Meet the Trader 05: Gavin Andresen, Clearcoin

AndresenMeet the Trader is a series of interviews conducted to explore the people behind the Bitcoin project.

Episode 05:  Gavin Andresen of ClearCoin, Bitcoin Faucet and Bitcoin.orgGavin studied Computer Science at Princeton and started his professional career in Silicon Valley.  ClearCoin is an escrow service that helps to mitigate the risks involved with Bitcoin transactions.

{ Introduction }

No matter how you look at it, Bitcoin is an interesting topic.  The currency has unique properties that threaten multiple paradigms, and its momentum as a store of value is undeniable–as the unit-value has risen astronomically over the last year.

That’s not to say there aren’t significant challenges.  While the young protocol seeks legitimate recognition, it is also firmly rooted in an open source community of developers that may not appreciate that level of formality.  As a project, Bitcoin is just now hitting adolescence and is in need of a parent.

Gavin entered the fray last June.  He now heads as a man of the people–one whose reputation was formed by checking in at Github and validated when he earned the trust of the legendary Satoshi Nakamoto.   Beyond being an advocate for Bitcoin, he has founded a company that has a revenue model aligned with the fate of Bitcoin.

His company, Clearwing, hosts two essential services:  The first is a non-profit endeavor called the Bitcoin faucet, which donates a few bitcents to those new to Bitcoin.  (Donating to the faucet is as easy as sending coins to the address at the bottom of its page.)

The second service, Clearcoin, addresses a pressing need within the Bitcoin community: the need for escrow.   That is to say, how can commerce flourish when a seller isn’t sure if the buyer actually has the money for the transaction?  (…until after his goods are shipped and recieved.)  As you could imagine, without escrow, doing business in BTC is awkward to say the least.

The key behind any escrow service is trust.  Gavin may be a man worthy of it.


I know that trust is hard to gain and easy to lose, and an escrow service is really all about trust.  So I suppose I’d say ClearCoin is maturing slowly, in small, careful steps.

Gavin Andresen:


{ Interview }

Spencer: What’s the story behind Clearwing Software? Is it your livelihood?  Has the ClearCoin offering made an impact on the company’s bottom line?

Gavin: I created Clearwing Software shortly before launching ClearCoin for legal and accounting reasons.  It is a startup, and hasn’t generated significant revenue yet– the entire bitcoin economy needs to grow before there will be enough transactions for ClearCoin to be profitable.  It is my full-time job, but I’m tapping savings from previous jobs and entrepreneurial ventures to pay my day-to-day expenses.

Spencer: Is entrepreneurship in your blood?  Could you share a bit about your previous experiences?

Gavin: Maybe all of the moving around when I was a child made me more open to  trying new things and taking risks.  Working in Silicon Valley for eight years after college immersed me in an entrepreneurial culture, and gave me enough financial security so I could pay off my student loans and start a little two-person software company.

Like most startups, it flopped– we created software for a market that we thought might take off (360-degree-wraparound panoramic photography)… but didn’t.

My next venture was more successful– I joined a Western Massachusetts startup doing an early voice-over-the-Internet application (Roger Wilco), which was sold to a Silicon Valley company before the .com implosion.  After that was All inPlay, a socially-conscious startup that never found a good way to market online games to blind people and their sighted friends and family.

Spencer: How did you get involved with Bitcoin and eventually become the head at  What kind of leader do you aspire to be?

Gavin: I first heard about Bitcoin in May of 2010.  I was looking for a new
project to tackle, and Bitcoin matched several things I was interested
in– economics, peer-to-peer technologies, and cryptography.  I started by reading Satoshi’s paper, all of the messages that had been posted on the bitcoin forums, and even the initial discussions sparked by Satoshi’s announcement of bitcoin on the cryptography mailing list. Back then it was possible to read everything that had been written about bitcoin in a day or two.

I decided the Bitcoin Faucet would be a good, easy first project, so I
implemented it and then spent $50 to buy 10,000 bitcoins and began giving them away.

I submitted some patches to Satoshi for various features that I thought were missing from core bitcoin and started proposing new features on the forums… and then a few months ago Satoshi asked if it would be OK if my email address was listed on the “Contact Us” page.

I didn’t realize he was planning on removing his email address!  So I became the de-facto technical contact for bitcoin.   I’ve had lots of previous experience acting as the “chief technical officer” for startups, although never for an open source project before– I’m learning as I go.

