.
On the other side, consumers, they actually have very strong loyalties to businesses. They are more likely to support an Apple brand than a bank brand. You could apply this as well, to the local level. [Some] people are more likely to trust a local business than they are a large international brand.
So I think it is very [important] to empower local businesses to issue what we call gift cards but are really prepaid assets issued by the business in exchange for the future delivery of services or goods.
That is where I think the transformational impact can be. If suddenly businesses can use this tool to help with their cash flow or get a better idea of demand for their product by selling tickets for future products. I think there are a lot of applications for businesses, and its a great tool for creating relationships between customers and users and businesses.
My vision, and I think the vision of Vinny is that in the future, we are less likely to have money in banks. We will have some money with crypto-assets like Bitcoin, which are essentially digital versions of gold, but we might also find it convenient to have some assets with businesses that we conduct business with on a regular basis.
Starbucks is a great example of that. It is kind of the example everyone gives, but it is so massive that I think it is always useful to remind us that a well trusted brand is able to get prepaid bits to make up about a quarter of its revenue globally, which to me is insane but you can see how many advantages it gives them in terms of cash flow and transaction costs and they are able to give back to their users as a result.
I think every business is trying to imitate that model. To the extent that they have a brand that is trusted and people love, they have a chance to do something similar. Blockchain technology will make it easier for them to do that and for users, it is going to give them an ability to verify how much has been issued in this prepaid business that is printing money essentially.
Can I transfer it or exchange it with someone else easily? These are the kind of things that bitcoin users are used to that are not currently easy to do in traditional finance.
DeMartino: That is one thing you guys [at Gyft] aren’t really into, letting people resell their gift cards, but could this be something to help with that?
Giyom: Yeah, it is a difficult business when you are asking people to provide us with your PIN number on the back of their card and with the plans that we will sell that to someone else. Some companies are, or at least seem on the outside, to be successful at it. But it is very difficult to do, some merchants like it, some merchants don’t. At Gyft, we aren’t necessarily focused on that. But I am going to give you an example, something that is very hard to do today.
Let’s say Coca-Cola wants to issue a gift card. If you want to redeem this gift card, there are tons of places that have Coca-Cola, every place in the US and the world probably has some Coca-cola for sale. But, it is very difficult, almost impossible, to go into a grocery store and say “okay, I have a Coca-Cola gift card and I want to redeem it for this product here in my basket.”
But that [they still offer coupons and Reward Points] shows you if Coca-Cola could do it, they would do it. They are a trusted brand and some people love it and it would be a great gift for some people. There are tons of businesses that are unable to issue credit. To do that, you need to have someone issuing credits, who transfers them to a Gyft or another receiver, and then that receiver would have to be able to go to the grocery store and convince them to accept it knowing that it is a true, authentic asset, and then they could go back to the issuer to get some bank money or some other asset that is valuable to them, or maybe even use that Coke credit to buy more Coca-Cola products.
That is impossible to do today, and I think that is an example [of what can be done]. Trading [in the future won’t be] as simple as people trading one gift card for another but also, it will also be liquid and people will be able to say okay “I’m going to redeem Coca-Cola credits for some bank credits or some other crypto assets.” That will be a pretty cool thing, I think.
DeMartino: When we first decided to talk, it was going to be about the health of bitcoin. Things look a bit better now with the blocksize debate. But what do you think about the debate and forking?
Giyom: What I think personally is that it is good to be conservative about things. I’ve stated that on my Twitter stream. I am in favor of a very reasonable and immediate increase to 2MB, and then maybe if needed to 4MB or 8MB. I think there are some exciting technologies out there that are being built and that will offer true scalability. So I think it is worth it to be on the safer side of things. I think it is very important for Bitcoin to maintain its decentralized nature.
With gift cards, [decentralization] is not as important, because you are already trusting the issuer of the asset, so you don’t necessarily have the same issue of needing to be strong on anti-censorship. But for Bitcoin it is very important. I think of Bitcoin as the future global reserve currency and potentially the deepest and most liquid market. [We may see] other cryptocurrencies use Bitcoin essentially as a bridge. If you want to swap a gift card asset for a stock maybe you’ll go through some bitcoin system. You’ll sell your gift card for bitcoin and immediately buy some stocks with that bitcoin. It may happen transparently or you may not be aware of it, but I think bitcoin potentially has a very interesting role to play globally. Just in the US, maybe we could use just bitcoin, but on a global basis [the idea described above] is the best candidate we have today.
