Crypto Insider welcomes Akin Fernandez again to discuss a number of things: the concept of "Ethical Bitcoin", his startup Azteco, and the relationship between State and Bitcoin.

The image featured above is a mural from the beginning of the film Idiocracy.

The image sums up the difference between the Azteco/Ethical Bitcoin world and the computer illiterate world of KYC/AML: the "Idiocracy World". Our world on the other hand is a future of monorails, prosperity and fantastic technology. The KYC/AML future is Brawndo.

Akin Fernandez AKA “Beautyon”

Crypto Insider once again welcomes Akin Fernandez (also known as Beautyon). This time we discuss his current project that is aiming to feed hyperbitcoinization - Azteco and all things related to it, including the concept of "Ethical Bitcoin" and the relationship between State and Bitcoin. Our previous conversation with Akin was on net neutrality and can be read here.

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For the readers, can you sum up how Azteco works?

You go to your local supermarket phone or corner store, and buy an Azteco Voucher, in the same way that you buy a “Top Up” voucher for your “Pay as You Go” mobile phone. You put the 16 digit voucher number on the voucher into the Azteco website, along with the address you want the Bitcoin sent to, and then seconds later, the Bitcoin arrives. Everyone who tries Azteco gasps when they realise how simple it is, and they ask, “Why can’t everything be as simple as this?”. Every time we hear this, we know we’re on the right path.

This delivery model is correct, and Azteco services a billion dollar addressable market. Around 70% of phone customers in Western Europe and China use prepaid SIMs with the figure rising to over 90% for customers in India and Africa. 23% of cellphone users in the United States were using prepaid service as of 2011, a share that’s expected to rise to 29% by 2016. Each one of these 350 million users is a natural Azteco user;  they do not have bank accounts or credit cards, are used to mobile top ups by voucher or refill card, and all of them use remittance services to send and receive money. They will have no problem understanding Azteco, and we will serve them all, opening the world of Bitcoin powered e-commerce to them. All they need is Samourai Wallet to send the Bitcoin to and they are instantly onboarded.

How would you sell someone on the voucher concept over, say, an ATM/p2p transfer approach?

We know this model is superior to the ATM model for several reasons. First, from the vendor perspective, we don’t have to manufacture ATMs and deliver them. We can set up new vendors in minutes, anywhere on Earth, and the vendors can use existing POS systems to issue our vouchers. Furthermore, if our vendors have multiple outlets, they can use our Sub Vendor system to turn each of their stores into outlets at zero extra cost.

If a vendor with ten stores wants to sell Bitcoin with ATMs he has to buy 10 ATMS. With Azteco, he doesn’t even have to buy one, and can sell Bitcoin through all of them. Azteco vouchers can redeem to any Bitcoin address, and you don’t have to physically appear in front of a machine to buy a voucher. All of the advantages and ease of use with Pay As You Go Top Ups transfer 1:1 with Azteco.

We are the easiest, most frictionless of all Bitcoin services. Compared to LocalBitcoins, that has very large volumes, Azteco is very easy, and has a consistent UX. We will easily be able to match Local Bitcoin’s volume, and create a high level of brand loyalty. Very soon, micropayments are going to be  widespread with Lightning, The vast majority of Bitcoin users will be buying small amounts of “Disposable Bitcoin” for day to day use in services on line, in the same way that they top up phones as and when needed.

I understand you’re London-based. Have you faced any challenges from UK financial authorities regarding the transmission of Bitcoin?

Britain has many Bitcoin companies operating in it, including Blockchain.info. It is a country full of expertise and great connectivity. We don’t treat Bitcoin as money, but instead, correctly treat it like a phone top-up. We don’t have custodial accounts and so we are not subject to the rules required for custodial businesses. It is very important to characterise Bitcoin correctly. When you make a Bitcoin transaction, you don’t transmit anything; you make a digital signature on the Bitcoin database, that is verified by others who check that the signature is valid. This is in no way similar to transmission of anything, and Bitcoin is not money, it is a database. Thankfully the understanding of this is spreading, and we’re finding we don’t have to do as much explaining as we used to.

Everyone should try to use the correct terms when attempting to describe how Bitcoin works, and avoid analogies, because it’s poor analogies that spread confusion. There is no such thing as “transmission of Bitcoin”, and companies that use Bitcoin are not “Money Transmitters”. Most importantly, Bitcoin is not money (even two judges in the USA have determined this in separate jurisdictions), and it isn't ever transmitted. As I’ve said several times, the country that accepts the reality of Bitcoin will be set to make a fortune and secure the prize of being the centre of global Bitcoin development and entrepreneurialism  —  the alternative is to signal that Britain doesn’t want anything to do with the most significant innovation since the internet headquartered in London.

Complaining that all tech companies are in Silicon Valley is meaningless. Britain has the chance to capture Bitcoin and secure it’s global leadership position for decades, or they can cede this to another country. It is entirely up to them. Either way, Bitcoin is going to happen and totally dominate, and somewhere is going to be the centre where all the brains and money — and revenues — are concentrated.

Are you able to comment on a roadmap?

I can say that once we start rolling out, our spread will be solid and constant. Our outlets will spread quickly, as each vendor can open sub vendors. We’re very excited because we will not only sell a lot of Bitcoin, but in doing so, we will help change and correct the perception of Bitcoin. This is very important, because a correct perception will accelerate Bitcoin’s spread.

You’re well-known on Twitter for somewhat anti-statist views. Can you see Azteco rolling out without too much interference from governmental bodies?

