Settling a tab in crypto tokens?
While the idea may seem far from mainstream, it’s actually at the center of a deal that finds the non-profit behind the world’s eighth-largest blockchain, the Stellar Development Foundation, funding the co-founders of OKCupid and their new cryptography-centric startup, Keybase.
Revealed exclusively to CoinDesk, Keybase has accepted an undisclosed investment from Stellar. But while the terms of the deal aren’t known, the startup wasn’t shy in boasting about the alleged size. Stellar was so keen on the concept, the company now says it won’t need to pursue a Series B round at all.
And that’s no small feat. Founded in 2014, Keybase is built around improving end-to-end encryption, a goal for which it has secured $10.8 million in venture funding in a round led by Andreessen Horowitz.
Thursday’s deal, however, isn’t a typical VC round. (As evidence, Stellar isn’t taking a seat on the Keybase board.) “It’s a very friendly and mutually beneficial arrangement. It’s significantly less formal than a traditional venture round,” Keybase co-founder Chris Coyne explained.
But if the idea and its participants sound surprising, Coyne, who helped launch the well-known U.S. dating aggregator in the 2000s, sees it as a continuation of years of interest in cryptocurrencies.
In fact, near the end of his time at the matchmaking giant, Coyne and his partners made OKCupid one of the first well-known tech companies to accept bitcoin payments.
Coyne recalls:
“What I realized while this integration was happening was that people had to go through this huge effort to acquire this bitcoin, and then we were just taking it from them. It never felt like anything was really happening on the consumer side.”
Now as a co-founder at Keybase (alongside another OKCupid cofounder, Maxwell Krohn), Coyne believes that his company has built an infrastructure that could accelerate person-to-person payments through work with stellar and the use of its cryptocurrency.
To begin, Keybase is accepting the funds in what it jokingly called “dirty fiat,” though over time, it indicated it will enable customers to hold value in Stellar’s cryptocurrency, lumens.
Product ahead
Circling back to the big idea, though, it’s easy to see the fit for both parties.
Since even before OKCupid’s bitcoin integration, Coyne and his partners have been excited about the potential of crypto, but disappointed to see it even still largely used as a store of value or for speculation.
“It feels like we’ve almost given up on this story of people sending cryptocurrency to each other,” Coyne said. “What excites me about Stellar is that it’s insanely fast, transaction fees are close to zero and the low energy consumption is exciting to a lot of people on our team.”
But there’s more the ideology supporting the deal.
The heart of Keybase’s technology is a central repository of public keys, so that data can be encrypted to all of a user’s devices without any need for them to handle cumbersome PGP keys (or even see them).
Keybase already allows users to send encrypted chats, files and even run encrypted Slack-like collaborations, all end-to-end encrypted, across multiple devices for each user. Private keys stay on each device that generated it, so the user never has to trust Keybase itself.
In this way, whatever Stellar is investing in Keybase to build for the lumens ecosystem, Coyne seems to hint that the idea is bigger than a mere wallet.
He said:
“There will be a reveal later this year when the product launches. We will definitely make person-to-person cryptocurrency transactions a lot easier.”
Lumens’ features
Still, Stellar’s lumens could bring additional advantages to Keybase users.
One feature of lumens the team likes is its ability work as IOUs for fiat, backed by institutions (such as banks) that can be transferred between users.
Using blockchain, these fiat-backed lumens could easily cross borders, so a French user could pay in euros to a British user who would receive pounds, all for tiny fees subtracted from the transaction.
But while most tech companies would have a hard time backwards-engineering a crypto integration effectively, Keybase can, and the reason goes back to the early interest of the founders in its core ideas.
“Back then, I imagined this world where people had wallets, cryptocurrency wallets, and we would send small amounts of money to each other,” Coyne told us, concluding:
“It’s always felt like something we could do a very good job on.”
Payment app photo via Shutterstock.