NISMO Stuff's Man of the Year 2013: Satoshi Nakamoto

The last "Man of the Year" I announced was back in '10 as since then I haven't felt I've encountered anyone or anything truly revolutionary or worthy of the designation.

My choice of Elon Musk at that time looks quite prescient now--he was just named Fortune Magazine's Businessman of the year for '13, Tesla has a market cap $15B, Solar City (another Musk founded entity) has a market cap of near $4B, SpaceX has exceeded all expectations and is on a path to bring people to Mars and beyond and Musk has brought to the forefront the idea of a superfast Hyperloop transportation system.  Musk's ideas and companies are truly transformative and will be impacting not just individuals but in fact the entire human race as we move forward.

You might not know the name of Satoshi Nakamoto yet but his creation will, if not itself, its derivatives, impact everyone in the immediate future.

No one knows who Nakamoto is or even if he is real.  He may be a fictional amalgam of a a number of people or may be an obscure mathematician at your local university.  Truth is, it doesn't matter.  Back in '08 "Nakamoto" published a paper on the internet titled "Bitcoin: A Peer-to-Peer Electronic Cash System".  Shortly thereafter the digital currency "Bitcoin" was created using a peer to peer network and outside the control of any government or regulatory agency.

Bitcoins are a bit hard to explain to people and, truth be told, I don't 100% understand their creation and details myself.  Some things that are simple to describe Bitcoins however are its anonymity (due to encryption techniques, Bitcoins can be bought, sold and used without the ability to track or identify the user or holder.  Bitcoins are also outside any governmental control, no financial authority can create more in order to pursue a fiscal policy.  They are a wonderful way to route around international sanctions, runaway inflation and capital controls.  Oh yeah, and they're a great way to buy drugs.

That's probably where you have heard of them--if you have.  The online marketplace "The Silk Road" was a forum in which you could exchange your BitCoins for drugs 100% anonymously.  Earlier this year the creator of The Silk Road was arrested and charged with various crimes (including trying to hire a hitman to kill people) but NONE of the thousands of individuals buying and selling drugs over the network have been arrested or charged...the nature of the currency prevents any attempts to ID the participants.

Right now the BitCoin is a niche product used by a VERY few people for typically shady or silly transactions--but this is rapidly changing.  This week alone the largest university in Cyprus announced it will begin accepting BitCoins as payment and Virgin Galactic (Richard Branson's space tourism company) accepted an individuals BitCoins for payment of a trip to space.  Additionally, more and more retailers are beginning to accept them--Foodler, OK Cupid, WordPress, etc. and even Gyft where you can buy giftcards to places like Amazon, Gamestop, Target and others with BitCoins.  Hell, there's even a BitCoin Black Friday event.

So what's the big deal with all of this?  The creation and acceptance of BitCoin takes the government's and any other Fiscal entity's, control over your wallet out of their hands.  No one can ID who has what money nor to whom its going or for what.  Imagine the US where the government has no ability to create, destroy, track or control wealth.  Or beyond that, imagine a single anonymous world currency.

The Feds are scared of it.  So scared that they aren't trying to control it at the moment.  At hearings in Washington this past week it was all lovey dovey between the politicians and BitCoin experts.  Why??  Because if the US gets in the way of the development and use of BitCoins the Chinese will dominate.  Already the largest BitCoin exchange is located in China.  Imagine that...China, home to the largest and most reliable source/exchange of the world's first completely decentralized monetary network.  Which is really what this comes down to...if the US doesn't lead the way in the development and acceptance of cryptocurrency the it will go underground and overseas and the US will lose any/all influence on what minimal controls they may be able to implement around it. 

I don't fully understand all the repercussions surrounding BitCoin, nor how its use will turn out, I do know that creating a currency that can't be printed/created or destroyed,can't see rules imposed upon it, is easy to transfer, easy to secure, verify and divide, is limited in supply, anonymous, easy and cheap to transfer, non Bank controlled and more widely accepted by the moment--will change the world.

Square Cash is a PayPal Killer...

Its rare when my work life and my personal life intersect.  This is one of those rare instances.