DeMartino: When the blocks were getting too full during the Spam tx attack and stress tests, did Gyft experience any problems with confirming transactions?
[Due to FirstData’s IPO, I was informed Gigyom couldn’t answer this question directly, but he did give this insight]
Giyom: I will say that Gyft is trying to accept zero confirmation payments to users and that takes a lot more than just looking at confirmations. We do a lot of fraud detection and even before we confirm a transaction, we can determine if we are willing to take the risk without waiting for confirmations. So we aren’t necessarily relying on the blockchain to make some of these decisions. It’s useful to us to have confirmations but ultimately people want their gift card instantly. That is why people come to us, that is our valuable position: instant merchant funds with any payment method.
So, we can’t entirely rely on confirmations, to answer your question, it hasn’t really impacted us much because we don’t rely on it as much [as other companies] and I think it is something everyone in the industry is trying to do. They are all trying to look at things other than confirmations to determine if they are willing to accept a transaction with zero confirmations.
When you look at it, you are exchanging an asset for another asset. If you send a digital good, if it isn’t consumed immediately, there are ways you can use that to mitigate that risk.
DeMartino: You mentioned that you got into Bitcoin five years ago?
Giyom: The first time I heard about Bitcoin was around 2010. So I have been following it for the past five years. I tried to buy some from a company, it went bust a couple weeks later, but my bank wouldn’t let me transfer the money. So I bought some Bitcoin a little later, but from other people. Early on, it was really difficult to buy it legally with bank money.
DeMartino: What made you realize it was going to be successful at that time?
Giyom: I think very early on, and it is still the case today, and it’s true of any technology, what has really impressed me was the ecosystem. The community on forums and the small businesses, all the enthusiasts that were creating this ecosystem. Businesses that were not viable but were trying to provide all kinds of services around it, I think that was really amazing. I think that is what made Bitcoin successful and what I think will keep making it successful. Even today, as a software developer I looked at Bitcoin as an ecosystem. So, to me it is not just a currency or a platform, it really is software and with all these software developers around it. There must be, I don’t know, 10,000 people, or more, working on Bitcoin [and related projects].
So, to compare it to Linux, some people say Bitcoin is starting to follow that path. It started as a personal project and then nobody thought that it was going to be serious, then it became serious and everyone said “Linux is going to kill Windows” and “Bitcoin is going to kill Fed Money” and in the end that is not quite what happened to Linux.
Linux on the desktop never really caught on [with the mainstream user]. But now, everyone is using Linux. If you have an Android phone, you are using Linux. You could even say anyone using a website is using Linux. So everyone is using the technology and using the community and the software that it is based on. I think that is the most likely path for Bitcoin.
Of course, [unlike Linux] we have more than just being open-source software, it is also the network, the data, the participants and the blockchain itself. But I think it is an interesting comparison. For another comparison: I’ve been working in the financial industry for a while. There has never been any kind of open-source software for banking before bitcoin. There weren’t any banks saying ‘oh yeah we are going to open-source our core banking system and put it out there for people to contribute.’ There were some really small attempts by individuals but they never really worked because they were disconnected and they didn’t have value on their own. Whereas bitcoin, it is financial, open-source software, with transactional value on its own. I think most banks and most financial software companies are traditionally based on the idea of security as secrecy.
I used to work for a company that was originally building safes for banks. Security is changing, and we are finding the most secure thing to do is to let everyone look at your code. I think it is quite likely that financial institutions like banks or companies like us will look at this and say “let’s build on this” not just on the back end but on the front end for website and other things. Maybe a bank will take an open-source bitcoin wallet and customize it to make it a bank wallet. It will look like the same bank wallet to the user, but the background, the security model will be perfected in the open by the bitcoin community.
I have started to see a change in tune, a lot of companies that were only focused on bitcoin are now looking at the blockchain and saying ‘actually we have built a really cool technology that can be used for a lot of other things.’ Airbitz is a good example, maybe it was always a part of their strategy, but they were about being a very secure, decentralized wallet and now you go to their website and it says they are basically an open source stack that you can build your next application on. That, to me is the most interesting story about bitcoin is that it is open sourced financial software, I think that is the source of a lot of the excitement when we talk about blockchain.
DeMartino: What advice would you give to bitcoin startups looking for investment?
