Does the Bitcoin community need another wallet? Amsterdam-based BlockTrail reckons there’s space for another player, despite some sizable and well-funded wallet entities already — such as Blockchain.info and Coinbase, to name two. The former has raised around $30 million to date, according to Crunchbase, and apparently racked up around 4 million users; while the latter has some $107 million in funding and circa 2.5 million users.
Other pretty visible wallets include Circle and Xapo, and there are of course scores of smaller wallet apps. (Albeit bit-player wallet apps might not be the kind of place you want to store your Bitcoin wealth.)
The new Dutch challenger BlockTrail, which has been live in the Bitcoin analytics space since 2014 — and is backed by €500,000 in seed funding from its co-founder Lev Leviev (who also founded Russian Facebook rival Vk.com) — has just launched a multi-platform Bitcoin wallet (iOS, Android and web) which it claims is more secure than some existing alternatives, owing to implementing multi-signature and HD wallet, which earlier-to-market Bitcoin wallets may not have.
And which it says is more in keeping with the decentralized spirit of Bitcoin — since users of its wallet create and store their own private keys, rather than trusting in it to be a central key control and coin repository — a la Coinbase, for instance. Update: NB: Coinbase does, however, offer a multi-signature vault product for pro users which also lets users keep their own encryption keys (although the vault has a withdrawal wait period so does not function in the same way as an instant-access wallet). Of the vault it notes: “Coinbase has no ability to move funds (which means you are safe from Coinbase being hacked, going bankrupt, or anyone seizing your bitcoin). It also means that you as a customer have much greater responsibility in storing your backup key securely. If you lose this backup and forget your multisig password, Coinbase cannot help you recover your bitcoin. For this reason, we only recommend this feature for advanced users.”
The advantage of a decentralized wallet, according to BlockTrail co-founder and CEO Boaz Bechar, is that the BlockTrail wallet user retains control over their Bitcoins, and can’t be locked out by a centralized service provider should that entity decide they need to freeze your account, say, or be told to by the authorities. Or should they be hacked. Or else vanish into the ether taking your coins with them — a la the Mt. Gox exchange saga. The nascent Bitcoin landscape has had more than its fair share of Wild West moments already.
Of course some people might want the reassurance of trusting a large, well-funded entity that has insurance underwriting the risks of hacking so the company can claim it will reimburse users for any lost Bitcoins. But as BlockTrail’s co-founders point out, that’s not so very different to trusting a traditional bank. And if it’s centralized financial control you’re after then why are you even involved with Bitcoin at all? (Well, presumably you might just be a currency trader trying to profit off Bitcoin price fluctuations, rather than a decentralized cryptocurrency ideologue. But still, they have a point.)
The whole reason why people get into Bitcoin is to no longer be dependent on a bank. The motto that I like about Bitcoin is ‘be your own bank’. You don’t want to be part of a financial system that keeps you hostage when they own your funds.
“The whole reason why people get into Bitcoin is to no longer be dependent on a bank,” says BlockTrail CTO Ruben De Vries. “The motto that I like about Bitcoin is ‘be your own bank’. You don’t want to be part of a financial system that keeps you hostage when they own your funds.”
“People [in the Bitcoin community] know us, and there’s reason to trust our brand and use our apps. But in the case of Bitcoin you don’t even need to trust us, so if we were to disappear… people still own their Bitcoins. We cannot run away with their Bitcoins. And they could still use the app and restore their wallets even without us, which is really what makes us special,” adds Bechar.
A decentralized wallet does have some potential draw backs though, on the usability front — given the service can’t carry out certain actions immediately as it does not hold the coins itself. So there’s likely more back and forth between the wallet and the user when they want to do things with their coins, say like sending them to someone else or instantly selling them. Although BlockTrail argues that multi-signature and HD wallet now make it easier for a decentralized wallet to smooth out these sort of usability wrinkles.
Is BlockTrail targeting its wallet at core Bitcoin community users, or trying to cast a wider net to more mainstream consumers who might be thinking about starting to dabble with BTC? Initially they say the target is Bitcoin savvy types, perhaps developers who have already been using its Bitcoin API and blockchain explorer. But they add the aim is to reach out beyond existing well-informed Bitcoin nerds — and are in fact touting ‘UI simplicity’ as one of their differentiators, despite being a decentralized wallet service.
“We are interested in bringing Bitcoin to the masses, to the widest audience possible,” says Leviev. “For example one of the functionalities that’s available and we’re going to improve is that you can send Bitcoins to anyone in your contact list even if they don’t have a wallet downloaded.
“So initially you will basically get an SMS saying ‘hey try out this wallet and get a Bitcoin that I’d sending you’, and that’s how we think we can build from the existing community to a wider audience.”