As for what kind of leader do I aspire to be:  one of many, I hope! When I talk about the Bitcoin project I try to suppress my personal political and business agendas so I give an accurate impression of Bitcoin.  And I try to keep an open mind when presented with new ideas, even if the idea starts with “Bitcoin can’t possibly work because…”  I would like to see Bitcoin leaders from different
countries, cultures, and political philosophies talking about why it is a good idea.

Spencer: I could imagine being the head of an open source project is kind of like herding cats.  How does the heirarchy play out within Bitcoin’s development community?

Gavin: Compared to a business, there is almost no hierarchy; anybody can
contribute code, and my policy on who has write access to the git repository has been “whoever contributes lots of patches and is willing to help.”  With software development it is easy to see who is creating useful stuff– those are the people who naturally become the leaders of the development community.  The “cat herding” aspect comes up when it is impossible to get everybody to agree on which stuff is useful and which stuff isn’t, and that is where the leader or leaders
sometimes have to step in and make a decision so the project keeps moving forward.

Spencer: What have been some of the interesting observations made while operating Clearcoin?  How has the product matured since its debut in December?

Gavin: The most difficult thing for me has been balancing work on core Bitcoin, work on ClearCoin, and work on the business side of ClearWing Software.  I need Bitcoin to be used more for ClearCoin to really be a viable business… but maybe an easier-to-use ClearCoin would help make that happen.  And on the business side, getting investors and seed capital would let me grow the company faster… but maybe I should make the product better while giving the Bitcoin economy time to grow.

I’ve been extremely cautious with ClearCoin, because I know that trust is hard to gain and easy to lose, and an escrow service is really all about trust.  So I suppose I’d say ClearCoin is maturing slowly, in small, careful steps.  I’m in the process of creating an API for it so websites and tools can be built on top of it.  In hindsight, I should have built the API first, because it has been very useful for creating rigorous automated tests to make sure I don’t break anything as I add
new features.

Spencer: Escrow seems especially needed with Bitcoin because of the irreversible nature of the transactions.  So ClearCoin is making Bitcoin a more tenable currency for traders, but there is still a risk that funds won’t be released to the seller.  Could you explain ClearCoin’s “charity escrow” implementation and how it attempts to deal with this risk?

Gavin: The person sending the bitcoins can create “charity escrows” which will donate escrowed coins to charity instead of refunding them if the transaction goes bad.  That gives both people the same incentives and risks– there is little incentive for the sender to try to cheat because they will lose their bitcoins whether or not they release the coins.  And there is little incentive for the receiver to cheat, because if they do they won’t receive the coins, either.

I really like the idea of some good (donating to charity) coming out of a bad situation (a transaction that didn’t go as planned).

Spencer: One of the principle concerns that newcomers have when they learn about Bitcoin is that their wallet files are only as secure as their computers.
Are there any steps being taken to improve the Bitcoin implementation as it relates to this issue?

Gavin: Making the wallet secure from ‘casual theft’ by requiring a password to send coins is high on my priority list for Bitcoin, and Jeff Garzik has an initial implementation to get the discussion going for how, exactly, that should work.

However, there is really nothing anybody can do to prevent a virus or trojan from stealing your coins if a compromised computer is the only device you have for sending bitcoins.  Malware could lie in wait on your system and discover your wallet password the first time you go to send coins.  The only way to solve that problem is to get some other device involved– for example, I could imagine requiring that your computer rendezvous with an app running on your cell phone to send bitcoins, requiring you to confirm the transaction on both devices
before they’re sent.  Assuming the malware didn’t manage to infect BOTH your computer AND your cell phone, that could be secure.

“Rome wasn’t built in a day,” though, and the first step is to at least make it much harder for somebody to sit down at your computer when you’ve stepped away and emptying your wallet by sending themselves your coins.

Spencer: As one who has started a Bitcoin service of your own, how did you frame the pertinent legal issues as they related to your business?

Gavin: I’m reluctant to talk about specific legal issues and regulations,
because I am not a lawyer and I know there are laws and regulations
about giving legal advice.

I think it is safe for me to say that I’m lucky be in Massachusetts
instead of California, because the regulations for escrow companies in
California “requires a manager who possesses a minimum of five years
of responsible escrow experience to be stationed at the Licensed

Spencer: One could say that you have a finger on the pulse of the Bitcoin economy, as you have a sense for the volume of trades.  What do you regard as the primary impediments to a bustling, high volume bitcoin economy?