Giyom: Good question. I think Bitcoin is an interesting place to be. I would advise companies play both sides at the same time. You need to look at the Bitcoin space as a place to experiment and do things in a permission-less way if you want, but you also need to look at the technology itself and how it can have usecases that don’t have the same requirements of bitcoin in terms of anti-censorship, and that is how we can be successful as a business.
There are some contradictions about being a bitcoin business. Bitcoin really is about decentralization and that is about moving points of extraction of value. How do you build a business, if there is no points of extraction of value? So, to me, you need to have some central aspect to what you are doing. Even if it is selling services like some open-source companies have done. I think the best is to be active in the bitcoin space and learn from that as much as possible.
In terms of security, bitcoin is a four billion dollar prize for anyone to hack. Even the NSA doesn’t give that kind of prize for breaking their algorithms. It is a very big prize out there, so it is a really good space to perfect technology. As a business, you probably have to look at other markets where people are looking at ‘how do I use this technology to solve Internet of Things or social privacy problems’ or incumbent businesses like banks. I think you have to do both. Being only focused on Bitcoin or only focused on Blockchain is, in my opinion, not the best thing, I’d recommend doing both at the same time.
I think what AirBitz is doing is really interesting. They put a product out there, they got some users, they really learned from that. They didn’t have to ask anyone to do that. They didn’t have to go to a bank and say ‘do you guys want to use our mobile technology?’ they just went out there with a product. That is the beauty of it. I don’t know them much, but it seems to me now we have perfected this [platform] and you can use it for a lot of practical applications and corporate business applications and I think that is very cool.
DeMartino: When you are talking to mainstream, non bitcoin companies, maybe a new gift card you want to offer or something like that, does the Bitcoin connection tend to concern them at all, or are they excited about it?
Giyom: It really depends, some companies don’t care, some care a lot. I think we see both cases. I don’t want to talk about specific brands, but I think you’ll see more brands concerned than not, but it is not a large majority.
I thought you were going to ask me what do I tell them. I think what is interesting, is the global aspect of it. When a business accepts bitcoin, they open themselves to a global market. As a local ‘pay for your coffee with bitcoin’ I don’t know, if you look at all the operational costs, bringing in a device, training employees and doing more work, if it works out. When we say ‘We will reduce your transaction costs’ there is some uncertainty there, it is just not that clear.
But when you tell a business ‘Now you can accept funds from anywhere in the world and ship to these people.’ They can wait for six confirmations to be sure and then ship their product and then they have already been paid. That is very exciting [to them]. To look at one models that I like but I’m not related to is Streamium where you can publish video content and allow anyone in the world to pay for your content, that is a really cool use case of bitcoin.
DeMartino: As someone who has been through the ups and downs of Bitcoin’s price, what would you say to bitcoin investors or holders that are worried about the price stagnation that has been going on for the past year or so?
Giyom: Right now you have to ask ‘what is the story?’ I think the story right now is that ‘Bitcoin is dead’ Bitcoin at the point of sale is dead’ there are all these stories about Bitcoin being dead. Some journalists like to bring up this problem. The truth is that everyone is experimenting, building prototypes and products that will be released over the next 18 months or maybe more.
Everybody is working on Bitcoin related technology. So, whether it is built on bitcoin or whether it is technology like a private blockchain, whatever it is, I think, ultimately people will be looking for one, two or three assets that they will go to as a very liquid asset. The connection between various chains. When you do a payment it might start on a conglomerate of bank’s chain but if you want to actually transfer that to a country in Kenya, then maybe the only way is to go through bitcoin. But it is actually much easier that today because the private blockchain is almost the same technology, so it is easier and quicker to just swap on into bitcoin and then with another private blockchain on the other end.
I am a believer In the internet of chains, where Bitcoin will likely play a critical piece. So it’s not this grand idea that everybody is going to use bitcoin or that every asset is going to be built on the bitcoin blockchain. I think [the important thing is that] all this technology is spreading and that is going to ultimately drive more use of bitcoin itself.
Recently, I saw an investor who said it was probably the most mispriced asset in the world. Because there are still very few people who understand it. I think it is useful to I don’t know how many actual million users bitcoin has, but lets say there are a few million, and thats pretty nonsense, but I think we are still at the early stage of this.
We would like to thank Gioym for taking the time to talk to us. You can read more about the First Data acquisition of Gyft here.
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