Imagine sending cryptocurrency as easily and safely as sending a text to a friend. That’s precisely what new startup Coincast recently launched to do, and just in time as well: Facebook is just starting to bring its Novi digital wallet technology to WhatsApp in the U.S., enabling no-fee simple crypto transactions via the USDP stablecoin.
But this isn’t just stablecoins.
Coincast allows you to send mainline cryptocurrencies like Bitcoin and Ethereum to people who don’t even have a digital wallet yet.
“We are making it … as simple as sending a text message,” CEO Albert Renshaw, who just closed a series A round of investment, told me in a recent TechFirst podcast. “You can send Bitcoin or Ethereum to someone’s phone number. And even if they don’t have a wallet or have any crypto experience, the funds will get transferred to this intermediary wallet on-chain that only they will have access to, or you the sender will have access to.”
For users, this is simple.
Coincast aims to make crypto simple
Photo by fabio on Unsplash
But on the backend, Coincast does a lot of complicated math to enable this “intermediary wallet” because it does not take custody of the cryptocurrency in transit. Rather, Coincast actually deletes a part of the private key that secures cryptocurrency in non-custodial wallets and then literally brute-forces that part when someone received the funds. (If you’re not a crypto person, non-custodial wallets are cryptocurrency wallets that you — and only you — control, or have custody over. They are secured by long and complicated “private keys:” essentially a password. Lose that password, and you literally could lose access to the cryptocurrency forever.)
“The nice thing is that the user is completely ignorant to all this … they’re just getting a withdrawal PIN and entering the PIN, and then it says ‘loading’ and then they have their money,” says Renshaw. “They don’t actually know that it’s part of a brute forcing process or anything like that.”
Making crypto easy is important if the next billion people are going to start using digital cash, minting NFTs, and participating in web3 projects.
Right now, it’s simply too hard and too high risk for most: crypto can get lost in transit, it can become inaccessible on your very own smartphone, or even lost in cold storage or a hardware wallet.
While the regular world of finance has its own issues and complexities, these new challenges, along with all the forest of apps and terms and platforms in the emerging world of cryptocurrency, keeps potential users and adopters at bey.
“Right now … if you’re using something like Coinbase Wallet, typically you’re going to be using Bitcoin addresses or Ethereum addresses, they’re long strings of hexadecimal characters and things like that,” says Renshaw. “You might use QR codes, that’s an easy thing. But in our opinion, everyone has a phone number and so it just gets really easy to just send crypto via phone number.”
Part of the impetus: Renshaw telling relatives about Bitcoin years ago.
Despite the fact that it was cheap and available, most didn’t take his advice and buy any, simply because buying and storing crypto was hard. It’s gotten easier over the years, but it remains challenging for many.
Using a custodial wallet, like the Coinbase website, is easier. (Note: Coinbase Wallet and Coinbase are different things.) Coinbase has custody of cryptocurrency that you store and manage on the company’s website, and that has some advantages for accessing, trading, and cashing out.
But it does mean you’re not fully in charge of your own currency.
And it also means that customers have to go through Know Your Customer (KYC) and Anti-Money Laundering (AML) protections, which means extra hassle and challenge in getting starting. (I tried to give my kids a little bit of crypto. They gave up before I could send them any.)
Crypto is already so hard — and irreversible — that even cryptocurrency companies regularly send funds mistakenly. Decentralized finance platform Compound recently sent $90 million of its own tokens to the wrong people, prompting the CEO to beg for people to voluntarily return the funds.
Anything that makes it easier, therefore, is probably a good thing.
Including recovering from a disaster scenario: lost crypto.
Despite the fact that Coincast is a non-custodial wallet, there is an option users can enable that will allow Coincast to recover lost funds.
“We actually secure users’ wallets with a process we’ve created called Presign Protection, and this is something that’s patent pending as well for us,” Renshaw says. “If the user’s opted into this, they don’t have to, but if they have, we actually sign a transaction that essentially drains your wallet into our corporate cold storage. We don’t broadcast the transaction. We just sign it ahead of time so that it’s a valid transaction. We then encrypt it with high 256-bit encryption and store that on our servers. So theoretically, later on a year from now if you realize, ‘I forgot my PIN, I don’t have access to my wallet,’ we can then go through the courts or some process like that and verify ownership.”
Hard-core crypto aficionados will never do that.
But grandma might, and while it requires trust the Coincast won’t do nefarious things with your funds, it also provides peace of mind that the Ethereum that you forgot about in 2021 and is worth $250,000 in 2030 … is actually recoverable.
Renshaw doesn’t plan to stop with texting crypto. Next up is interfacing with DApps (decentralized apps) and web3 projects, plus NFTs.
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