Bitsquare Interview Featured image with logo


Featured Interview with Manfred the founder

Founded in Jan/2014

1 Founder, 1 Full-time, 2 Part-time

Updated Apr/17

Bitsquare is an open-source desktop application that allows you to buy and sell Bitcoins in exchange for national currencies, or alternative crypto-currencies.

Bitsquare founder Manfred has created a game changer with the first working (to my knowledge) decentralized Bitcoin exchange (and other crypto-currencies). I have tried the platform out and I love it, but it needs the critical mass of users to be effective. After reading this interview I highly recommend you look at the details of Bitsquare on their site, download the software and try it out for yourself!

When was Bitsquare founded?

I started the project in January 2014. First it was only a concept to see if a decentralized exchange could work. After discussing the concept in various forums I hoped to find developers to implement it. As no developers showed up I decided to build a prototype in the expectation it will be easier to find developers with a working example. After a few months I got a working prototype where I could demonstrate a trade with the MultiSig and a P2P network. Over the next year a small team gathered and the project started it’s journey…

Are you the only founder? How many other people are working on the project?

Yes I am the only founder. At the moment there is another full-time developer and two part time developers as well as a bunch of contributors in different areas.

When did you first get into Bitcoin? How did you hear about it and what was your first thought?

I heard first about Bitcoin in spring 2011. I got very excited immediately and thought: Wow that is the most important invention since the Internet. I saw (and see) it as a very disruptive force that will fundamentally change our financial institutions as well as force governments to redefine themselves (as a service provider for society and not as the central control and power entity). Money is a fundamental element in society.

What gave you the inspiration to create Bitsquare?

I thought that the fact that there was no decentralized exchange to get in and out of Bitcoin was one of the big missing pieces in the Bitcoin ecosystem. There were some rough ideas out around building one and I though it seemed possible, and so I started to figure out how it could work.

What is your technical background?

I am a software developer since I was about 17 years and I was musician before that. On the software side I have my roots in UI and game development.

What do you do on a day to day basis at the moment and what is your team doing?

I try to focus on development but I am also busy with all kinds of organizational work and support. The re-branding (we will re-brand to bisq with the next release) also took quite a lot of time. Our team members are helping in many different areas from communications to organizational tasks.

Most of them have full-time jobs and families so they are restricted in the time they can spend. Besides them there are a few developers working on different parts of the project and a wider group of contributors and supporters who help with translations, support on the forum, spreading the word.

What is Bitsquare Video:

How are you going to make money from Bitsquare or is it a not for profit?

At the moment there is only the trading fee payment to the arbitrator which is a revenue stream, but as the fee is very low that is negligible. Another source is donations, but also that is far below a level to fund professional development.

We see the gap between non-profit open source projects and commercial startup based structures as a fundamental problem in our society. It is a problem to earn money if you create real value for others (as many OS projects do) but if the particular project does not fit the classical commercial paths.

On the contrary it is very easy to earn a lot of money if you are working in a company creating damage for society. I think that has to change. We need other models to enable the sleeping potential of those who want to provide value to society but have no possibilities to do it.

The DAO might be the vehicle to fill that gap. This is the background why we are working on a DAO model. In Bitsquare there is much work to be done but little chance to earn money in the current state. The basic values of the project are not really compatible with commercial company structures.

So we need a compatible model for funding the open work which fits the project. Our DAO has nothing to do with TheDAO or Ethereum and I was opposed for a while to use the term DAO because of the association with TheDAO. But it still is the best description for what it stands for: A Decentralized Autonomous Organization.

We use a token based on Bitcoin (kind of colored coin) and will contain voting and a rewarding model for contribution. It will be launched soon (May) and I hope I find time soon to write up the paper for the public.

It will make all contributors, token holders and will help us to scale up and serve as a sustainable funding model.

Can you describe the process of turning your idea into a reality?

I think this is not very common in software development, but I usually start with the UI. The user experience and input is what leads me to the underlying business logic and data structures.

That comes mainly because of my background in UI and game development but I also see usability as a very important aspect, especially also in relation to privacy and security.

The lack of good usability and UI is one of the main reasons why so many people are not using the great tools to protect their privacy and giving them a higher level of security.

Can you walk me through the critical components of Bitsquare?

On the technical infrastructure there are mainly 3 core elements: The P2P network, the Bitcoin related part (wallet) and the trade protocol. Soon there will be the DAO layer as well. The P2P network is a gossip network similar to the one used in Bitcoin.

