Monday 11 May 2015
Bitcoin wallet startup Circle have announced ‘dollar features’. What does it all mean?
Wallet provider Circle made some interesting announcements at the end of last month. One was that a group of major investors including Goldman Sachs and China-based IDG Capital partners had made a $50 tranche of investment. Another was that they would be pushing into the Chinese market. It seems that this will not be a bitcoin initiative, at least to begin with, since the Chinese government has banned companies from accepting or dealing in bitcoin. But, as Circle state,‘China is today the center of innovation in mobile apps and digital finance. We have a lot to learn from them, and we’re excited to bridge the dollar economy to the yuan economy using global digital currency. This will take time, as companies and services like Circle’s must address a complex and evolving legal and regulatory landscape in China.’
Read also: Cubits, the Coinbase of Europe
The approach completes the circle, allowing customers to get bitcoin into the system as easily as merchants convert it back
Whilst the other two announcements might be interesting background to the growth of the bitcoin and digital payments economy, the news of most direct significance to the crypto ecosystem was the announcement that they would be integrating ‘dollar features’ into their wallets. This is a feature we’ve been seeing more and more, as with outfits like Coinapult and Cubits, and it’s one of the key ways that companies will be able to leverage bitcoin’s advantages for international transactions whilst avoiding some of the pitfalls.
‘If customers choose to hold dollars instead of bitcoin balances, they can still pay any person or merchant who accepts payment in bitcoin, without ever holding bitcoin themselves. Circle will handle instant conversion from dollars into bitcoin at the time of the payment. The reverse is also true: customers can accept bitcoin and expect Circle to convert it instantly into dollars in their Circle accounts.’
This is essentially a hybrid system that uses the low costs and fast transactions of the decentralised bitcoin network, with the stability of a centralised dollar account. Deposits are also insured, which will give customers greater confidence after a series of recent exchange hacks.
The real significance is that it allows customers to use bitcoin without having to deal with it, completing the circle with the merchants who accept digital currencies. All the bitcoin transactions go on behind the scenes. This means a Circle customer can purchase something from a bitcoin-accepting merchant – who gets all the advantages that brings – but doesn’t have to worry about exchange rate volatility and security considerations. A similar setup on the merchant’s end serves the same purpose on the other side of the equation.
It’s a ‘bitcoin inside’ type solution that leverages the technology but keeps it simple, safe and out-of-sight for users. Is this bitcoin’s killer app? Maybe, and it certainly can’t hurt.