interviews
Crypto For The Cash Economy
by Daniel Polotsky
January 22, 2020
Daniel Polotsky is the CEO of CoinFlip, the leading Bitcoin ATM Operator in the US.
frank | How did you get into crypto?
DP | It was around 2013 that I found out about Bitcoin for the first time. It kept popping up in news articles. I wanted to buy some after it appeared on my feed for the fifth or sixth time. I thought, "I've read about Bitcoin, it seems like a cool thing, like a cool alternative money investment that's not issued by the government, decentralized, something that's never been done before," so I decided to purchase them.
I went to the first Bitcoin ATM in Chicago, it was at an empanada place called Cassava. I put in cash, received a coin, but I didn't like the process. The bills kept going in and out – it took a really long time to get the bitcoin. I didn't want to do it again when I bought it again. Instead, I went on a site called locabitcoins.com which back in the day, had these listings where you could meet people in person to purchase Bitcoin.
We met at a Starbucks. I'd put down cash and she would send me the Bitcoin. We kind of got to talking and eventually decided even though the Bitcoin ATM I had used back in the day wasn't super user friendly, it's still in theory a better idea than meeting people in person because it's not safe. It's not really scalable. A single person can't meet with 23,000 people a day. There's a limit.
So we decided to work on the ATM thing. I was a sophomore in college, I was 20 years old, I was at Northwestern and I kept working on it. By the time I was 22 and ready to start a full time job, the opportunity at CoinFlip was too good to pass up. We had just under 20 ATMs – that was two, three years ago.
Fast forward to today, we're the largest Bitcoin ATM company in the world by volume, with 420 locations across the United States. Obviously we're growing and I hope to be able to get Bitcoin in the hands of as many people as possible.
This is different from the other conversations we’ve had about Bitcoin so far, in that most people aren’t treating it like a currency but rather a stock, or investment. But a Bitcoin ATM is tangible, immediate, more cash oriented. Do you find that because there's a physical component to what you're doing it's easier to explain to people?
What you were saying about currency versus investment, I don't know if I agree with that. I think Bitcoin can be used as a currency eventually, but in first world countries like the United States, it is still more of an investment or means tool.
I definitely agree that the physical element makes it very easy to explain to somebody. Its familiar. Essentially all you're saying is, "Okay get some cash. You already have a phone number, download a Bitcoin wallet, you're going to put the cash in, you're will see the exchange rates, you're going to input your QR code which is that black and white square, and then you're going to receive the Bitcoin instantly."
That sense of instant gratification and the physical component definitely makes it accessible. Because the ATM is something in a convenience store that you see in real life. They're not just moving imaginary money around.
How do you interact with something like Coinbase?
Coinbase is an online exchange where the exchange actually holds your money. You wire money from your bank, they hold it, and then you trade on the exchange, using the dollars that you have on the account. We don't hold customer accounts.
So for example, we don't have an account where you can deposit money and then hold it and then trade it. You insert the cash, we immediately do a conversion of the Bitcoin and then you receive the Bitcoin, it's on your phone. You own it, we are not the custodians.
You're not a custodian or a wallet at all?
We are working on expanding into a wallet, but no, we are more like a currency exchange. You go to a currency exchange, you get quotes for an exchange rate that tells you, “it's this many euros for this many dollars.” That's more similar to the model I see us as, as opposed to a company with a mechanism that people use to trade and speculate with continuously on.
Other than speed, why would I do this in person and not online?
Not everyone has a bank account. It's 30 million people that can't afford bank accounts, don't trust banks, don't have banks, think banks are inconvenient, or say they don't want to use bank accounts. They might want to use cash. There's a bunch of workers that get paid in cash.
There's a whole cash economy and you can't use cash at Coinbase.
They only take a bank wire transfer or a ACH. So you literally cannot use cash there. It’s a quick, easy and convenient way to use a different payment method to get it.
Does it work in reverse? Can I cash in my cryptocurrency for U.S. Dollars?
It actually does. We have around 30, 40 units where you can do exactly that. You send us the Bitcoin. Once we get network confirmation, you scan your ticket at the ATM and then cash will come out. It does go both ways.
Do you have competitors? Are there other ATM options?
Yes, there are other Bitcoin ATM companies. None of them have the volume and the low fees that we do, but they do exist. Like I said, we're the number one Bitcoin ATM company by volume in the world, but we do have competitors and they tend to be in the United States, but there are probably in the world 5 to 6,000 Bitcoin ATMs.
Are most of them in the U.S?
A pretty big chunk are in the United States. That's typical. The United States is often a leader in emerging technologies because we have systems in place where people are entrepreneurial and whatnot. Plus we have a large cash economy.
What is the sale for the convenience store? Why would they want them?
The convenience store gets the best deal of anyone. I mean, they get a check, our ATMs are really small. They're probably one and a half or two square feet by five feet. So it's really easy to place them inside a convenience store. The convenience store is not going to be able to monetize that square foot any meaningful way other than receiving rent from us, and we also give them the option for a profit share. In addition, we bring in around 1,500 people a year to any given location. So it's absolutely free advertising for them. It's not like you just see a Bitcoin ATM and you use it. You're literally searching for it and then you go to where it is. So we drive traffic specifically to that store and they can always buy something when they are in there, chips, soda, whatever it is. So there's absolutely no drawback for the convenience store.
