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
We're Teaching Our Kids Too Late
by frank
April 19, 2019
This interview was originally published on November 18, 2018 in our Civics issue.
This interview with the students of The Young Women's Leadership School of East Harlem was conducted and condensed by frank news.
From left to right: LaShay Fernandez, Morgan Carter, Javeria Amir, and Fargana Alden.
Morgan: Right now, we're learning about how to take an issue that we feel passionate about and see how we can impact our local government - legislative, the mayors, governors. To see how we can change the issue, or see if we can get more engagement so people will pay attention. The issue we all picked was sexual assault in schools, from colleges, middle schools, high schools...
Why did you choose that?
Morgan: At first, it was separated for a week. Some people wanted to do education and the other side wanted to do sexual assault. We were debating for a week or two and none of us wanted to do it together, and then eventually we just had to decide - why don't we just put them together? Now we're doing sexual assault in schools. And how education and money affects why we don't have sex ed.
That's amazing.
Javeria: There's this thing that there's enough about raising awareness for it. It's time for us to take action and the way we can take action is contacting our local office members rather than just going for the governor or the president. We're saying oh my god the President's doing this and what are we doing? We know we can't directly affect what the President is doing himself, but we can work at a local level which is what we're going to do now.
Who are your local officials?
Javeria: Our mayor and our city council members. We would start contacting them rather than the governor.
LaShay: We did a whole thing where we sat down with people in our neighborhood or district to look up all our local members and see what they're doing and see if they're good. We looked them up and really tried to see if our representatives are everyman or superman. To see how much of our representation is actually what we want, or actually accurately depicts the people that are there - us.
What's the conversation around sexual assault? What are the things you want to see done and what are the sort of modes of getting those things done?
Morgan: Today we learned about root causes and systemic causes. We're starting in elementary schools and high schools. People have sex ed, but we realized that a lot of the problem is that people don't actually know what counts as sexual assault. No one has consent classes. You can't just start at high school, because by that time a lot of people are already having sex. We said that maybe we could start with 7th and 8th graders and give them sexual education - maybe not assault, but basic knowledge so that later on they can know - this is what we do, this is how this works.
LaShay: It's very hard because since people are so young and it's such a fragile thing even though yeah, you should learn about it, we're also talking about different ways to tackle the situation. Instead of just saying "consent" and just straight talking about sex with 12 year olds, it's using different methods. There's this video that a college made about tea and offering people tea and it's really weird, but it really pushes the message of consent and not forcing people to do what they don't want to do.
Fargana: To add on, some parents don't have a lot of knowledge on sexual assault or how to to keep safe, or they feel uncomfortable talking about it. For us to teach kids at a young age about safe sex and just making sure everyone's using protection, what no means if someone is saying no to sexual intercourse. It's very important for us, and also since we are young teens, it'll be easier to talk to students because we're in the same generation in a way. We would just be considered like their older sister, we'll have that bond if they ever need something, we can help them out.
Are you learning about how to communicate with your representatives directly? How can you make sure your voice is heard outside of the classroom?
Javeria: We haven't gotten to that point yet. We're trying to figure out what part of the issues are we focusing on, what are the factors that are leading to such issues, and once we have those down, then we can go and be like this is what's wrong with our system, and this is what we have to fix. Once we get that correctly done, then we'll be approaching them, but we haven't learned how to do that yet.
Morgan: It's hard because sex ed is like - a lot of parents don't want their kids learning about that and it's not just girls, it's boys that have to learn about it, too. It's kind of hard knowing exactly what we want them to do because it's often a societal thing. It's hard for them to say, oh we want a rule against this. You have to make something specific.
Do you guys feel empowered by the class?
LaShay: Yes, I was just talking to a friend about it today because I think a lot of times we sit in our class, and especially going to TWYLS, we talk about this stuff, like since freshman year we've been talking about this stuff, and it's such a big issue and we always talk about it, but we never talk about what we're going to do about it. And I think sometimes when you're just in your little city, you think this is huge and this is happening in the government and I can't do anything about it.
Even if you're starting small, it's a ripple effect. I think that's what the class has really done for me. I can do stuff, even if it's really small, it's important.
Javeria: People talk a lot and they don't do anything about it. We have a social justice club and I feel like that has empowered us in general and then having Generation Citizen - being able to take action now, instead of just talking about it. What should we do? I feel like it's a wonderful opportunity for us to have.