I am anti-illogic. It is not logical to claim that Bitcoin is money and should be subject to new laws or the existing laws to do with money, but the in game monies used for decades are not. Bitcoin is identical to the FarmBucks in FarmVille, and all the arguments people mount to claim that it is different are all prosaic, in the form of run on sentences, and avoid any mention of the actual truth, which is Bitcoin is a database containing text.

You can’t claim to be running a free country where you have guaranteed rights, but then say that publishing random numbers on databases requires special permission. This is part of what makes Bitcoin so fascinating; it manages to insert its utility into the protected space reserved for speech, where it cannot be touched without completely invalidating the rights guaranteed in all properly run countries.

Now, if you are unfortunate enough to live in an improperly run country where you have no legal protection of your inalienable rights, then the State can literally “ban” anything; there is no pretence of rights or the rule of law. However in countries where there is a pretence of the rule of law, they can’t make an exception for Bitcoin where your rights are suspended. Certainly in the USA (and the process that leads inexorably to this conclusion has already started) the Supreme Court will rule on this matter, and there is no way the Court can find that Bitcoin is money and maintain that the Constitution is in force as intended; the two are mutually exclusive.

Early in Bitcoin’s history, a small group of misguided people insisted that Bitcoin needed “legitimacy” (one of several things they claimed it needed; adoption, legitimacy, liquidity and other things). In order to confer this illusory “legitimacy” to Bitcoin, some very foolish people in the USA mistakenly believed that registering with FinCEN would confer legitimacy to their start-up, which no longer exists, despite having 11,000 outlets (another example of why outlet counts are meaningless).

I argued then that this was a huge mistake, and that Bitcoin was not money at all, and that they should concentrate on offering a good service, rather than trying to signal to people that they were virtuous. Had these naïve people acted properly, Bitcoin (in New York) would not have suffered the BitLicense or the catastrophic misdirection of perception that has caused many people problems. We now know that this position is 100% correct; look at how the Token industry has gone out of its way to characterise what it sells as nothing to do with money or securities. They are very careful not to conflate what they do with financial services, and not a single Token has registered with the SEC. They now understand that registration does not confer legitimacy, and is the kiss of death.

It is the experience of BitLicense that educated everyone not to run to the State for legitimacy, but instead provide a service people want. This is not to say that services (especially Etherium Tokens) will all succeed  —  what is important is the principle. The SEC will never guarantee or reimburse any token holder if the project fails to deliver, and so their involvement is literally worthless. They don’t have the technical expertise to validate any software project and so they can’t even verify claims that are directly provable in the source code (where it even exists). The state slows down the rate of iteration; we now know that  The Token Frenzy was just that; a frenzy where most of the offerings were and are junk.

These experiments will not be run again, because the market has been immunized against them. The cost of discovering all of this is far less than it would have been had the SEC slowed down the process of launching and experimenting, and charging millions per token project in registration “TokenLicenses” and other worthless nonsense.

Azteco and other correctly designed businesses on the other hand, are very simple and do only one thing. We don’t promise returns, hold anyone’s Bitcoins, or do anything related to investment or banking. We simply write to the public database in return for a fee. It is exactly the same as mobile phone companies selling access to the GSM phone network, where you can push voice or text data to any other number on the network. The Pay As You Go GSM vouchers you buy from mobile operators are not usable outside of the mobile operators network GSM network; exactly as Azteco vouchers are not usable outside of our service, and Bitcoin is not usable anywhere but inside Bitcoin. Once you start thinking about Bitcoin in the correct way, and with precision, everything becomes clear, and the business models, obvious. Now with Lightning on the way, our model will become even more obvious.

Finally, everyone is going berserk about how much information Facebook and Google stores on it’s users; it is pure Doublethink for anyone to ask (quite wrongly and irrationally) for KYC/AML in Bitcoin, but rail against Facebook and Google for storing personal information. Anyone who is for KYC/AML whilst simultaneously complaining that Facebook and Google “know too much” is very irrational; they are asking for information to be stored and for information to not be stored in services that serve only data.

Think about it. Bitcoin micropayments are now here. People will be paying for every conceivable small purchase from single articles in newspapers to cans of CocaCola to bus tickets. There is no way that the anti Facebook/Google brigade would want that intimate shopping and reading information to be known and stored by anyone, therefore, they should be for Ethical Bitcoin, that prevents exactly that correlation and data mining of individuals through analysis of the block chain and who controls what addresses. The illogic of the hysterical anti-Bitcoin misdefiners, is easy to tear down, and in the long run we will win this argument because they have no rational, logical answers.

What are your favourite projects in Bitcoin?

  • Samourai Wallet
  • Bitcoin Core
  • Lightning (and associated projects)
  • Eclair
  • OpenDime
  • Ledger
  • Blockstream Satellite
  • OXT
  • The Elements Project
  • BitID ← (super interesting)
  • and others…

All of these projects (and some I did not mention) are all classifiable as “Ethical Bitcoin”. They all approach Bitcoin correctly, make the correct assumptions, don’t abuse their users and are beneficial. A voluntary association modelled on Underwriter’s Laboratory will be very useful going forward as a standard bearer and resource for people working in Bitcoin or using it, encouraging best practices and other good things that benefit everyone.

As successful companies coalesce on best practices, the market will be seen to be orderly, protective of consumers and non threatening; Bitcoin is not a threat; it is an unprecedented opportunity to help billions of people and solve many problems, simplifying processes, eliminating payer fraud, facilitating the inclusion of billions of people, all of which will have cumulative effects that we can scarcely imagine. Thanks to one publicly shared database that can fit on a desk. Astonishing!

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Law graduate and crypto journalist.
Twitter: @MattoshiN

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