Jesse Heaslip, Bitcoin Entrepreneur: How a Government Partnership Will Build a Bright Future
With Anthony Wile - December 29, 2013
The Daily Bell is pleased to present this exclusive interview with Jesse HeaslipJesse Heaslip is co-chief executive for Bex.io, a privately held company providing a platform that allows you to own your own bitcoin exchange. Jesse leads business development, design and marketing and the company just completed a successful financial raise and is releasing its first exchanges in early 2014.Daily Bell:
Thanks for sitting down. Let's start with some background on bitcoin.Jesse Heaslip:
Bitcoin is an increasingly popular protocol introduced in 2009 by "Satoshi Nakamoto." No one knows who he is, even today, but he placed a white paper on the Internet that explained how a peer-to-peer electronic currency would work and the ecosystem flourished from there.Daily Bell:
Is it money?Jesse Heaslip:
Bitcoin is a cryptocurrency. Every transaction updates a public ledger called the blockchain. The blockchain permanently records every single transaction.
Bitcoins are created through a process called mining. People "mine" them electronically by solving mathematical equations. This is known as "proof of work," and those who participate are known as miners. Successful miners receive transaction fees and new bitcoins.
Given that it's an entirely new kind of currency, bitcoin has been highly successful in its short life. However, there are a number of serious concerns that the community is still addressing.
Many people associated BTC with the recent shutdown of Silk Road, the online marketplace that supported the use of bitcoin purchases for potentially illegal items and drug purchase. Bitcoin exchanges have gone out of business and bitcoins have been stolen from electronic wallets. China recently banned the use of bitcoin but bitcoin keeps growing anyway.Daily Bell:
There's considerable price volatility.Jesse Heaslip:
Speculators are driving the price of bitcoin, which recently reached over US$1,000. But as more vendors accept bitcoin, volatility should lessen and bitcoin should behave more like a regular currency. It's entered an era where it is now receiving acceptance from major vendors including Reddit and WordPress.
We are at the tail end of the first wave of acceptance and just at the beginning of a second and much larger wave. There will be tremendous innovation over the next few years and a huge number of additional crypto coins. There will be huge developments built around "proof of work" and different kinds of mining. Say a health insurer wants to encourage healthy habits and lifestyles. That insurer could issue electronic coins based on a reduction in your resting pulse. You could accrue currency by becoming more healthy.Daily Bell:
But would the currency be accepted as money? Would it actually be useful?Jesse Heaslip:
Many currencies are beginning to come online and they're often priced against bitcoin. The bitcoin community generally accepts them and thus they are exchangeable against bitcoin. That's one place where exchanges come in.Daily Bell:
Tell us about your company, Bex.io.Jesse Heaslip:
Well, it's simple enough. We build digital currency exchanges and partner with groups in countries around the world to operate them locally.
We split the transaction fees with our partners on a case-by-case basis. We try to find a split that is beneficial to our partners while allowing us to grow our business at the same time.Daily Bell:
How does an interested individual or group begin to work with you?Jesse Heaslip:
We create exchanges with several groups at once called cohorts. Our first cohort of five exchanges will be launching in the coming months. Members of the first cohort have all pre-purchased 25-100K of Bex services.Daily Bell:
Comment on the technology, please.Jesse Heaslip:
We have tried to use technology appropriate to the task. On the back-end we use Elixir, a dialect of Erlang that is highly scalable and suitable to bitcoin exchanges. On the front end we use AngularJS and a fully responsive HTML5 interface to ensure a consistent and professional presentation.Daily Bell:
The interface comes from you?Jesse Heaslip:
Yes, the interface we give you is customizable because different clients have different needs. Each country and region of the world reacts differently to different colors and looks. We want your presentation to be the best you can have.Daily Bell:
What about security?Jesse Heaslip:
We manage hosting and are intimately involved with the security of the overall system. If you have a certain hosting provider, we're certainly open to working with the vendor if they prove suitable from a standards standpoint.Daily Bell:
Cost of an exclusive Bex.io license?Jesse Heaslip:
This is negotiable based on the duration and region. We're a startup and are trying to be flexible and cost effective.Daily Bell:
Tell us a little more about yourself. How did you come up with the Bex idea?Jesse Heaslip:
It was a market-driven concept, which often proves to be the best type. We were working with a client that wanted to build an exchange, but the cost was coming in high. So we wondered if we could build an exchange that several clients could sponsor. We put out a query via a landing page and we received a torrent of response.Daily Bell:
