21 Inc, ‘Decommoditizing Mining’

(21 Inc. Investor presentation slide via FT Alphaville)

Ever since 21 Inc‘s CEO Balaji Srinivasan made an unusually forthcoming announcement, about the company’s plans, details of their products and intentions have been slowly leaked.

The original blog style announcement was full of new details. Srinivasan himself has officially taken the lead as CEO, while former U.S. treasury secretary Larry Summers has joined the board of directors. This makes Mr. Summers the highest ranking former government official involved in a digital currency startup.

The post continued to describe the company’s direction, which is centered around a chip embedded in everyday electronics, the BitShare ASIC microchip. We also learned that Cisco has made an investment in 21, and is a named partner developing a product line with the integrated BitShare chip.

Perhaps the most interesting part of the announcement was the revelation that the BitShare chip is not simply for mining Bitcoins. The chip enables devices to earn small amounts of bitcoin to spend in the upcoming Internet of Things. This could also include using colored coins for asset tracking and smart contracts.

“at 21 we are less concerned with bitcoin as a financial instrument and more interested in bitcoin as a protocol — and particularly in the industrial uses of bitcoin enabled by embedded mining.”
— – Balaji Srinivasan, 21 Inc CEO

The plan, according to some leaked 21 Inc. investor slides, is to roll the BitShare chips out in three phases. The roll out starts with small devices such as USB charging hubs, which would cost a little more than the USB hubs currently available.

(21 Inc. Investor presentation slide)

From there they plan to jump to OEM devices like routers, printers, and gaming consoles. Instead of building entire devices themselves, the company is asking manufacturers to add the BitShare chips to products. According to the leaked documents they will share any revenue with manufacturers, to secure these contracts.

The final stage is to get CPU manufacturers such as Intel and AMD to integrate their BitShare chips, enabling seamless integration of all electronics in the IoT.

"The 21 BitShare can be embedded into an internet-connected device as a standalone chip or integrated into an existing chipset as a block of IP to generate a continuous stream of digital currency for use in a wide variety of applications."
— – Srinivasan

They aren’t stopping at hardware, 21 Inc. realizes that it will take much more to bootstrap the micropayment revolution across their greater target market: All consumer electronics.

"Our team of PhDs in EE from MIT, Stanford, and CMU has built not just a chip, but a full technology stack around the chip — including reference devices, datasheets, a cloud backend, and software protocols "
— – Srinivasan

According to NY Times reporter Nathaniel Popper in his latest book "Digital Gold: Bitcoin and the Inside Story of the Misfits and Millionaires Trying to Reinvent Money" 21 Inc. was originally founded in 2013 as "21e6," strictly as a top-secret mining operation for high-net-worth clients who couldn’t otherwise come out in support of bitcoin. Back then the companies $5M fundraising round was the third largest investment in bitcoin history. As the price of bitcoin skyrocketed in the Fall 2013 the original investors, a whos-who list of the Silicon Valley elite, would have made substantial gains.

As China quickly became the market leader in hashing power, and Bitcoin’s price steadily declined through 2014, Srinivasan made a decision to change the focus of his company. The freshly funded 21 Inc is still focused on mining, but on a widely distributed scale.

The company’s apparent focus on interconnected appliances has been the cause of much debate and speculation throughout the Bitcoin community. While some scoff at the not-exactly-generous sounding 75%-25% mining pool proceed split in favor of 21 Inc, Mr. Srinivasan explained in his announcement Monday that the idea isn’t to make consumers bitcoin rich; It’s to give their devices an “infinite stream of digital currency” to engage in micro-transactions.

(21 Inc. Investor presentation slides)

In theory doing so would help bootstrap a new mode of commerce that is otherwise impossible with legacy financial tools, “bitcoin will ultimately be seen as a fundamental system resource on par with CPU, bandwidth, hard drive space and RAM,” Mr. Srinivasan explained. “It’s Bitcoin for convenience, not profit.”

Rumors about 21 Inc.’s plans have been circling for over a month, with stories about bitcoin-mining toasters for consumer profit and a much more likely internet-extending femtocell device from Qualcomm. The femtocell device attempts to tackle exploding Mobile data traffic,  and accepts bitcoin payments for internet access.

(21 Inc. Investor presentation slide)

If the investor presentation slides are to be taken at face value, 21 Inc. plans to rapidly roll out their BitShare chips providing, “A miner in every device in every hand,” by the end of 2015.

This ambitious goal relies on the BitShare chip tapping into a variety of markets . For 21 Inc, those chips could enable radically lower costs for their own mining operation, earning bitcoins from potentially billions of different miners without paying for electricity.

To hardware manufacturers such as Intel, Qualcomm and Cisco, the chip could potentially open up whole new markets as an, “enabling technology that expands well beyond digital payments.” stated Padmasree Warrior, Chief Technology & Strategy Officer at Cisco.

A key driving force in the chips adoption would appear to be that 21 Inc is offering hardware manufacturers an ongoing revenue stream, a share of the 75% stake in the bitcoin mining. If so, hardware manufacturers could view this deal as irresistible.

To your average Bitcoin enthusiast these chips could very well be the “killer app” they’ve been searching for. Enabling machines to create a bitcoin economy of their own, while putting bitcoins in users hands, could cement Bitcoins place as the premier digital currency.

And to the customer of these products, they should prove to be a near-bottomless well of cheap and accessible satoshis, for use with future bitcoin-requiring applications.