Despite questions about Bitcoin’s future, a new Paris-based startup called Bitit has created a service designed to make it easier than ever for average people to acquire the virtual currency.
Nicolas Katan, cofounder and CEO of Bitit, says the company’s goal is to solve two of Bitcoin’s biggest issues: accessibility and fraud.
“We have a vision to democratize Bitcoin for all,” he said. “Bitcoin is a really great technology. But the problem for now is that it is complicated and difficult for people to access.”
The company’s debut comes amid a big debate within the Bitcoin community about how to evolve the Blockchain technology behind the virtual currency so the system can continue to expand. This schism has some questioning the future of what others have hailed as a revolutionary financial system.
Katan is confident that these problems will be sorted out. In the meantime, he believes as strongly as ever in the value proposition that made Bitcoin a phenomenon in the first place: namely, that it eliminates the need to use banks and credit card companies — that can charge fees for moving money around — and allows for more efficient management and control over your money.
However, the fundamental system can remain complicated for a non-technical person. And because there are high rates of fraud, many exchange services can charge people who want to buy and sell Bitcoins fees of up to 20 percent.
To get around these problems and extend the potential benefits of Bitcoin to everyone, Bitit now lets people walk into physical stores and buy the virtual currency with cash. The startup also lets people purchase Bitcoins online through the company’s website.
And soon, people will be able to buy plastic gift cards or electronic vouchers to give as presents. The company currently has the Bitcoin gift cards for sale as part of a trial at La Maison du Bitcoin in Paris, a meetup space for people working on projects related to the virtual currency.
The key to Bitit’s process is that it has arrangements with partners (it can’t reveal the names) to buy Bitcoins on a regular schedule. At the moment, many users have been reporting that it can take a week or more for the Blockchain to process a transaction. Bitit eliminates that delay for users by having the Bitcoins ready to deliver in as little as 10 minutes.
The trick, and what Bitit hopes will be its secret weapon, lies in algorithms it has written to help minimize its risk profile. This works by carefully balancing the rate at which the company buys Bitcoin and the rate at which customers purchase the currency.
Also, its system is designed to minimize the risk of fraud. People can buy up to $25 worth of Bitcoin with no paperwork. They can buy up to $500 after that, but must submit a series of documents to confirm their identity in the system.
“Our value creation is how we manage the risk,” Katan said. “When you say Bitcoin and credit card, you think: fraud.”
Anyone wanting to buy or gift or receive Bitcoins via Bitit still needs a Bitcoin wallet. Bitit hopes to eventually develop its own, but for now, users will need to use a third-party solution.
It should be noted that Bitit is not the only company trying to tackle these issues. For instance, BitAccess has deployed Bitcoin ATM machines in the U.S., Canada, and Europe that let folks deposit cash and receive Bitcoins. The company also recently struck a deal with Flexepin, which also lets people buy vouchers for online purchases. The new partnerships will allow people to buy Flexepin vouchers to use with BitAccess in 6,000 locations in Canada.
In the U.S., LibertyX is pursuing a similar strategy. The company says it now has 19,000 partner stores in the U.S., where people can purchase a Bitcoin voucher from the cashier with cash.
From the start, Bitit says it is available in any one of 100,000 stores, thanks to a partnership with Neosurf. Like Flexepin, Neosurf makes vouchers that let anyone use cash to buy a special gift card. That card can then be used to make one-time purchases on the Internet. But Neosurf is already more widely in use, which means it can give Bitit access to its 100,000 store partners.
It’s a good jump-start for a small startup that has yet to raise its first round of funding. The company was just formed last year, with the support of Paris’ The Family, a startup incubator that gave Bitit $20,000 last year to get started. And so far, Bitit has processed about $60,000 worth of Bitcoin transactions.
Katan said he is currently in the process of raising the company’s first official round of venture capital so he can expand his three-person team.
“We are going to have a lot more transactions,” he said. “It’s growing really fast. We have to be ready to continue to adapt our fraud system and make people know they can trust us.”