The drive to increase the adoption rate of Bitcoin by the public has been gaining increasing momentum over the last couple of years or so and that appears about to be taken to a higher gear with the announcement of capital raised by a stealth startup set up for the purpose of taking the crypto currency mainstream.
A Silicon Valley startup called 21 Inc has reportedly managed to raise a whopping $116 million in venture funding to promote the adoption of the Bitcoin technology. The capital raised by the San Francisco-based company is the greatest ever by a startup in the digital currency industry, according to crypto currency news service Coindesk.
But for now, the people behind the stealth startup have not revealed the exact plans of actions to be followed in the attempt to broaden the use of the Bitcoin technology.
The story of Bitcoin began about six years ago when it was launched by a coder or group of coders working under the pseudonym, Satoshi Nakamoto. The original aim was for a decentralized payment system and elimination of financial intermediaries, thereby reducing costs of payments. However, the adoption rate of Bitcoin has not been overwhelming due to various concerns, including volatility, theft and money laundering.
How it started
The Silicon Valley startup was co-founded by Balaji Srinivasan and Matthew Pauker in 2013. Srinivasan is a partner at the top venture capital firm, Andreessen Horowitz, while Pauker was the co-founder of data-encryption company Voltage Security which was sold to Hewlett Packard Inc. last month. Srinivasan, who reportedly joined Andreessen Horowitz in 2013 after the company headed a $25 million series B funding for 21, now wants to take to the Bitcoin startup full time as its executive chairman. Pauker serves as 21’s Chief Executive Officer.
Originally known as 21e6, the stealth startup derived its name from the 21 million that has been set as the maximum amount of bitcoins that can be released. Srinivasan said the main reason 21 was kept in stealth mode for this long was because its founders “didn’t have anything to say to the world” about the project. He compared the effort of the Silicon Valley startup in taking Bitcoin mainstream to the gradual growth of 56-kilobit Internet modems, global fiber cables and wireless towers in the lead up to making the Internet available in homes in the 1990s.
Some top names have already associated with 21. Aside Andreessen Horowitz, RRE Ventures is another top venture capital company that has invested in the Bitcoin startup, just as Chinese private equity firm Yuan Capital. Qualcomm, Khosla Ventures and Data Collective have also invested funds in the project. Equally involved are founders and CEOs of some top companies, including co-founders of PayPal, eBay and Zynga as well as chief executives of Dropbox and Expedia.
These investors are of the opinion that the slow adoption of the Bitcoin technology stems from the public being unaware of its full potential and merely thinking of it only in terms of a currency. The Bitcoin technology can be used for greater purposes more than many people realize, including use for secure online voting and smart contracts.
Responding to questions from the Wall Street Journal, Netscape and Andreessen Horowitz co-founder Marc Andreessen said 21 “is working on what they – and we – consider to be core infrastructure for mainstreaming bitcoin.”
The Qualcomm Role
Qualcomm’s involvement in the Bitcoin startup has been especially hailed by Pauker. The 21 Inc co-founder thinks the efforts to take Bitcoin mainstream will greatly benefit from the top tech company’s production and mass-marketing advantages. Based on the importance placed on Qualcomm’s involvement in the project, it is very likely that the Bitcoin startup is contemplating full engagement in the futuristic idea called Internet of Things – a concept based on automatic communication and relationships among Internet-connected devices for enhanced operation and energy use efficiency.
Bitcoin’s underlying technology called blockchain is a digital ledger kept on diverse, independent computers and under no central control. It is hoped that the blockchain technology will be quite essential and helpful in easily handling large data load that will be generated by Internet of Things devices. The absence of a centralized structure means that blockchain ledgers will not be under the control of a single party, thereby ensuring that information is transmitted securely without being tampered with by a third party.
Some other companies have also been contributing their bit in different ways to increase the use of Bitcoin. One of these is Coinbase Inc, which raised $75 million in new funding in January. Among the investors that took part in the fundraising was the New York Stock Exchange. The San Francisco-based crypto currency wallet provider introduced the US’ first licensed Bitcoin currency exchange a week after making its funding announcement.
Security firm BitGo Inc has introduced a new Bitcoin insurance program. Hi-tech security and insurance programs have equally been developed by top financial services firms Circle Internet Financial Ltd. and Xapo Ltd. New York-based Bitcoin Investment Trust has been granted approval by regulators to attain the status of the first publicly-offered Bitcoin fund.
Coindesk estimates that venture capital funding for Bitcoin startups increased more than threefold to $347 million last year from the year before. The increased capital is expected to greatly help in creating products, services and infrastructure that will contribute to boost the appeal of the crypto currency to more people.
The hope of the people behind 21 is that the relatively new startup will significantly complement the different efforts being made by other people to take Bitcoin mainstream.
It had been speculated by some in the Bitcoin community that the top players were secretly trying to development an advanced tool that will put them in significant control of the process of mining bitcoins. But that appears not to be the case with 21, although the exact master plan for the startup has yet to be revealed.