Foxconn's entry heats up race for first mass-market Bitcoin-friendly phone

Apple Inc supplier Foxconn has agreed to manufacture a blockchain phone from startup Sirin Labs. The contract electronics maker's entry has heated up the race for a phone aimed at digital coin aficionados.

Bitcoin and other crypto-currency users may soon not need to carry their cryptocurrency-laden memory sticks to make daily purchases or memorize usernames and lengthy passwords — a smartphone would suffice.

At least three technology startups are planning to roll out as early as this year blockchain-based handsets or operating systems that will make it easier for people to securely store and use digital coins among other things.

"Interest in blockchain is driven by the multiple applications this technology lends itself to. In 2017, many companies across a wide range of industries started to understand the feasibility, sustainability, and potential deployment of blockchain, International Data Corporation (IDC research analyst Carla La Croce told DW.

"But 2018 can be defined as the year of blockchain."

Nature and Environment | 18.04.2018

Read more: Bitcoin's blockchain technology now employed to trade gold 

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What is a cryptocurrency?

Bringing cryptocurrencies to masses

Raising the stakes is Taiwan's Foxconn, the world's largest contract electronics maker and a key Apple and Amazon supplier.

A Foxconn unit has agreed to develop and produce a blockchain-based smartphone from Swiss-Israeli technology startup Sirin Labs, Bloomberg reported last week.

The new smartphone, called the Finney, will let users "shop on crypto friendly sites like Overstock.com and Expedia, converting cash into specialized tokens if needed," Bloomberg said.

Users may also trade battery power with others and get paid in tokens or earn by simply allowing a tourist to browse the internet using their phone's Wi-Fi.

"Blockchain technologies and cryptocurrencies are considered to be too complex for 99.99 percent of the population," Sirin said in a white paper, adding that Finney will help bring cryptocurrencies to the masses.

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Bitcoin: Where it came from and where it's headed

Good time to start a currency

Introduced in 2009, Bitcoin was the world's first decentralized digital currency. It quickly gained traction amid lingering uncertainty in the wake of financial crisis. Designed to be as rare as gold, Bitcoin was created to have a maximum of 21 million "coins." Initially worth just a fraction of a cent, by February 2011 the currency had gained parity with the US dollar, then it really took off.

Bitcoin: Where it came from and where it's headed

An anonymous founder

The name Satoshi Nakamoto is synonymous with Bitcoin. It is said to be the alias for an unknown IT whizz who invented the cryptocurrency. But despite claiming to be a 30-something Japanese national, it is generally thought that several computer science experts created the technology behind the digital coin. One rumor even suggested that Tesla chief Elon Musk is the real Satoshi, which he denied.

Bitcoin: Where it came from and where it's headed

So no coins then?

Instead of being printed like dollars and euros, each Bitcoin is created on a global network of computers and verified by the system rather than a bank. There are no transaction fees. The smallest amount you can buy is a "Satoshi" or one-hundred-millionth of a Bitcoin. Purchases can be made anonymously and even at digital currency ATMs. When you buy Bitcoin, it is often stored in a digital wallet.

Bitcoin: Where it came from and where it's headed

Complex puzzles

To ensure that not too much Bitcoin comes into circulation, a process called mining was created where blocks of transactions could only be processed once a difficult math problem was solved by geeks. The puzzles are becoming so complex that bigger and bigger computers are being utilized to decipher them. That's led to concerns about the amount of electricity used to handle Bitcoin transactions.

Bitcoin: Where it came from and where it's headed

Are Bitcoin fortunes legit?

Due to its anonymous nature, Bitcoin's success is likely being fueled by organized crime, including money laundering and the purchase of illegal goods. The currency is also being targeted by cybercriminals. A recent hack blamed on North Korea forced a South Korean digital currency exchange into bankruptcy. Reports suggest the "Islamic State" armed group used Bitcoin to receive funds to buy arms.