How far back do you go with bitcoin?Jesse Heaslip:
I have spent a good deal of time over the past two years on what you could call the bitcoin periphery and during that time I was hosting regular meetups in Vancouver. We'd have three or four people in a room but then the price went up and more people would join. You started to see the interest expand, and my interest did, too. Now, with this exchange concept, we're fully committed to enabling bitcoin growth.Daily Bell:
Where did you meet your partner, Yurii?Jesse Heaslip:
I met him through the meetup community. We kept running into each other and gradually as we became friends we began talking about what we could do together. We shared the same interests but it was the never the right time. One of us was always busy or had other commitments. But late last year we were suddenly both free at the same time and decided to try to focus on bitcoin. We began to develop the concept of a scalable exchange and now we are developing an exchange for four or five companies at a time. Our target client market is those individuals or groups that want to leverage the current interest in bitcoin. Often they may be miners that have bitcoins to market that they have gained via the mining process and want to sell on the open market. There are all sorts of opportunities.Daily Bell:
Where were you before that?Jesse Heaslip:
Before then, I was working at a local accelerator, what you might call a venture incubator, Growlab. So I've been around startups for a long time, including bitcoin. We have both been around venture capital ideas and seen the good, the bad and the ugly.Daily Bell:
Before then?Jesse Heaslip:
I was working in South America and learning to code. I ended up in New Zealand for a while at a startup and then returned to Vancouver in 2010. I'm a sports fan and I wanted to be in town for the Olympics. I worked directly for a startup in Vancouver and you start to get good at evaluating opportunities. You look for explosive markets. As an entrepreneur you have limited financial resources; however, you do have time and talent, and you have to ask yourself what is the best use of your time. Others will be asking the same thing, especially if you approach them about funding something.Daily Bell:
Give us a bit more detail on your background.Jesse Heaslip:
My dad is an architect and for a long time my mom ran a daycare center, so they are both entrepreneurs. I think I get that from them. I went to the University of Victoria and received a Bachelor of Commerce degree. I was always interested in how businesses can invoke change and found participating in startups to be exciting.Daily Bell:
You embarked on a raise to get this off the ground. What was that like?Jesse Heaslip:
We raised about half a million, and it was one of the hardest things I've ever done. In order to open the doors you've got to answer tough questions and you better get the answers right. It ended up taking four months of concentrated effort.
It's still early days in the bitcoin community and there's a sense of shared purpose. Most of our raise came from people who owned bitcoins, though we were paid US dollars. There are people trying to live on bitcoin, but that's still hard at the moment. We pay some office expenses in bitcoin.Daily Bell:
Do you think you raised enough?Jesse Heaslip:
We didn't want to raise more. The government of Canada has programs to finance us, too, and we can stretch out what we've got. This is a long-term business, and we have enough to take us to the next level. Also, you don't want to give up too much of the company, which we didn't. We're still very much in control, though with the next round we anticipate that the board will start to evolve. Competition-wise, we believe there were about four groups that set out to do what were doing, but now there are only three. One just dropped out.Daily Bell:
What about the recent bitcoin price downturn – from nearly US$1,000 to about half that?Jesse Heaslip:
Usually, when bitcoin prices decline, people begin to buy again. So there's a three- and four-month lag on any price action. If bitcoin goes down, buyers tend to bid it back up about three or four months later. So sometime in March, we expect there'll be another big climb back up.
Also, volatility tends to shake out the weak hands, which adds resolve to the remaining participants in the community.Daily Bell:
Comment on some of the controversy surrounding bitcoin.Jesse Heaslip:
There are growing pains. The future of bitcoin in our estimation is as a regular, regulated money. These days, you only want to build exchanges that identify the user via a labeled wallet. That means the users' purchases and buying habits aren't hidden in any way.Daily Bell:
Doesn't that have a big impact on a main factor of bitcoin, which is anonymity?Jesse Heaslip:
For the most part, bitcoin is not anonymous to begin with. That's kind of a myth. In the past, there has been research into tracking micro transactions and you can pretty much figure out the user if you track enough of them. There will always be dark wallets and tools that cater to a niche market that values anonymity.