If you are a motorsport enthusiast and need to send or receive funds for any reason in an amount up to $2500 a week then you NEED this app/system to save yourself and whoever it is you are transacting with, valuable "transaction" costs.

Square, the San Fran based entity headed by Jack Dorsey (one of the founders of Twitter) and developer of that little, white, plastic, square device you plug into your smartphone to accept swiped payments, has released a new product that I can't really see as being anything but a PayPal killer.

The fact that it might kill Square itself is part of the story as well.

What it is:  Square Cash is an app for your mobile phone (do a search in the App store of your choice) or a method by your email, wherever that happens to be located (your desktop at work, home, library, someone else's phone, etc., you don't need to go to any site initially as when you send your first transaction the system will send you all the links that you need though if you want to check it out before you send your first transaction you can go here: https://square.com/cash) that allows you to transfer funds between bank accounts via debit cards.  Since nearly everyone has a debit card backed by either Visa or Mastercard, the transactions take place over these networks but are connected to the end user's bank/checking/savings accounts (depending upon what accounts you have your debit card linked to).  There is NO fee to either the sender or the receiver, no interest charged as funds come direct from (we'll simplify here) your checking account, minimal delay in funding and the process itself couldn't be more simple.  Enter the email address of the person you are sending the money to, in the "CC:" line you type "cash@square.com" and in the subject line type the amount you want to send--$1.84 (for instance).  If you want to type a note to the person go ahead but its not required.  Click send.  Done.  That's it.

Well, almost.  At your first and ONLY your first time using this service you will get an email bounced back by Square with a link to their site where you plug in your debit card #.  There, now that's it.  After doing this once you'll never do it again and moving forward to send cash all you have to do is type three things--the email address of who you're sending the $ to, cash@square.com, and the amount.  Click send.  That's it.

Its so amazingly simple I was stunned.  No accounts, no passwords, no logins, no charges, nothing.

It works in this method for amounts up to $250 a week.  If you want to send more than $250 a week there is still no cost but you need to provide a bit more information (to help prevent money laundering, terrorist financing and such) like your DOB, full name and last 4 of your SSN.  Doing this allows you to send up to $2500 a week to other people.

I just used it today to pay a friend back for concert tickets he is giving me tonight.  No worrying about withdrawing cash or sending a check and he got the money confirmation instantly.


So why on earth would ANYONE use Paypal again?  No one with a brain and needing to transact in an amount of $2500 or less would.  Given that Paypal likely makes its bones on the aggregation of large numbers of money skimmed off smaller transactions vs. larger amounts from larger payments, Square Cash appears to be a PayPal killer.  Square has the backing of enough major players and as a private company (currently) doesn't feel the need to monetize everything to the nth degree like PayPal and its public Ebay owners do.  Does Square hope that the adoption of Square Cash leads more people to become regular Square merchants paying for payment processing on a larger scale for their small businesses?  Do they hope to bring people into the Square ecosystem and drive the adoption of the Square POS systems?  I don't really know but I think Dorsey has something else in mind.  These two prior suggestions don't seem to make much sense--most of Square's small merchants could likely just switch over to asking clients to pay by Square Cash and avoid transaction fees all together and the use of POS systems for larger scale businesses isn't linked heavily enough to people like you and me trying to pay someone back for lunch or a movie to drive those sales.

There's something else at work here and I'm not seeing what it is.  Square has a lot of backing and can operate without charging for this product for a long time--but they are still having to pay their processing partner each and every time someone sends cash to someone else.  The more people adopt this product the WORSE financially it is for Square as its a cash out ONLY product...there is NOTHING coming back in right now.  Now maybe they can generate more VC investment interest if they can claim "50 million individuals have adopted the Square Cash money transfer method" as this would certainly be a big user base for you to claim.  There is some discussion evidently of opening the service up to international money transfer transactions and charging a fee for those services--but that opens up a whole other kettle of worms to deal with...one Square hasn't branched into with its primary, payment transaction business line so this is a relatively distant, risky and lower volume opportunity than P2P transfers here in the US (and likely Canada in the near future).  I don't know how Square will make a buck off this product but I do know one thing...

Goodbye Paypal...its been nice to know you...