Gavin: I think there are three major impediments right now:

First, it is still too hard to purchase bitcoins.  CoinPal is a great service for purchasing small amounts of bitcoins, but we really need a convenient, legal way for new people to purchase several hundred to a few thousand Bitcoins.

Second, it is still to hard for website owners to start accepting bitcoins.  I think that problem will get better soon as people gain experience doing it and, hopefully, hire themselves out so website owners can concentrate on selling their products or services and not worry about whether they should run bitcoind on their web server or which shopping cart interface software and E-wallet service they should use.

Third, Bitcoin has to find initial market niches where it is significantly better than existing solutions.  I don’t think being less expensive than (for example) credit cards will be enough on its own to convince consumers to start using bitcoin instead of dollars, for example.  Maybe one initial market niche for bitcoins will be small business owners who are very aware of how much credit card transactions cost, are tired of paying chargeback fees or bounced check fees to their banks, and so decide to start using bitcoins to pay other small business owners for products and services.  I don’t think there is any way to predict in advance what the “killer applications” for bitcoin will be, so I expect to see a few uses take off while a lot of others don’t.

Spencer: You hit upon an exciting point: there is much room for Bitcoin growth internationally.  To be a global currency, there will need to be “Gavin’s” for the different subsets. Consider you are a member of the press in Brazil and want to talk to a “major participant” of the bitcoin project in Brazil. Where does one even start? Then consider the same question for China, India, Pakistan or any of the 150+ nations that should be getting on board. (Question from Bitcoin News)

Gavin: Martti and I recently set up a “
mailing list for press inquiries, and as we get inquiries we’ll try to figure out who would be good people all over the world to talk to reporters about Bitcoin.  However, the first person to setup an exchange site for Bitcoins to/from Brazilian Reals or who creates a popular Brazilian Bitcoin information web site will probably be the first person reporters in that country talk with, and the first person we’ll direct them to.

Spencer: As far as Clearcoin’s net profits are concerned, it seems like a high margin business with very low fees.  How much will it need to scale in order to be a big money maker?

Gavin: The entire bitcoin economy needs to be much bigger for ClearCoin to
start making money and paying for all the time I’ve already invested–I’d estimate 50 to 100 times bigger, although I have to admit I haven’t bothered writing a business plan with projected growth rates and estimated revenue.  From my experience, and from the research I’ve seen, successful entrepreneurs don’t make grand five year plans; they take advantage of opportunities as they arise.  I won’t be surprised if a year from now ClearCoin looks and works completely differently from the way it looks and works today.

Spencer: What’s the runway look like for ClearWing?  (How long have you given yourself for the service to take off?) Are you in it for the long haul?

Gavin: I will give it two years, and if it isn’t taking off I’ll either gracefully shut down the service or merge with a larger Bitcoin service that could use an escrow solution.  I plan on sticking with Bitcoin-related projects for as long as Bitcoin is taking off, though, so expect to see other projects from ClearWing Software even if ClearCoin isn’t the success I hope it will be.

Spencer: There seems to be quite a bit of academic interest surrounding Bitcoin at George Mason University.  Are you aware of any other recent developments in the academic community?

Gavin: I haven’t heard of anything– I have a Google Scholar alert set up so I’m told when academic papers that mention bitcoin come out, and there have been only a handful so far.  My wife is an academic, so I know how long the academic process can take– create a grant proposal, submit it, wait six months or more for it to be approved (or not), then find graduate students or hire post-docs to help with the research which can take a year or two or four…

Spencer: You talked a bit during your EconTalk Podcast about Satoshi and his “benevolence.” From the community: (Blitzboom) Would you like to meet Satoshi, and what do you think of him as a person?

Gavin: Sure, I’d like to shake Satoshi’s hand and congratulate him on creating what I think might transform the world’s monetary system.  I can’t really speak to what kind of individual he is– all of my conversations with him have been strictly about Bitcoin.  He’s obviously extremely smart and very driven; it is astounding how many details he got right when designing and implementing Bitcoin.

I hope there are projects in the academic pipeline to study Bitcoin that I just don’t know about.

Spencer: Thanks Gavin for doing the interview!

Gavin: You’re welcome!


I’m proud to announce that comments for this blog will now be hosted at witcoin!  If you would like to leave a comment or help to support this author: Comments.


If you would like to be interviewed, please contact me here.

For those of you that have yet to build your service, remember to tell me when you’re finished!


