These Smart Banknotes Could Bring Crypto To The Masses
2017 saw cryptocurrencies take us by storm; bitcoin’s meteoric rise woke the world up to the possibilities of distributed ledgers and their potential impact. It sent investors into a flurry of speculation and FOMO. At one point the digital currency surged more than 1,900%. All the talk has even got Wall Street dipping their toes in. It seems crypto is no longer considered an ephemeral rush and the technology behind it, blockchain, is proving as profoundly revolutionary as the internet was and is.
Every successful technology navigates a Cambrian era of growth before it figures out what it’s best used for. Blockchain and cryptocurrencies are arguably in their one-size fits all stage. The issue being one-size never fits all. What of the sceptic, the technically unsophisticated, the conservative, the one sitting on the fence? How do we get crypto to them? People love crypto because it’s a decentralised trust-less system that needs no middleman — it allows digital exchange of value using existing computing power. That’s great! But managing private keys and buying and selling crypto is complex; you need to open an account on an exchange, get a wallet, manage keys and passwords. In most countries you need to pass lengthly and complex Know Your Customer hurdles. There’s just so much friction involved; a transaction takes a long time, uses a lot of energy and involves a lot of risk (bitcoin is very easy to lose). The sceptic or the average Joe just isn’t going to bother. Would not something tangible, accessible, easy to grasp and less of an illusion be so much easier? Like a physical crypto bank note? Why not allow the masses to skip this digital cash metaphor and revert to something simpler, almost reminiscent of China’s easily receivable Hong Bao (红包). Here I chat with Andrew Pantyukhin, Co-Founder at Tangem, who is changing this paradigm and bringing physical crypto to the masses.
What does Tangem do?
Tangem is the first physical manifestation of digital assets. We are the first real physical bitcoin — the first tangible bitcoin. Tangem notes are smart banknotes with a special chip that carries cryptocurrencies or any other digital assets. With these banknotes you can conduct physical crypto transactions by just handing them over or receiving them. Unlike using crypto currency online, physical transactions are immediate, free, anonymous and there are no fees. They are truly decentralized, meaning it will never be restricted by technological limitations.
Where can you get them?
You will be able to get them all over the world, from corner stores, retail chains, special ATMs, or people that already have them. You use them exactly like cash, but it’s not fiat currency backed by a government, it’s crypto!
Why did you create Tangem?
It’s like champagne — it was a bit of an accident! We have one of the most unique microelectronics teams in the world that can program secure elements natively — it’s a very rare set of skills. When cryptocurrencies started gaining traction around 2014— 2015, we started researching what we could do in this field and how we could apply ourselves. We thought about smart cards that would carry value but it was impractical at the time. The chips were too slow, lacked elliptic cryptography support, were too insecure, or too power hungry, or prohibitively bulky and expensive.
Because of our microelectronics exposure we had good working relationships with all major chipset vendors in the world like NXP, Samsung and Infineon. At one point when we were talking to one of them, trying to implement cryptocurrencies on smart cards, they told us that they had on their unannounced roadmap a chip family that would do everything we needed at a great yield and price point. We got relevant information and specs of the chip, and samples months before anyone else in the market. Now there are several such chips in the market and we became the first major client and use case for them in the world.
Why is it possible now?
In 2017 we saw a minor breakthrough in chip technology. Historically we had two directions in embedded chips: one that was super secure, designed to be «unhackable» — the so called «Secure Element», and the other that was powerful and versatile enough to handle elliptic curve cryptography and complex calculations. Last year certain types of secure elements gained support for advanced cryptography, embedded flash memory, while achieving even higher levels of security certifications, lower power consumption and incredible affordability. Even the 65 nanometer variants are extremely thin, small and physically resilient.
Why are these smart banknotes considered unhackable?
It makes the cost of hacking a single banknote uneconomical that it’s not worth doing it. Moreover, hacking a single banknote doesn’t give you access to other banknotes.
The tamper-proof chip technology has been developed and continuously improved for decades for military and government applications — like identification and access control, or for the financial services and telecom industry, recent credit cards and SIM cards. The technology addresses all known attack vectors on hardware and software levels.
Why does the world need a smart banknote when everything is digital?
It’s really very simple. Crypto is still very difficult to use; it requires a steep learning curve. The users have to go through so many steps that are complex and tiresome. With a physical bank note all you need is the bank note and there is no need to learn or know anything about crypto currency. Everyone knows how cash works. We don’t need to teach you anything. Plus everyone knows how to keep things physically safe — you don’t need highly sophisticated digital skills.
What’s the market size?
Today we believe there are only around five million people actively trading and using cryptocurrencies, i.e. having over 100 dollars in crypto and most likely 20 million wallets. The global awareness of cryptocurrencies is about a billion people today. We believe the demand will come from that one billion and that’s the market we are going after. That’s the current demand and it will grow quickly to seven billion once we remove the barriers to use.
Besides cryptocurrencies what are the other applications?
We are still treating cryptocurrencies with our perception of fiat currencies; controlled, centralised and tied to GDP. What we don’t yet appreciate is what happens when anyone can release their own private, regional, industrial, corporate currencies at almost no cost and circulate them infinitely throughout their employees, partners, customers — that would qualitatively change everything we know about currencies, economics and monetary mechanics. I think that’s the most interesting effect we are going to see.
So it’s not just about existing money, the whole definition and perception of cash is going to change once we drop the cost of introducing a new currency to almost zero.
Of course, we are also thinking about going after other segments. These chips are super secure, they can be used for government identification or commercially issued identification. They could be used for loyalty cards, gift cards, ticketing, any applications that require digital proof of something physical, or physical proof of digital assets. We are a new way of tying the physical and digital together, which has never been done before. Inherently we treat digital as easily copiable and this technology guarantees it cannot be copied. That again has never been possible or practical before.
On that note, is there anyone else that is doing what you are doing or similar to what you are doing?
The set of technologies we use is emerging and will be available to everyone in the coming years. We were very lucky to have most of the required software stack and talent even before the latest advances became available. So we could just divert our engineering resources to the new project. That was extremely lucky. It took us altogether about three years to develop that software stack and expertise — it would take a minimum of one to two years for a competitor with unlimited funds to get to the same level of functionality and security. Obviously, by the time they get there we hope to be light years ahead.
How expensive is it?
Current production cost for us is under $2 per item — we’re making millions of units now. When scaling it to billions of units it will be in the same ballpark as modern paper bank notes. It’s a no brainer for most governments to switch their legal tenders to this tech in the future. One of our long term goals is to extend the national blockchains that certain governments are developing to their physical currencies.
Finally, what’s the next goal for Tangem? We’ve developed the technology to grow cryptocurrencies to the first billion people, now it’s also up to us to develop distribution and commercial partnerships to physically get this technology in the hands of billions of people around the world.
Original article here.