Fargana: In addition, compared to other schools, TYWLS really prepares you. We're really thankful to be offered Generation Citizen because in other schools, again, they would talk about it - or not even, the topic wouldn't even come up in their conversations - it would just be ignored rather than at least being talked about it and seeing different ways how we can help. For us to talk about it and see how we can fight as young teens, it really impacts us.
Can you tell us more about the social justice club?
Javeria: The social justice club is led by Jessica Taylor, our 10th grade global history teacher. In that club, anyone - I think it's mostly high schoolers - can come in the beginning of the year, we focus on an issue and advocate for the issue we think is affecting our community right now. We're in 10th grade and we raised some funds for the Syrian refugees, that was around $500 by doing food sales. It's just the little things we're doing. We're seeing what current issues are affecting the people around us. It's giving back and even though our school doesn't have that much, we're trying to take initiative.
Fargana: We donated a bunch of toiletries to a women's shelter as well. Every year we would do something - I think of it as a main project and then a mini project. So the mini things are some local things - like donate toiletries, donate money, and then our main project is what all of us are mainly focused on and how we can help.
That's amazing. Have you guys learned about civics anywhere other than Generation Citizen?
Morgan: I think some of us learn it at home, but in school, other than government or AP US History, not a lot. I think as a whole, they always push us to change something or if you feel something, talk about it, try to change it so not directly, but I think that we all get encouraged throughout our years of being here to try to change something.
Javeria: Our government class is coming senior year, it's important, but other than that we're not used to having that - what policies are, how they're made. It's senior year and Generation Citizen. For me, even if we're in AP Government, you're getting that in senior year which is a little late, but.
How early do you think civics should start?
Javeria: I feel like middle school. They're going into that 9th grade year where they're like we're going to be like high school, and they're already empowered so you might as well give them another boost.
Fargana: Yeah, it would really impact a person if you're starting in middle school. It would be perfect to teach them about the government issues and who's your local representative, what does it mean? Then when you're in high school, as the years go by, you'll have more knowledge. Each grade, we can all come together and create a bond within us and be able to go out and do something. For seniors, since we're capable of doing it, we can continue it in college and teach others that really didn't have this opportunity when we were in high school.
Are any of you about to be 18?
Yes, yes.
Are you planning on voting?
Javeria: Yes! I was going to say that. Us turning 18 - I feel like this is encouraging me at least to vote. That's one of the ways my voice can be heard, so why not? I feel like that's part of the issue. We need to tell them - yeah, voting may seem like your voice is not heard at all, but we're the people and you're one person so we need all the people to make that voice be heard, so vote, please.
Are you excited to vote?
Javeria: Yes, I'm really excited. I've been waiting. I've been waiting to turn 18 so I can vote.
LaShay: I think it's so funny that she's acting like that because my parents don't vote and it's really weird. I'm always like why don't you vote? "Well it's not gonna matter." I'm really glad I took this class because you're influenced by your political socialization - you're influenced by the people that you're around, and you inherit these ideas and you're kind of conditioned to believe this one thing and I think before I came to TYWLS, I kind of did have that mindset of well, I can't make a change, I'm one person. I'm so excited to vote now and it's so weird because before I didn't think it would matter.
Fargana: I don't turn 18 until another year, my parents are immigrants - they're both US citizens - so it's for them, the only main election they worry about is presidential because that's the big one, but I feel like now that I have more knowledge on this, I'm literally waking my mom up early so she can come with me to go vote. Well, for her to vote, I'm just gonna be there making sure she's there.
Morgan: I'm the exact opposite. It's weird because my mom has always been - my mom is the kind of person, even if she doesn't like anybody on the ballot, she'll still vote. She's always told me to pay attention to what's going on and vote. And I was always just like, I don't really care, but I think Generation Citizen has made me really want to do something now because every single thing counts. I kind of wish, like a lot of things, that we would've learned it in middle school.
I think the problem is we underestimate young people. They think they're not old enough to understand it. When a lot of times, the middle schoolers know more than you think they do. Like a lot more. And I think that they need to start encouraging them and teaching them because I feel like 11th graders and 12th graders, we're about to leave, there's no point. I feel like if I would've heard it in 8th grade, maybe I would want to vote more. I can change a lot more things than I thought I could have.
Never underestimate the youth.