Meet the Trader 04: witcoin, Necrodearia

Meet the Trader is a weekly interview I have started to help the providers of the Bitcoin economy gain exposure.

witcoin, Bitcoin meets content submission

Episode 04:  necrodearia (aka “mizerydearia”) of witcoin .

This is the story of a unique idea and the person behind its early development.

{ Introduction }

It’s a simple idea: witcoin is a socially driven content site like Reddit, only that when a user “replies to” or “upvotes” content–that user is contributing a fraction of a bitcoin to the author of the post. (It costs a small sum for the author to make the original post as well.)

This way, each community member has a real stake in what he or she says.  witcoin is not a zero sum game because there’s both an incentive for users to contribute quality content and a big reason for spammers/trolls to stay away.

I was drawn to this story because witcoin is a different species of web service.  It exists in this kind micro-micro-payment space.

For example, in replying to a particular post I actually made the smallest transaction of money I have ever made in my life. (Here is the link.)  My experience only validated what I already believed: that witcoin is opening the doors to a whole new arena, lighting the way for what could be the world’s first true micro-micro-economy.

As with any social site, there is the chicken and egg paradox and it goes like this:  to have users, you need content — but to have content, you need users.  witcoin is on its way to overcoming this issue, with hundreds of users, a fundamentally different contribution model, and a lead developer focused on improving the product.  It’s only a matter of time.

A couple final notes on witcoin:  1.)  Its log-in/sign-up implementation could not be simpler or more accessible.  Using OpenID, logging-in (“getting wit it”) is a breeze–the user doesn’t even need a username/password.  Web app developers take note.  Pretty slick.  2.)  It recently added an option to include charities in the distribution of proceeds, an interesting idea in and of itself…

mizery, necro:

The man (or woman?) behind witcoin, “necrodearia” (aka “mizerydearia”), is a creative coding beast, and has churned out so many Bitcoin projects that his servers can’t host all of them simultaneously (lack of resources).

In his own words (from the interview below):

My focus for witcoin is to create a platform that allows users to profit from their participation.  I think that is the next step for community-based sites that we’ll see grow over the next few years.

But necrodearia’s roots extend beyond witcoin into a wide range of other contributions.  There are so many clients/bots/services he’s conceived; one could say that he’s the “baby-daddy” of the Bitcoin community.  It also makes him one of the community’s most dedicated and steadfast contributors.

Necro’s focused to the point of having a lopsided and slightly ironic life.  He’s smart but broke.  He’s socially withdrawn but the operator behind a social content sharing site.  I give you, necrodearia:


Spencer: So “necrodearia” (aka “mizerydearia”), who the hell are you?  Where are you from?  What’s your background?

Necro: Hmm… I am …  I’m not sure who I am.  This type of question is always difficult for me.  Perhaps I can define myself by my experiences, which happen to be primarily sitting in my room (when I have one, which I do for now) at my computer either working on web development and other developmental activities or idly and enjoyingly surfing the Internet, reading amongst various other user-generated content type of sites.

I am from Milwaukee, WI, which happens to be where I am currently staying, existing, just after living in Appleton, WI for about six and a half years.  My history consists of primarily sitting at my computer desk and actively playing around with scripting, web development and sometimes games.  I used to play games quite a lot as I was younger.  Now I try to focus on more productive things.  I try, but I occasionally fail.  And if I’m not playing a game, I’m instead surfing the Internet for something amusing or entertaining, which has had an influence in my excitement for establishing witcoin as it is.

Spencer: What are your personal drivers?  Monetary gain?

Necro: Hmmm… I am not so sure.  It must be some kind of passion.  I would love to establish success from the site.  However, I kind of strive for a minimal influence of monetary gain by focusing the profit-sharing to include participating users as well as allowing for charitable donations to participating organizations and charities.  I guess what drives me is success.

I would love to become successful and not have to be concerned about struggling, but I don’t want to establish success in a way that stems from or promotes greed, evilness, lying, cheating, stealing, corruption, control, power, slav…oops, I’m rambling.

Spencer: How do you think of witcoin?  A project, a business, other? And how does that fit into your vision for witcoin?

A penny for your ideas.

Necro: Well, before and at the time that I began working on the site, I was working on a few project ideas, primarily dedicating all or most of my time towards working on them.  The same has been true for witcoin, in which I have established more passion and effort to work on and establish.  It is a kind of project that I would like to establish successfully not just for myself, but for the participating community, of which there are about 200 users so far.  In a sense, I consider it as a kind of job or responsibility:  a responsibility to continue establishing and developing the platform so that the community’s investments are worthwhile and beneficial to them.