Bitcoin: Where it came from and where it's headed

Bitcoin leads, others follow

Bitcoin is the largest of all the cryptocurrencies and its incredible rise has spawned many imitators. Other large digital cash creators include Ethereum, Zcash, Bitcoin Cash, Ripple and Litecoin. As of November 2017, their number had swelled to 1,324. Hundreds of others have attempted and failed to launch their own digital coins. The market is now coming under increasing scrutiny by regulators.

Bitcoin: Where it came from and where it's headed

Watch it skyrocket

2017 was a stratospheric year for Bitcoin. Worth close to $1,000 in January, some twelve months later it had scaled to an all-time high of $19,784. Despite much skepticism, the currency started to see serious interest from institutional investors. Two exchanges began Bitcoin futures trading, allowing speculators to punt on the incredible volatility in the value of the cryptocurrency.

Bitcoin: Where it came from and where it's headed

Warnings abound

From central banks to respected investors, almost the entire financial establishment warned of a massive Bitcoin bubble, which they said can only end in disaster for holders of the digital currency. Among them was Nobel prize-winning economist Joseph Stiglitz who said Bitcoin "ought to be outlawed." Jamie Dimon, the CEO of JPMorgan Chase labeled those who buy the currency "stupid."

Bitcoin: Where it came from and where it's headed

The shape of things to come?

Just before Christmas 2017, Bitcoin saw a dramatic rally, topping out at nearly $20,000 before losing a third of its value in just five days. More intense volatility followed early in the New Year, only to be reversed when it plummeted by almost half. Are we in for an even bigger rollercoaster ride if Wall Street adopts Bitcoin?

'Minefield of legislation'

And working towards a similar goal are two other startups — Hong Kong-based Zippie and Ireland-based Embedded Downloads.

The latter has already shipped some units of its blockchain-friendly phone, called Bitvault, to its military customers in Asia.

The Bitvault maker says the device, with preinstalled cryptocurrency wallets, does not store users' security keys. Users are required to create private and public keys using biometric identification every time the device is used.

While the startup has not taken any "definite decision" on shipping its phones directly to consumers, Chief Executive Hein Marais told DW that it has been approached by some mobile phone makers to license the technology and that he was open to the idea.

Discouraging Marais from taking his multi-layered encrypted smartphone to masses is what he calls a "minefield of legislation."

"Due to anti-terrorism laws, law-enforcement authorities are becoming increasingly wary of encrypted devices and want a backdoor to enter the devices," Marais said over the telephone.

"And that defeats the purpose." 

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Embedded Downloads has already shipped its blockchain-enabled Bitvault phones to its military customers.

Grandma-friendly technology

Rival Zippie has chosen a different path. It is developing a mobile platform — compatible with several Android devices.

The platform, among other things, will allow smartphone users to choose which data to share and be paid in cryptotokens for sharing their data with the big data firms.

"Companies are monetizing data but are not sharing the profits with users. With Zippie, the users will be at the center of the ecosystem," Zippie founder Antti Saarnio told DW. "They will no longer lose control over their data."

Saarnio hopes switching to Zippie and its blockchain-based services and apps would be a "seamless experience" for existing smartphone users. The platform will automate creation of cryptocurrency wallets and storage of private keys.

"This will allow users to send cryptotokens to even their grandmas," said Saarnio. "After all, I can't expect my grandmother to create a blockchain wallet."

Zippie will automate creation of cryptocurrency wallets and storage of private keys

Overcrowded smartphone market

But breaking into an already overcrowded smartphone market is not going to be easy for the startups — a reason why Embedded Downloads is for now targeting only enterprise customers and Zippie has stayed away from making a handset.

But Sirin is undaunted. It aims to ship from 100,000 to a few million units this year, Bloomberg reported.

The Switzerland-based startup plans to sell the device through eight new stores, located in places with the most active cryptocommunities, such as Vietnam and Turkey, Bloomberg said.

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