It’s early 2017. Thomas Hartman and Alex Kravets find themselves entrenched in a bold endeavor based on the following belief;
Bitcoin, to become mainstream as a global transaction and savings medium, must be physical.
Taking precious metal coins as their starting point, these two ambitious entrepreneurs are in the throes of curating a physical bitcoin that they hope will appeal to neophytes and nonexperts in the crypto space. Their intent, to shield users from addresses and the other complexities of the bitcoin protocol. Their hope? To make Bitcoin as easy to use and secure as gold.
Similar to precious metal coins, and unlike nearly all popular physical bitcoin and hardware wallets to date, Satoshium token (“satoshiums”) as they are known provide safe offline physical transferability. There is no need for users to understand addresses, transactions, confirmations, change, fractional amounts, secrets or backups to hold or transact with "satoshiums."
So who is the brain behind this venture? Alex Kravets, who BTCManager interviewed for this article is the inventor of Google Auto-Complete. He was the Chief Architect and developer lead at iRise, a collaborative prototyping software firm. He led them from inception to commercial dominance in the prototyping and requirements niche, with $50 million in funding and a diverse portfolio of Fortune 500 clients.
His business partner Thomas Hartman is a serial entrepreneur with deep technical expertise, including a founding role at Marketpsych, a financial data analytics firm which was absorbed by Thomson Reuters. He has been involved in cryptocurrency since 2011 and has on-boarded over 50 people to bitcoin, including many friends and family for large amounts. He blogs and Reddit's as @standardcrypto.
Both Alex and Thomas have experience as software developers in the trenches and as CTOs managing local and distributed teams.
The Minting Proposition
Minting is the process of manufacturing coins through what is known as "coining.” In the case of Satoshium, a smartphone is used to execute the various stages of the minting process as follows:
Minting: Creation of a minted satoshium. (Requires an address, performed by minter.)
Verification of minted status: This is the stage that determines whether a satoshium contains bitcoin that is transferable. This step can be performed offline, that is, without network access to the bitcoin blockchain. (Easy, shields user from addresses, can be carried out by novices.)
Redemption: Here all of the value is moved off the satoshium (Performed by minter.)
Anyone who has a bitcoin wallet can mint and/or redeem a satoshium. These users that were mentioned above are known as “minters” Minters also can assist users new to bitcoin (“novices”) own bitcoin easily without relying on trusted third parties.
A minted satoshium can then be treated almost like a gold coin, with a phone confirmation indicating that it’s genuine and appropriately funded.
Upon funding, novices can buy, sell, spend and receive minted satoshiums, circulating them hand to hand without touching the blockchain. Since they’re not minting or redeeming satoshium, novices have no need to understand Bitcoin addresses or related complexities. A newbie user needs only to know how to check whether a satoshium is minted using a phone app - a process that can be mastered through a natural learning curve.
At the point of sale or transfer, a smartphone verification of transaction is performed, like a gold or silver assay on a coin. The authentication can be performed offline, without an internet connection to the Bitcoin blockchain.
Denominations are standardized and utilize bits rather than fractional bitcoin. A satoshium contains transferable bitcoin with the denomination physically displayed on it (Minted status), or it does not include transferable bitcoin (all other statuses). There is no guessing how much bitcoin a minted satoshium has. The “all or nothing” nature of a satoshium makes it similar to a traditional, precious metal coin.
Similar to precious metal coins, satoshiums are not meant for day to day circulation. They are essentially bitcoin placeholders for onboarding, holding, and occasional re-selling. If you want to secure a satoshium, it is best for them to be hidden away or placed in a safety deposit box.
Satoshiums are reusable. After redemption, they can be reminted with a new address and fresh funds. Since satoshiums are on an open protocol, people would be able to keep using them even if if a company is dissolved or a phone app becomes unavailable.
Like bitcoin hardware wallets, satoshiums are more secure than general purpose computers and phones, which have large attack vector for bitcoin-stealing viruses. Using a crypto-processor to lock secrets in a tamper resistant way is also far safer than using an easily tampered hologram (e.g. Casascius) or a scratch-off (e.g. Little Bit of Coin).
The Value Proposition
Regarding the advantages of a physical coin over traditional bitcoin held electronically, Satoshium co-founder Alex Kravets says that it pretty much boils down to ease of use, peace of mind, and learning curve, or lack of one, in the case of Satoshium. “Everyone already knows how to use coins, to the point that it seems weird to talk about “user experience” or “user interface” for a coin. Monkeys can use coins -- google “capuchin monkeys learn to use money” for some fun reading. Coins are entirely intuitive. That is what we are striving for with satoshium.”
He continues: “A gold coin reduces the mental overhead of using gold as a medium of value storage and transfer. Similarly, a satoshium reduces the mental overhead of storage and transfer of Bitcoin.”
The following matrix offers a comparison between Satoshium and existing Bitcoin storage solutions. “Easy to use” here means bitcoin can be bought from an untrusted seller without needing to understand bitcoin addresses or other low level details of the protocol.
How Will the Coins be Verified and Authenticated to Prevent Fraud?
Regarding security and fraud prevention, Kravets says that the objective is to make physical bitcoin coins that are as secure or more secure, in practice, as gold coins. Satoshiums, he says, can then circulate in the same places, alongside gold and silver; pawn shops and precious metal dealers, for starters.
Notes Kravets, "Moving to the nitty gritty, anti-counterfeiting is covered in Section 5 of the whitepaper; the whole of Section 5 is probably worth a read if you want the full story. Concerning innovation, “5.2.2 Platform Integrity” is interesting."
Says Kravets on the future of minted coins and whether Satoshium has plans to offer any altcoins: “No plans to offer altcoins, but if it makes business sense and there is demand who knows. We try not to be doctrinaire. But both Thomas and I are strong bitcoin maximalists, so there is that.
“The biggest possible future win scenario is for government mints to issue bullion bitcoin coins with satoshium inside, alongside the bullion gold and silver coins that are currently popular with collectors and precious metals bugs. There is a huge appetite for bullion coins, with one and a half million US mint gold eagles and 50 million US silver eagles selling annually, according to the Wikipedia page for gold eagle and silver eagles.”
“When we see “Bitcoin Eagles” on sale from the US Mint in 2027, we will declare victory and go home, satisfied that the mission we chose for ourselves is complete.”