But we should also look at our online lives as a whole. Because of the vast amount of Google data – and data generally available on the 'Net – it's very hard to hide. That word simply doesn't exist, as applied to human beings. Our buying habits can be tracked, our interests, our private lives.Daily Bell:
So from your perspective, the supposed anonymity is not the most valuable facet of bitcoin?Jesse Heaslip:
No. The most valuable element is that bitcoin does away with a large part of the friction of transactions. With bitcoin there are no time delays and no added costs. I can transfer large sums of money anywhere in the world in an instant. Compare that process to using a credit card or a bank wire or even Western Union. The end user saves time and money, and that alone makes bitcoin and related money quite valuable.Daily Bell:
There is concern that bitcoin's competition is going to come from places like Wall Street.Jesse Heaslip:
Yes, it's true that firms like Morgan Stanley are releasing their own versions of electronic money but for a lot of reasons, I don't think they fully understand the concept or the advantages of utilizing an open-source platform. Of course, if banks utilize bitcoin or a similar electronic currency, it will make them more efficient.Daily Bell:
Was the shutdown and subsequent reopening of Silk Road a good thing?Jesse Heaslip:
It was fantastic in the sense that bitcoin is not going to be identified with drug dealers and other fringe elements. In fact, Bitcoin is coming into its own as a full-fledged platform within the paradigm of modern money. Again, the issue is not anonymity for most people but the lack of friction when it comes to transactions. The convenience and global utility is what is going to make all sorts of electronic currencies more and more popular, especially bitcoin.Daily Bell:
Is there anything that can derail bitcoin?Jesse Heaslip:
I believe it is likely past the point of derailing. Governments would have to freeze bitcoin in its entirety and that's probably not going to happen. China just put the breaks on bitcoin, but we'll see how long that lasts. And even in China, it is perfectly possible to make micro-transactions. But right now the Chinese can't make large-scale purchases because the authorities won't let them.Daily Bell:
What about gold and silver? Are they good media for transactions?Jesse Heaslip:
Bitcoin is more liquid than gold and silver, and the main difficulty with bitcoin – lack of acceptance – is changing quickly. Last year there were maybe 10,000 vendors that accepted bitcoin. Next year, 100,000. The number is growing exponentially.
And bitcoin is not by any means the only electronic coin these days. As we discussed earlier, acceptance is growing all the time. You may soon see dozens or even hundreds of coins come online, each with different features and different kinds of proof of work. The proof of work can be almost anything and thus, I'd anticipate that this sort of money in a wide variety of configurations will be offered and receive acceptance. If people can make money by altering behaviors or doing something else advantageous, they will.Daily Bell:
A thousand coins will bloom?Jesse Heaslip:
Probably, and that's a nearer-term projection than you might think. Vendors will have tremendous incentives to issue coins to encourage use of their products.Daily Bell:
So the future of electronic money is commercial. That will be the driver rather than anonymity?Jesse Heaslip:
Anonymity is passé. That's simply a fact, and I'm not making a judgment about it. People should assume transparency online and conduct themselves accordingly.Daily Bell:
That's a controversial assumption, though. Many people don't like to think all their behaviors are accessible to authorities who presumably can judge them and even prosecute them.Jesse Heaslip:
I guess it works both ways. The transparency of the electronic ledger means increased efficiency. You can project that people won't have to do income taxes anymore because their financial history will be available electronically. The government could simply calculate annual taxes, send you a bill and return a refund or whatever as necessary. The whole process of tax filing could be automated.Daily Bell:
But there are negatives associated with that, too. Right now the potential for anonymity means that governments are at least a little worried about raising taxes too high because people simply won't cooperate and will seek ways to opt out, either legally or illegally. But if all transactions are recorded and transparency is universal, then maybe the governmental incentive to keep taxes at reasonable levels will vanish.Jesse Heaslip:
Possibly, but the kind of transparency we're discussing cuts both ways. Presumably, people would demand similar transparency from government and thus, even with higher taxes, if that happened, you'd get more public efficiency.Daily Bell:
We probably could debate that all day. But on another point, what is going to happen to the dollar as these electronic currencies become more popular? Will it cease to be the world's reserve currency?Jesse Heaslip:
There are certainly those within the bitcoin community who feel that way. On the other hand, there are huge opportunities to work with fiat currencies and there is no reason why electronic currencies and current fiat currencies can't coexist. One can complement the other.Daily Bell:
Presumably there are also more regulations that electronic currency will be subject to.Jesse Heaslip:
Electronic currencies are not going to exist outside of the current regulatory structure, at least not popular ones with longevity. When you look at what happens to places like Silk Road, you can see that. The authorities shut them down. On the other hand, if you are willing to work within the rules of the current structures, then there are absolutely tremendous opportunities. The deals being made in Silicon Valley are getting bigger and bigger and are starting to take place in the tens of millions. The potential has barely been scratched. One out of every 400 people in the US now has a Coinbase account.Daily Bell:
So obviously, from your perspective the future is bright for bitcoin and other alternative currencies.Jesse Heaslip:
Absolutely. We're on the cusp of explosive growth, though within more formal government parameters.Daily Bell:
We'll watch all this unfold with interest. Thanks for your time.Jesse Heaslip:
Thanks for yours.
