Since Circle Internet Financial announced their services recently, including no-fee bitcoin “banking”, many in the community have had no shortage of questions about the company, which to date has mostly been shrouded in secrecy.
Company Chief Technology Officer Sean Neville took to blogging platform Medium and said that “…the debut came with more praise than we deserve at this point, and also more venom than we probably deserve.”
One of the first questions Neville answered was regarding invites, and seemingly the lack thereof. Very few people have actually received their beta invite to Circle. Neville explains:
Arithmetic is the short-term issue: Tens of thousands of requests must map to an initial cap far, far below that number (and ramp up to greater volume only afterward). This angers some people. I can understand why; in the debut demos and press, we should have more strongly emphasized how closely we’re throttling the ramp-up. We are not in general release whatsoever.
Neville says that invites are going out to casual consumers as opposed to hardcore crypto-fanatics — given that the casual user is more of Circle’s target. But in time, the platform will be open to all. It’ll just take some time.
Perhaps one of the more interesting questions to come out have been on Circle’s model. The company plans to allow users to acquire bitcoin free of charge, where other services like Coinbase charge a fee.
Says Neville:
We’re interested in the long-term value of digital money, not optimizing for minor short-term profit. We will have future, higher-level products that we fully intend to be revenue-generating, but this first basic product needs to be free. That’s the cost of mainstream consumer adoption.
He adds that fees like credit card interchange fees will be passed on to the consumer, but that Circle doesn’t plan to bring in revenue with their basic wallet service. Rather, the topic of bringing in money comes in later with additional products.
But allowing consumers to purchase bitcoin with their credit cards carries significant risk. Bringing us to the next question: Isn’t Circle opening itself up to a world of hurt by allowing card-to-bitcoin acquisitions? What’s stopping a person from buying the bitcoin and subsequently filing for a chargeback?
Neville says:
We’re willing to assume the cost of a certain level of fraud, though obviously we will need to tweak instant access and IDV to prevent fraud from becoming untenable. Reducing friction for mainstream consumers simply implies high costs in this domain, and we’re accounting for this in our COGS.
This actually plays into why so few invites have been going out. Circle’s trying to “get a good handle” on the fraud-prevention tactics. Again, something that will take time to master.
If you watched Circle’s presentation video, you may have noticed that customer balances are presented in fiat denominations that fluctuate according to the present exchange rate. Some in the community took issue with that, but Neville addressed this, too:
Changing balances are weird for the mainstream consumer; they’re funding an account, not buying a stock. My own sister would probably call support the first time she saw her balance tick up or down. Even if she was “making” money, she’d still be uncomfortable, because she’s a consumer with an account, not an investor in Bitcoin.
He adds Circle has a unique approach in mind as to how they’ll address volatility down the line.
Now let’s talk about insurance, because this was one of Circle’s selling points when they debuted the product last week. According to Neville, Circle has worked hard to get a 100 percent coverage insurance policy that covers all assets (consumer balances and company reserves).
“I believe that insurance, like full reserve audits, will soon be basic requirements for companies like ours, but in the meantime we’re in a period where they’re viewed as features. I think this underscores how early we are in the evolution of this business,” he says.
So – is Circle in it to crush competitors like Coinbase? Doesn’t seem so, but Neville says they do wish to crush competitors not in the bitcoin space (you know, those companies in traditional finance).
Competition is a good thing, and we think we speak for the community when we say that we’re excited to see what comes from this.