Spencer: You are a man of many Bitcoin projects (IRC Bitbot, Stats Control Panel, MtGox Market Bot,, and the Bitcoin Gentoo Ebuild).  Two questions:  What got you so involved with Bitcoin?  What caused you to settle down with witcoin?

Necro: Well, as I first encountered an article about Bitcoin, I became instantly excited, participating like many others by running Bitcoin miner and generating Bitcoins.  However, I additionally began using my self-established skills and interests to contribute towards the establishing Bitcoin community in ways that I enjoy.

Initially I established running an IRC bot and combined it with working on a series of statistical and informational web pages. Initially for the IRC bot I expanded developing single-serving pages displaying real-time data which users could monitor in their web browser.  A website allows for the display of more data than is suitable for an IRC environment.

When I first ran the Bitcoin client (I think version 0.2.0) I ran the Windows version using wine.  The Bitcoin client was fairly unstable and occasionally crashed causing wallet file corruption a few times.  I wasn’t able to use the linux binary in my gentoo linux environment.  So, I began learning how to write an ebuild for gentoo portage and came up with this.

After having generated some Bitcoins and also receiving various donations for my developments/contributions, I began playing with the market at Mt. Gox.  I wrote a bot using Snoopy to buy and sell for me, although, it wasn’t very profitable and I ended up losing more than I made.  Until then, most of my ideas and efforts were by myself.

[Critical connections were made that would lead to more projects and then witcoin.]

In September of last year I responded to one of noagendamarket‘s posts looking for someone to help establish a Bitcoin business directory website.  [This led to further project ideas.]  At first the projects were simple kind of like proof of concept types of sites such as which allows users to edit the content on the page by paying a Bitcoin amount greater than or equal to the last user that submitted content.  Then I began working on a project that was more involved and in depth, Pizza4BTC, which was meant to be a pizza exchange market.  I haven’t finished it yet, but someday I would like to rewrite it.  I had initially established it using Drupal, and have found the CMS to really show how bloated and slow it can be for data intensive types of websites.  At one point and for weeks I had grown quite frustrated from the vps becoming inaccessible due to running out of memory from only about six simultaneous browser tabs to edit content nodes.  I had eventually learned to edit only one or two nodes at a time, but later decided or realized that if I were to establish the site successfully that I would have to prepare a more efficient environment/platform….

Just at the end of last year, “noagendamarket” (IRC nick) blurted out one of his ideas,, and I instantly recognized how exciting and amazing the idea would be.  At first the idea was a kind of question and answer site.  The idea was very similar to one that I had previously, even before encountering Bitcoin.  The idea or focus of the site has since evolved into a user-generated content type of site and I began to establish the idea of rewarding users for their content.  theymos helped me to establish the idea of distribution of profits; e.g. the cost of upvoting being equally distributed to all previous upvoters and the poster.

Armed with that idea and my excitement and determination, I dedicated all of my time to work on the site.

Spencer: In your own words, what does witcoin bring to the content sharing model?

Necro: As a user-generated content site, witcoin brings the opportunity for users to establish profits from participating in trending and hot topics, but also the opportunity to lose from participating in dying or unpopular topics.  This helps to minimize undesirable spam.

It brings in all sorts of things.  [hehe]

Thanks to “noagendamarket” (IRC nickname) for pointing out the recently submitted article on Social networks: “We’ll take data as payment.”  I think there is a noticeable distinction between social networking sites and user-generated content sites.  Both allow for user-generated content, but user-generated content sites focus less on private or personal content and more on providing awareness of trending or hot topics.  I recognize that witcoin’s profit sharing model may help to reestablish using money instead of user data as payment.

Spencer: Do you think of witcoin’s struggle as “Reddit vs witcoin?” How do you frame the competition?

Necro: Not really.  I am a fan of Reddit and also StackOverflow and have allowed their influence to help shape witcoin.  I do not consider or focus on other community sites as competitors.  My focus with witcoin is not to compete with existing sites, although there is some overlap in functionality and style of content which provides that opportunity.  Instead, I am interested in focusing on making it easy for users to profit from their content from within the environment of the site.

Many bloggers or users that submit content on user-generated content sites may not establish any profit or get paid for their submissions (content or writings).  My focus for witcoin is to create a platform that allows users to profit from their participation.  I think that is the next step for community-based sites that we’ll see grow over the next few years.  For now, I don’t think this type of idea exists at other sites.  I imagine at some point other sites will crop up providing similar ideas or implementations and additionally existing community sites will integrate profitability from participation in some fashion.