We route all traffic over Tor (it is integrated so the user does not need to setup anything). With that we get the high privacy protection of Tor on the transport layer.

On the Bitcoin side we use BitcoinJ as SPV client with a HD wallet. We have rough plans to move over to Bitcoin Core as soon there is a SPV model available. There is work going on in that direction and if that succeeds we can use Bitcoin Core inside Bitsquare similar to how we use Tor with no higher resource requirements as BitcoinJ. That would solve a critical privacy flaw with BitcoinJ as well as giving us the advantage of always being up to date with the latest release of the Bitcoin reference implementation and getting all the new features as soon they are out. For the user there will be no visible difference.

The trade protocol is a handshake protocol between the two traders. They exchange a couple of messages to establish the trade contract. The P2P network is the layer for delivering and in case a peer is offline to store the messages.

Screenshot of the trading platform

Bitsquare screenshot

What is the greatest challenge you have faced?

The P2P network was probably the hardest part on the technical side. We had to change our initial solution and started over again.

Beside technical challenges there is the difficulty of trying to bootstrap to get the required network effect.The chicken and egg problem (there are not enough traders so traders will not use it – thus causing the effect that there are not enough traders) is difficult for all projects who need a network.

We managed to bootstrap organically but overall trading volume is still low. We have been doubling our volume every 2 months but probably the lack of continuous promotion activities kicked us a bit backwards the last months. Though the overall user base has grown as we see in the high numbers of downloads (currently at over 58,000)

I expect that the DAO will give us the required resources to scale up. There are simply not so many people who can afford it or who are motivated enough to work on such a project without getting paid. And to drive such a project to a larger scale, it needs much work on many fronts.

What would be the best case scenario for Bitsquare in 5 years time?

(Manfred’s response here blew me away – most people say their business will be booming to this question but his best case was very altruistic)

The best scenario would be that our governments and financial institutions will reform themselves in such a positive way that the main factors why people would use Bitsquare (protection of privacy, security) will not be important as there are no problems in that area.

Then Bitsquare would fail due to the lack of demand as we would be living in a free and prospering world. I would be perfectly fine with that!

If our governments and financial institutions turns out to not respect our right of privacy then I see a lot of demand for Bitsquare.

There are also many ideas for extensions and sub-projects – so if the DAO succeeds and there are enough people working to make those ideas a reality, we might see a platform based on privacy protection by default. Permission-less innovation and participatory ownership.

The basic infrastructure of Bitsquare (P2P network, Bitcoin wallet, interactive protocols, DAO funding, voting and governance, etc) can serve as a base for much more than an exchange. Especially the DAO might turn into its own project which might be the root for other new projects.

But I try to focus on today’s work, enough work here to not spend too much time on future fantasies.

What are the biggest factors in your success so far?

To have such a great community! I am surprised how often people are expressing their gratitude for the project and how much support we get from many different angles.

What is your advice to someone who wants to create a similar business to your one?

Do what you really believe in. Don’t think on the money side. Try to have enough cash reserves to be able to stay independent.

If you could start again what would you do differently and why?

I asked that myself a few times 😉 But honestly there is not too much besides technical details…

The main decisions to never take money from investors, to not start a classical company, to not get stressed too much by not earning money.. All that I would do exactly the same way again.

Do you have a marketing strategy to get new users on board at this stage? It seems that the program is working perfectly but you need users now?

Yes marketing is for sure our weakest point. We are working to get more support in that area but it is difficult to find the right people. Andreas Antonopoulos would be our dream candidate but he is not for hire 🙂 Our high standards and expectations does not make it easy.

We don’t like the classic PR that many companies are doing. We are different to companies and that needs to be reflected in the way we promote the project. Paid articles or advertising does not fit our brand and values.

The way the Swedish pirate party has bootstrapped it’s community is one of the strategies which would fit well with Bitsquare. Rick Falkvinge has written it down in his booklet “Swarmwise – The Tactical Manual To Changing the World”

Anyone who is interested to join Bitsquare should read that booklet.

What do you need from the community to help grow Bitsquare?

Supporting us by spreading the word and using Bitsquare for trading is what everyone can do. Professional traders and market makers are very welcome to help us to provide more liquidity. There is quite a good arbitrage opportunity as well.

People with certain skills are welcome to contribute and become part of our DAO. We are always looking for developers (Java), promotors, translators (we have started to translate the application into 22 languages).

Anything else you would like everyone to know?

We are looking forward to hopefully announce soon the details about our DAO model. We are very excited about that and hope we can share that soon!

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