The Daily Bell
This is a pretty important interview, in our view. We thank Jesse Heaslip for his time and courtesy in sitting down with us.
We have some disagreements with the way bitcoin is evolving but as Jesse points out, people who are in the reality business when it comes to money and investing should face facts rather than letting their own sentiments sway their judgment.
What Jesse is presenting to us is pretty much the truth about bitcoin (as we see it along with him). Just as we have maintained in numerous articles, it is not anonymous – or at least it is rapidly getting less anonymous. Jesse believes the future of bitcoin is entirely transparent. Privacy, generally, as he points out, is basically a thing of the past.
Jesse also paints a picture in which electronic money shall be used in an almost Skinnerian way to incentivize certain behaviors. Again, that's a pretty scary perspective and one we're apt to disapprove of but we can't contradict his perspective. He may well be correct.
Finally, Jesse points out that the future of electronic money is under the aegis of government and that anyone who wants to play in this arena is going to have to play by government rules.
Of course, we tend to believe that bitcoin may have been set up as a kind of monetary false flag to begin with, and that what is occurring now is preordained. Whatever reasons Jesse has for being so blunt and uncompromisingly realistic are known first of all to him and his colleagues, but he has a reason for looking at bitcoin in this manner. He intends to build a business around it.
As for us, our suspicions are pretty much confirmed by this interview. We think bitcoin and other such money may indeed be the future of international finance. Turns out that perhaps IMF SDRs were simply a kind of head feint. Bitcoin may well be where the action is.
But we have reservations about it from a standpoint of free markets and competitive money. It sounds a good deal as if bitcoin will supplement the kind of monopoly central banking status quo that we have campaigned against for decades. It will be an adjunct, not a game-changer, even a reinforcer of the current monetary environment.
Bitcoin has already made many people wealthy and, as Jesse says, its main attraction right now is its frictionless element. It costs almost nothing to send bitcoins around the world. Over time, we have to point out, that may change, as well.
Thanks again, Jesse. Many of our forebodings – which we have received a good deal of criticism for – are confirmed by this interview. The idea that bitcoin may support and expand government fiscal efficiency when it comes to taxes is truly frightening to us.
But again, we've been pointing that out for a long time. That may well be why people like Margrit Kennedy -- a former UNESCO operative – have been pounding the drums for alternative monies.
We've been very clear that we believe this entire alternative anti-usury movement, with its celebration of people like Gesell and Douglas and its anti-freedom and anti-gold orientation, is a kind of elite dominant social theme. Those prominent spokespeople backing this movement often seem like military-intel types and the whole sovereign money idea puts the control of currency right back in the hands of Leviathan. Sure, the "people" are supposed to be issue out the money, but so what? Power corrupts, etc. ...
We should also note that Jesse has a pretty good business idea and is truly positioned at the beginning of a powerful trend. And to our viewers we say: Please respect the message and messenger – in this case, Jesse. He is surely an admirable entrepreneur with an interesting idea, and he has provided us with much food for thought.
Good luck, Jesse. You are obviously a visionary of sorts along with others like you. We just may not be very fond of aspects of the vision.