Such features are possible on BlockTrail’s wallet from the get-go because it’s benefiting from later developments in Bitcoin’s infrastructure, according to the team. “Because we came in a little later than a lot of the other wallets we’ve been able to think about things better, so we also have a lot of these convenient functionalities in our app,” argues de Vries.
“We differ from Blockchain wallet because we use different technology from them. They came around when HD wallet and multi-signature wasn’t yet around… We were able to start off our infrastructure built on multi-signature and built on HD wallet. And this offers users a better all around wallet and technology,” says Bechar.
“The space is very fragmented. There’s not that many big players that offer a good technology for the user and we think there’s space for a product like ours which offers better security and stays true to Bitcoin’s values by allowing users to keep their private keys,” he adds.
From an operations point of view, BlockTrail’s decentralized approach is clearly a lot leaner than the likes of Coinbase — the team is only around six staff at this stage (vs Coinbase’s up to 250 circa 110 staff). And it also claims it does not need to shell out such big sums on regulation and compliance, and so doesn’t need to have as much investor capital in the bank.
“[Coinbase] operates more like a bank. And we don’t really offer these services. We will plan to offer them later on, through partners, but our operations are very different — even though the product might seem the same to a person who is not very familiar with Bitcoin,” says Bechar. “We don’t have the kind of operation that requires compliance officers. And a large team of operations such as when you run a big exchange like Coinbase. They have multiple different products. It’s a different operation.”
“The regulation mostly comes into play when there’s an exchange of some sort from a cryptocurrency to a fiat currency. Currently at the way we’re structured we don’t provide this service. And while we do have plans to provide this we’re going to do it through third parties and partners that we’re working with,” he adds.
To be clear, although it does not have access to its users Bitcoins, BlockTrail is not ‘zero knowledge’ — it can see your transactions and knows how many Bitcoin you are storing in the wallet. And given its wallet is a mobile phone app, it’s not the kind of place a clued up Bitcoin user would want to store huge amounts of coins.
If you have serious BTC wealth you’d be storing the majority in an offline desktop client (with two-factor authentication enabled, and likely other limits — such as on which IP addresses can access it and where coins can be sent). So a mobile Bitcoin wallet like BlockTrail would only be useful as a repository for a subset of your coins — say, if you want to have some handy for trading/day to day use.
But for less well-heeled Bitcoin owners, Bechar reckons BlockTrail could be their sole wallet. “I think most people will find they’re using one wallet, and when we get to the mainstream users they’re using one wallet and will have these spending limits [such as daily caps] to keep them more secure,” he says.
BlockTrail is hoping to grab 100,000 users by the end of the year. The team says it is open sourcing its wallet code too, to further bolster trust in its claims.
The wallet is free to use, with the business model focused on monetizing via — as Bechar puts it — “added-value financial services”, via third party partnerships with Bitcoin brokers. The aim being to make it easier for newbies to buy and sell Bitcoins — and for BlockTrail to take a small per transaction fee for that added convenience.
“It’s not going to be an exchange, but it’s going to be an easier way to buy and sell Bitcoin,” says Bechar. “We’re looking to do that through parties that already provide this functionality… There’s brokers worldwide, for example here in the Netherlands there’s a company that sells Bitcoins so we integrate with them. So we’re looking to do this through a global partnership network with brokers.”
“The exchanges are the best place to buy your Bitcoins at the best rate but they require a lot of effort, of signing up, verifying your ID, verifying your address, then having to do bank transfers to them. It’s a lot of hassle. Also it scares people because… it’s just not an easy way. So using an exchange is really if you’re a trader,” adds de Vries. “[Brokers] are a lot easier to use because you don’t have to go through all the pain that most exchanges have. So we want to partner with these companies… Every country usually has a few, and they’ve all figured out how to work within their own regulations.”
He points out that working with local partners agains contrasts with Coinbase’s approach — since it’s taking on the challenge of complying with all relevant Bitcoin regulations itself. “They’re really going [U.S.] state by state, having to deal with all the different rules in every state, spending millions on just all this crap basically and they’re barely moving to Europe because here again they have to go country by country figuring out what the rules are, how the banks are going to respond when they want to do this. So that’s why if we can use local partners… that allows us to get into that country quickly and without too much hassle.”
At this stage BlockTrail has “a few” such partnerships inked in Europe, and none in the U.S. as yet, so will be looking to build out this partnership network — assuming it can first galvanize a solid user-base behind another decentralized Bitcoin wallet play.
This article was edited to clarify that Coinbase does offer a decentralized vault product, in addition to a Bitcoin wallet in which it holds the users’ encryption keys