Spencer: Are you working on witcoin full time?  How is it financed?

Necro: I think it may be okay to refer to witcoin as a job.  Otherwise, I don’t have a job.  I also have no money (other than some bitcoins and witcoins).  And also recently I have been homeless and struggling to continue working on projects, not to mention other things that I normally took for granted.

As stated in my previous answer, working on witcoin, or working on Bitcoin-related projects in general (and currently dedicating my efforts solely to witcoin) must be some kind of passion, because even through struggling to survive, I still managed to find a way to continue working on projects and developing witcoin.  However, currently I am being supported by my Father, but only for living expenses.  I am unsure how much longer that will last though.  The site and projects are funded entirely by noagendamarket.  He has funded all project expenses since I initially contacted him about working on the Bitcoin business directory website.  He is not wealthy though and has his share of struggles as well, thus he has a kind of passion also!

Spencer: For witcoin, what do you need most at this moment?

Necro: On investments: Well, I am not too familiar with investments, venture capitalists and the like, and I definitely do not want to find myself or witcoin being compromised by one or more investors that manage to use their investment as a way to manipulate and gain control over the direction of the site.  Even without any investors other than noagendamarket, I have experienced some rather strong arguments regarding a particular implementation being better or more successful than another implementation.

Their efforts towards stressing the importance and value of their argument were not influenced by any monetary investment, but instead also by a kind of passion that they have for the site to succeed.  I imagine that if they had established offering a monetary investment and were to argue similarly, that it would complicate things and potentially result in an awkward situation, at least initially.  However, it may be useful or beneficial to establish investments.  I’m not sure.  I am inexperienced in the world of business, yet, I don’t want to be taken advantage of, and I feel it’s fairly easy to do so.  So I will probably remain skeptical and inquisitive about any potential investment offers.

On content: The site could always use more content, however, I think more content will come from more users, which will come from the site establishing as a platform that attracts and entices users at their own efforts and interests.  I don’t want to implement the site poorly or prematurely, “spamvertise” it everywhere and expect and obnoxiously strive for more users and content.  That would be obnoxious.  Many Internet users have evolved successfully enough to recognize such obnoxiousness.  However, there are many more that seem to still remain naive and gullible and even argue supportive of their naivety and gullibility not entirely aware of it.  Many times I am naive and gullible too, but if you’re a venture capitalist …..

On translators: Recently I have been looking for translators specifically for the help document that briefly (for now) explains how the site works.  Eventually I will establish better multi-lingual support so that non-English content producers may also participate at the site in their native languages.

I think publicity for the site will come when the site is worthy of publicity.  It is like trending and hot topics that appear at user-generated content sites.  I intend on establishing witcoin as a platform that is worthy of such publicity.  At least, I think I will or that it will be possible.  The site is unique and I believe it is the first to establish a profit sharing model without advertising revenue.

Spencer: Thanks for your time and doing this interview!

Necrodearia (mizerydearia): Thanks for the interview, it was fun answering.  ^_^

– End of Interview

Mizery would like to thank  theymos, noagendamarket, ducki2p, tcatm for their contributions to witcoin, its design, promotion, and underlying ideas.

Personal thanks to: ducki2p and sgornick for help with some of the questions.

If you would like to be interviewed, please contact me here.

For those of you that have yet to build your service, remember to tell me when your finished!

Meet the Trader 03: Michael Hendrix, CoinPal

Meet the Trader is a weekly interview I have started to help the providers of the Bitcoin economy gain exposure.

Episode 03:   Michael Hendrix of CoinPal, Coincard, JJGames, and

Update:  CoinPal has suspended its service as a result of Paypal’s action against his account.

Michael runs CoinPal, which is a way to buy small amounts of Bitcoins with a PayPal account. He also runs CoinCard, which converts Bitcoins into

PayPal payments and pizza.  Read the interview to see what’s next for CoinCard.

A software development consultant by day, Michael has 4 young kids and lives way out in the sticks.   Be careful guys: this interview bites:


Michael of CoinPal
Spencer: Where are you from originally, and is Hanna, Wyoming the next Silicon Valley?