What excites you about Bitcoin?
The thing I like a lot about Bitcoin is, you know it's deflationary, right? I love Bitcoin because of that. The U.S. dollar loses 1% to 2% of its value per year because of inflation and the government printing more. Bitcoin itself is limited in numbers, so it's a better way to keep your money long term. The blockchain it's built on is fraud proof. It's public, everyone sees it, it's fast. You can send money halfway across the world in 10 to 15 minutes, it's borderless, it's cheap. The average fee to send is probably $2 to $3. What's cool is that there's no one single issuer.
So you can't turn off the coin.
You can't sue Bitcoin. There's no company responsible for Bitcoin. It’s all around the world. It's very resistant to being able to be stopped. It's kind of like digital gold I would say. That's what I like to say about Bitcoin, it combines characteristics of a commodity and a currency. It’s something that's never been done before. And I think it's very important to keep the centralized entities like banks and governments in check. If they ever go haywire, which they have in the past, there has to be some alternative. Some digital alternative that isn't as cumbersome as gold to obtain that the average person can get.
This decentralized economy is what I’m excited about. My goal with CoinFlip is to get Bitcoin into the hands of as many people as possible so that people see what is really so cool about this Bitcoin and why it really is the future.
Not that it's going to replace Fiat currency and replace dollars, but it's an alternative and it's always important to have an alternative.
Is your prediction that this becomes a widely used and accepted form of currency in the US?
Yeah, I could always see it in unstable countries, it could even be the number one currency. In stable countries, it might be number two currency or it could just be used as an investment vehicle. But I do see it as being perhaps the global reserve currency, within 10 to 20 years as people build trust on it. It makes sense for the countries of the world to not want the global reserve currency to be issued by one country. It used to be the pound, now it's the dollar, it makes sense for it to be decentralized and not one entity responsible for it. It makes a lot of sense in my opinion.
If it does go that direction what policy will come form around it or do you think it can exist as free as it is now?
I think it's actually one of the biggest myths that Bitcoin is not regulated. That's what everyone loves to say, but it's not true. Pretty much every applicable brand in the U.S. Government has come up with regulations regarding Bitcoin. The IRS came up with guidance for how to pay taxes on it. The SEC declared it as not a security and also declared guidance on how to determine whether or not projects that are Coinbase, like blockchain-based are securities or not. The CFTC has also regulated Bitcoin as a commodity and FinCEN, which is our regulator, is the financial crimes enforcement network and we're definitely heavily regulated by them. We're treated as a financial institution.
We have anti money laundering in our customer policy, so there are rules for Bitcoin.
It's a great system and I think that it's come far from it's early days. But now I think that you still need some regulation, some basic rules to follow, even if it is a borderless, permissionless system and there are those in place in the United States.
I want to get Bitcoin again into the hands of as many people as possible and lead the financial revolution. I want to place 1,000 ATMs by the end of this year and hopefully 3,000 at the end of the next year. In addition, we're working on having an OTC desk. That would allow us to actually trade Bitcoin and other cryptocurrencies in exchange for wire transfers and vice versa, so that's something I want to expand into. And we're also working on a wallet and an app.
What is the app?
The wallet is the main component of the app but it's basically going to be an easier version of our website. You know, just the main parts, probably the map, customer service, or awards program, and obviously the wallet. So we're going to have our own wallet where people can purchase Bitcoin and that's something that's really cool because it's an additional service we can offer to our customers, an additional way we can communicate with them.
Amazing.
interviews
Q&A with Catalina de Onís
by Catalina de Onís
February 8, 2019
Catalina M. de Onís is an Assistant Professor in the Department of Civic Communication and Media at Willamette University. Her research and teaching engage Latina/o/x studies, de/coloniality, race, environmental and energy studies, gender, and fieldwork. She is an affiliated faculty member with the Latin American Studies program and the Sustainability Institute.
How would you define Energy Democracy?
Energy democracy is essential for advancing energy justice, including by foregrounding the experiences, concerns, and needs of community members most impacted by different energy projects. A shift to renewable energy can replicate unjust power relations, so it’s important to be critical of “big green” projects that lack local community involvement and direction. For years, many Puerto Rican energy democracy advocates have been calling for roof-top solar and the need to have companies invest in local energy projects, rather than exporting the money to another place.
Elsewhere, I have defined “energy justice” as:
“Informed by environmental and climate justice, energy justice is concerned with how People of Color and low-income communities are impacted by global climate disruption, energy poverty, energy vulnerability, and decarbonization (i.e. transitioning from high-carbon energy sources, such as petroleum and coal, to low-carbon energies, such as wind and solar). Energy justice also struggles against the exploitation of indigenous lands and communities for high-risk and toxic energy development, from nuclear to fracked gas, and also recognizes the importance of sustainable jobs in the renewable energy sector and achieving energy security and sovereignty in relation to infrastructure, distribution, and access. Thus, this movement and discourse strives for direct community engagement to advance sustainable practices, including considerations of how, where, and for/by whom energy is produced, distributed, consumed, maintained, and disposed of (Sovacool & Dworkin, 2014).”
