This essay is an updated chapter from Luis Buenaventura’s Reinventing Remittances with Bitcoin, available for free in e-book and print form now.
If you’re just joining the Bitcoin train, it’s probably hard to imagine what the world of early 2014 was like. The largest Bitcoin exchange at the time, Mt. Gox, had just imploded and about $450 mln in customer funds had gone missing.
The market reaction to this catastrophic failure was both immediate and prolonged: Bitcoin price would tumble down a series of cliffs from a $1200 peak to a $180 floor over the next 12 months, shaking all but the hardiest of investors.
Using Bitcoin as a mode of transmission rather than a store of value
Preventing such a precipitous loss of value was one of the primary goals of Bitreserve, the startup launched by Halsey Minor in late 2013. Unlike most of the community, the founder of CNET wanted to emphasize Bitcoin’s use as a mode of transmission rather than a store of value, which immediately put him at philosophical odds with purists and crypto-anarchists.
Bitreserve’s product strategy was to mimic the function of a Bitcoin wallet, while actually storing your coins’ value in your preferred fiat currency. Sending Bitcoin to a Bitreserve wallet would instantly peg it against, say, the US Dollar price at the time of transmission.
If the USD price for Bitcoin was $1,100 and you deposited 1 BTC, your Bitreserve account balance would read “$1,100” in perpetuity. When you wanted to spend some of those Bitcoins, Bitreserve would look up the USD-BTC price at that moment, and dynamically convert your dollars to Bitcoins as needed.
This meant that you avoided losses if the Bitcoin price happened to fall, but the converse was also true. When the price started to rise — as during the bull markets of late 2016 and these recent weeks — your money would be left behind, languishing in its fiat prison.
Bitreserve raised close to $10 mln before going through a major revamp in mid-2015. Anthony Watson, the former CIO of Nike, took over the CEO position, and rechristened the company “Uphold.com.” It maintained the original vision of Bitreserve but did so with greater reach and a brighter color palette.
Importantly, they launched the Uphold Connect API, which allowed startups to build their own third-party financial products on top of their expanding network. Uphold was now essentially a wallet-as-a-service platform, allowing young entrepreneurs to build verticals without making large investments in the underlying infrastructure.
Two of those entrepreneurs were Antonio Garcia and Ruben Galindo Steckel, the founders of AirTM. “A year ago, [these] two young guys from Mexico City interned at Uphold’s San Francisco office,” writes Tim Parsa, Uphold’s head of Global Strategy and Markets, on the company blog. “A few months later they presented an idea for an app built on top of Uphold’s open API.”
“Human ATM” and pegged currency balances
AirTM combines two interesting ideas: Abra’s “human ATM” concept and Uphold’s pegged currency balances. It currently enables the flow of funds and exchange of currencies in some 62 countries, including Mexico, Argentina, Venezuela, the US and China. Co-Founder Ruben Galindo Steckel explains that their focus is in helping people in “harsh currency regimes” who are in need of basic financial services.
AirTM works by first connecting its customers with local “cashiers” in their country who can accept their cash deposits. Once the customer hands over their cash, the cashier will then send an equivalent amount of BTC to that customer’s balance on AirTM/Uphold.
Once “in the cloud,” the customer can manage their funds as they see fit. This strategy allows AirTM’s users to maintain their money in any currency they desired, which in the case of Argentina and Venezuela, usually means anything other than their own.
Having cashiers that are based in one or more of their supported countries allows AirTM to essentially facilitate self-service remittances. As long as the sending customer has money in the cloud, they can forward it to any beneficiary anywhere in the world. That beneficiary will then coordinate with their own local community of cashiers to receive funds in their desired currency.
One of the biggest surprises about AirTM is the average size of their transactions. According to Co-Founder Galindo Steckel, it’s just $36.
The global average remittance size is much higher, close to $200. The fact that AirTM’s average is small seems to indicate that they’ve found a way to sustainably facilitate micro-remittances via Bitcoin. That segment that has proven to be largely unreachable for traditional remittance providers like Western Union, whose $4 flat fees force customers to wait and batch their transactions instead of sending them as needed.
When asked what other services AirTM had in store for its users, Galindo Steckel lists “debit cards, microloans and a mobile app” as near-term improvements that the team was already hard at work on.
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