Michael: It’s more likely that the last person leaves town and the place blows away in the wind. :-)  Hanna was a busy coal mining town for 100 years but most of the mines closed a decade ago.  A few hundred people stayed behind.I’m originally from the Denver suburbs, but have lived in Wyoming for the last dozen years.  I love it here: there’s no income tax, there are guns everywhere, it still fees like frontier and has bred tough, independent people.  It’s an isolated, beautiful kind of place.


Spencer: It sounds like your whole family is entreprenurial. Are your kids going to grow up with the “startup bug?”

Michael: I grew up in an entrepreneurial environment.  My father started a real estate development company before I was born.  My grandfather started one of the largest mortuaries in Denver.  My grandmother started a large life insurance company.  My kids are all still pretty young, so it’ll be interesting to see if they choose that same path in life.

Spencer:  How did you get started with Bitcoin apps?  What’s the story behind Coinpal and Coincard?


Michael: My first experiment with Bitcoin was writing a market maker bot for Mt. Gox.  I bought about $30 worth of Bitcoins from Bitcoin Gateway (which closed shortly thereafter).  The bot chose a mid-point on the bid-ask spread and placed $15 orders on both sides.  After a week, my Bitcoins were gone and all I had left was Mt. Gox dollars.  Nearly all the market trades were happening on the ask side of the book, so my sell orders cleared quickly but my buy orders lingered for days.  That asymmetry made it nearly impossible to be a market maker.


While trying to solve that problem, I noticed dozens of people on #bitcoin-otc asking how they could buy Bitcoins for PayPal.  All previous services offering that had been shut down because of fraud.  I happened to have been working on some fraud detection ideas for a client and decided that selling Bitcoins for PayPal would be a perfect test for those ideas.  It seemed like a more tenable problem than fixing my market maker bot, so I started CoinPal.


A couple weeks later, nanotube on #bitcoin-otc suggested that I offer a “CoinPal opposite service.”  That aligned well with my view that Bitcoin will succeed when one can buy useful things with it.  During the slashdotting earlier this year, I hit my $1,000 per day Mt. Gox withdrawal limit and realized that I needed a second source for Bitcoins.  All three motivations pushed me to create CoinCard.


Spencer: Your service fees are so small, considering that your offering price is the same as MtGox’s lowest asking price. What kind of revenue are you seeing from Coinpal and Coincard?


Michael: The revenue is substantial (around $1,000 per day), but the profit is miniscule. After running the services for about 3 months, I think I’ve produced $30 profit. It probably works out to less than pennies per hour considering the time invested.


Spencer: What, if any, are the risks of running a Bitcoin exchange?


Michael: So far I’d say the biggest risks are fraud and market volatility.  Fraud is really rough.  As a Bitcoin exchange, the profit margins are tiny.  One fraudulent order can wipe out a month’s profit.  When I speak of market volatility, I mostly mean fluctuations in volume.  Price volatility can be hedged in various ways, but when everybody’s buying, business gets crazy and other responsibilities falter.  When nobody’s buying, you wonder whether the business is a good idea after all.  I suppose that’s completely psychological, but it’s a real factor for me.

Spencer: With your profit margins being so thin, do you plan on raising fees?

Michael: I don’t plan to raise fees. With CoinPal, that’s partly because high fees select against honest buyers. A scammer doesn’t care how high the fees are because he’s paying with stolen money. An honest buyer is exactly the opposite. If CoinPal ever makes much money, it’ll be through improved automation, better conversion rates and broader Bitcoin popularity. I probably won’t raise CoinCard fees either. That’s partly because having an easy way out of Bitcoins makes the currency more useful. I’ll probably focus on better efficiency with CoinCard too.

Spencer: How long did it take you to get your first customer for each service?

Michael: In both cases, I think I had customers within an hour of announcing the services.  I’m awful at marketing, so I think there was a lot of pent up demand in both cases.  Fortunately, word gets around quickly in the Bitcoin community.  I’ve really appreciated how many people have supported the services by recommending them on the Bitcoin Forum or in the OTC channel and elsewhere.  Bitcoiners are a remarkable group of people.


Spencer: You say you’re terrible at marketing, but hasn’t marketing boiled down to being trustworthy?Michael: That’s true.  Our community is still very close-knit, so word about an honest trader gets around quickly.  The Bitcoin wiki doesn’t set the Referer header, so I can’t be sure of the exact numbers, but I suspect that most of my traffic comes from that site.  I suppose that’s worked out well for me since I dislike marketing.

Spencer: Are you sticking with CoinPal’s simple, 1994-flashback design?

