Bitreserve will be opening its new bank-like wallet and payments platform to some beta users next week.
The brainchild of Halsey Minor, who also founded CNET, Bitreserve is a low-cost bitcoin and fiat currency payments platform, aimed at consumers, where holdings in bitcoin can easily be exchanged and held in one of several fiat currencies.
The service will allow fiat-to-fiat transfers at zero cost between individual members, and a forthcoming API is expected to be integrated with payment processors.
To boost user confidence, Minor says transparency has been made a priority, with professional audits, for example, and a tool that will allow users to construct an exact balance sheet for the company at any point in time.
So we could see just how Bitreserve works, and whether it lives up to the promises, CoinDesk got a log-in to test out the system.
Bitcoin in, bitcoin out
Minor got the ball rolling by sending me £10. He did this by converting some US dollars held in his Bitreserve account to pounds sterling and then sending it to my email address.
In my inbox, I received a message with the welcome subject header: ‘You’ve received £10.00!’. Within the email contents I found a link via which I could ‘claim’ the funds. Clicking this took me to the Bitreserve website to create an account.
What makes Bitreserve different from existing web wallet services is that it has no contact with the banking system.
As Minor says, it’s “bitcoin in and bitcoin out”, meaning a user can only fund their own Bitreserve account by depositing bitcoin. In other words, any new money introduced to the system must enter as bitcoin.
Sidestepping volatility
Bitreserve’s tagline is ‘the end of bitcoin volatility’. That’s a bold claim.
The way it intends to achieve this is by allowing users to convert their bitcoin into any of five major currencies: US dollars, pounds sterling, euros, Chinese yuan and Japanese yen; with each currency being depicted as a ‘card’.
A user can simply click a currency card and transfer the desired amount to another currency. Each transfer is charged at 0.75%, Minor said. This compares favourably to fees of 4.75% for an overseas cash withdrawal and 2.75% for an overseas purchase with a debit card from NatWest, the UK’s largest retail bank, for example.
With transfers between currency cards, the idea is that users can hold their bitcoin in a Bitreserve account, secure in the knowledge that the money won’t disappear, while also being able to cheaply access the funds in a variety of fiat currencies.
Big and bold
Members can send funds to one another at no charge, although, as mentioned above, commissions apply for transactions involving fiat currency conversions.
Like its tagline, Bitreserve’s user interface is big, bold and colourful. It’s also easy to use. Features like transferring and sending funds are clearly marked and can be executed within three clicks from the home page.
Each card also contains a list of all its transactions, with a drop-down menu allowing you to view each transaction on the public block chain.
For example, I sent 0.001 BTC (hey, journos aren’t rolling in it) from my account to a CoinDesk colleague’s Bitreserve account and could soon see the record on the block chain.
Bitcoin rates on Bitreserve are taken from Bitstamp. Product Manager Byrne Reese explained that when a user transfers bitcoin to fiat, the block chain transaction will show the funds being moved to the exchange. The bitcoin is then sold and the fiat is moved into the reserve.
Testing out Bitreserve has been a largely frustration-free experience, with the service appearing to work without a hitch. It will be open to a number of users who signed up for its beta release sometime next week, Minor said.
Reese said that the platform would be open to public access by year’s end, adding that planned updates to the system include changes to the registration process for collection of KYC information.
Plan for partnerships
Bitreserve has side-stepped the potentially difficult part of building a bitcoin business because its ‘bitcoin in, bitcoin out’ model means it doesn’t have to deal with banks. This is unlike end-to-end services such as Coinbase or BitPay, which offer links to bank accounts.
Instead, Bitreserve is offering a complementary service that Minor hopes will be integrated with the likes of Coinbase, via a soon-to-be-released API, for customers who are more interested in spending their coins than hoarding them.
Minor says Bitreserve will act as a “classic reserve”, meaning depositors can park their funds knowing that they aren’t somehow being synthesised into collateral debt obligations, for example.
How will this achieved? Bitreserve will make available “the definitive record” of its obligations to customers in a ledger it calls the “reservechain”. Minor says this will allow users to construct a balance sheet for Bitreserve in realtime, a kind of proof of reserves test that customers can conduct themselves.
The other thing Bitreserve will do is publish quarterly audits, carried out by a Big Four accountancy, so that customers will know that the funds in the reservechain actually exist.
Transparency may be key
The two transparency processes that Bitreserve promises to implement mean that customers will also be able to vote with their funds on one of the main ways the company hopes to make money: by investing reserves.
As Minor told us a recent CoinDesk interview, Bitreserve’s investment decisions will be public, so customers can pull their funds if they’re not happy.
Minor makes lots of bold claims for his new company. If he can pull it off, a platform like this could encourage greater cryptocurrency adoption by blackboxing the potentially confusing aspects of bitcoin transactions, leaving consumers with a simplified interface.
However, just as Bitreserve hopes to work alongside vertically integrated platforms like Coinbase, it could just as easily face stiff competition from would-be partners who could implement similar exchange features.
Additionally, with protocols like Ripple fighting for traction, for example, multi-currency accounts are already available, and competing startups like Circle are surely working to make sure their services are as unintimidating as possible to attract the largest number of users.
It’s Bitreserve’s plans for radical transparency that might give it an edge, but those are precisely the sort of plans that are so difficult to execute.