Is Energy Democracy inherently political?
Yes, energy democracy always involves politics and power struggles over energy sources and infrastructure, how that infrastructure comes to be, who decides, how it is maintained, and what policies advance or impede such projects. The political system in the United States, Puerto Rico, and in other countries throughout the world is entwined with energy industry interests that often have no problem with treating some communities as sacrifice zones to maximize their profits. There are large barriers to full participation in Puerto Rico, as evinced by the Fiscal Control Board’s website and the “public comment” process that requires submitting responses online and in English. As a result, the majority of Puerto Ricans in Puerto Rico are not able to participate in their preferred language. Furthermore, energy conversations among liquefied gas (LNG) industry officials, members of la junta fiscal/the control board, and local politicians are discussing lifting the suffocating 1920 Merchant Marine Act, or the Jones Act, only for the purposes of importing LNG. This exception epitomizes how corporate energy interests and their political allies are willing to waive one aspect of an arbitrary law only to the extent convenient for them, rather than addressing widespread calls from civil society to lift this act entirely to transform Puerto Rico’s dependence on US ships and imports. One of the LNG tankers making the route between Florida and Puerto Rico is “Taino,” named after the Indigenous peoples who faced the brutalities of colonization.
What does the history of energy operations look like in Puerto Rico? What sort of legacies are left?
Puerto Rico’s heavy reliance on imported fuel oil from South America and liquefied gas from Trinidad and Tobago and increasingly from the United States shows how energy sovereignty has been denied. During the height of Operation Bootstrap, in the mid-1900s, Puerto Rico was used as a test site for the petrochemical industry; the energy required was enormous to support this component of US-empire building. Local artist Rafael Trelles illuminates the problem of abandoned industries, job loss, and environmental contamination in his moving 2011 artistic piece: “Monumento al Fracaso” (Monument to Failure). Another artistic intervention against environmental injustice, titled “Contaminado,” emphasizes the problem of coal ash dumping and the impacts on human health in the southern region of Puerto Rico. These artistic efforts have unfolded synergistically with grassroots movements agitating for Puerto Ricans’ self-determination over their own energy futures.
How do you begin to move past them?
First, it’s important to call attention to the toxic legacies that scar Puerto Rico’s landscape and that harm the health of local communities. For example, a 2016 epidemiological study found that various diseases and respiratory problems are disproportionately high in communities that are nearby fossil fuel plants. So, instead of moving past these toxic legacies, it’s important to note that many communities continue to live with this contamination on a daily basis. Given this reality, it’s important to note the urgency of a just transition to grassroots, renewable energy alternatives that both improve human and environmental health conditions and create local jobs to grow struggling local economies.
Can you describe the grassroots led efforts for energy happening in Puerto Rico right now?
Numerous grassroots solar energy projects are unfolding throughout Puerto Rico. The longtime environmental justice group Casa Pueblo has been a large solar advocate and leader. Another effort, which existed pre-Hurricane Maria, is Coqui Solar in southern Puerto Rico, home to the two most polluting power plants in the Big Island, and yet many residents in this area often face power outages and were some of the last to have power restored after the 2017 hurricane season. The project involves already-installed solar panels on the community center and the development of resident-installed solar panels on surrounding homes. Service-learning with Drs. Efrain O’Neill-Carrillo and Marcel Castro and their engineering students has been at the heart of this collaboration. Also with university ties, El Instituto Nacional de Energia y Sostenibilidad Isleña (the National Institute of Island Energy and Sustainability, or INESI) is involved in many projects and has been a champion of energy democracy for years, including hosting “dialogue tables” with various members of civil society.
How have citizens responded to these efforts?
Those who are locally impacted tend to respond with excitement about the possibilities, but it’s important to not suggest that every Puerto Rican supports solar. It’s important to not treat Puerto Ricans as a monolith.
How has this work adapted since Hurricane Maria? Is resilience built into each energy project?
There’s now greater financial and academic support for these grassroots, roof-top solar projects from outside groups. For example, local Puerto Rican scholars and community activists have been supporting visits and collaborations of numerous university groups—from the University of Oregon to MIT. These collaborations can be helpful, if they are committed to a long-term, sustainable relationships and put the interests and needs of local communities first. Otherwise, colonial relational patterns can too easily develop.
What policy is central to this work?
Energy policy must center the realities of impacted communities. Too often in Puerto Rico, there’s the façade of public participation. However, from language to technology barriers, a dramatic transformation must be made before approaches to energy projects in Puerto Rico begin to be about the people instead of maintaining fossil fuel energy interests and their political cronies.
What sort of new policy would benefit your efforts and incentivize more participation?
The efforts of INESI create a vision for energy democracy, based on years of conversations that include diverse energy actors. Ayuda Legal Puerto Rico also is an important legal resource.