Michael: Actually, efforts are afoot to improve the design substantially.  It may be a couple more weeks before it’s finished as the work is being done by a talented, therefore busy, designer.  Incidentally, the design job is being paid for with Bitcoins.  I’ve made a few personal purchases with Bitcoin and I have to say that it makes a great currency for the Internet.  Maybe it’s just confirmation bias, but I’m routinely reminded in my daily affairs why Bitcoin is such an important project.  It’s fun to be a part of that.

Spencer: You have a unique perspective into the Bitcoin economy, being both an exchanger and provider of goods and services.  Do you foresee a long term issue with hoarding Bitcoins?


Michael: No.  I’ve seen many people spend their Bitcoins for valuable goods and services when they’re offered at a reasonable price.  There may be slightly more hoarding in the Bitcoin community, but I suspect that’s selection bias as much as anything.  People interested in a deflationary currency like Bitcoin are probably savers by their nature.  Spendthrifts don’t care about inflation because they don’t have any savings to begin with.  Anyway, I see a lot of coins being sold and flowing around the economy as trade for goods and services.  As more services become available, I only see this increasing.


Spencer: Do you have plans for offering more (goods) through CoinCard?Michael: Yes.  The most common request is to add gift cards.  I plan to add those next.  At the moment, CoinCard volumes exceed CoinPal volumes.  I want to try and keep them in balance because it makes my life easier that way.  So I’ll probably focus on increasing CoinPal sales before I add more CoinCard options.

Spencer: What have been some of the unforeseen challenges in starting these businesses?


Michael: The biggest challenge has been PayPal fraud, but I can’t say that was unforseen. The biggest unforseen challenge has been how many people don’t follow instructions. You’d be amazed how many emais I send to people who filled out a form wrong or forgot to press a checkout button. I thought I had made the steps clear, but I’ve obviously I failed. I don’t blame the customers, but I definitely didn’t expect it. Now that I’ve seen how prevalent it is, I have plans to improve the site design and clarify some of the checkout process.

Spencer: Thanks for your time Michael!

Michael: I think this series of posts is a great way to strengthen the Bitcoin community. Thanks for doing it.

-End of interview.

If you would like to be interviewed, please contact me here.

Bowling for Bitcoins: Meet the Trader 01- Peng Zhong, Information Architect at nylira

Meet the Trader is a weekly interview I’ll be doing to help the providers of the Bitcoin economy gain exposure.

Episode 01:  Peng Zhong of Nylira.


Spencer:  Hey Peng! Thanks for doing the interview!

Peng:  Hello Spencer. It’s nice to meet you.

Spencer:  We’ll get to your work in a minute, first let’s get to know you in three questions.

Spencer:  I play darts when I’m bored, what do you do?

Peng:  I listen to music. NIN, Fever Ray, Massive Attack.

Spencer:  You seem to be a man of the world (Hong Kong, San Fran). How did you end up in Berlin?

Peng: I’ve been spending time exploring Europe. Berlin is a comfortable place to get work done.

Spencer: When’s David Hasselhoff’s next album coming out? And is he as big there as he in Arkansas?

Peng:  It’s a common misconception that he’s big in Germany. I’ve asked around and I’ve gotten eye rolls at best.

Spencer: I’ve noticed your home page for your website has changed. I liked your old site too, why the switch?

Peng:  My new site is targeted at web developers who need help with visual design. I find that I prefer interacting with tech-savvy entrepreneurs. We’re more or less on the same wavelength, which means there’s less explaining to do.

Spencer: Two weeks at a flat rate, is that still your tag line?

Peng:  Flat rate yes, two weeks no. I have flexible work requirements, and I’ve found that the arbitrary two week wall has turned away projects I wouldn’t have minded doing.

Spencer: Looks like you might have been swept into the Ruby on Rails movement. What are your thoughts on Ruby/Rails vs PHP?

Peng: Ruby is a beautiful language, and Rails is a fantastic tool for quickly building a RDBMS-backed application. I don’t have an opinion on PHP, since I don’t have any experience with it.

Spencer: How did you hear about Bitcoin?

Peng:   There was a thread on Hacker News about the viability of Bitcoin mining for profit with a Radeon HD 5970. That piqued my interest.

Spencer: Have you had any Bitcoin clients to date?

Peng:  Not yet. I only found out about Bitcoin a week ago, and I’ve been busy in the meantime. That said, I can’t wait for my first BTC client.

Spencer: Again, thanks for your time!

Peng:   Thank you for the interview.

Peng Zhong

Information Architect