The coronavirus pandemic accelerated the world’s digital transformation through the increased use of online banking and mobile payment services. As the use of cold, hard cash becomes less common and the value of the dollar weakens, more individuals and companies are showing interest in digital assets like cryptocurrency.
Investopedia defines cryptocurrency as a “digital or virtual currency that is secured by cryptography, which makes it nearly impossible to counterfeit or double-spend… A defining feature of cryptocurrencies is that they are generally not issued by any central authority, rendering them theoretically immune to government interference or manipulation.”
Bitcoin is the world’s most prominent form of cryptocurrency. As of February, more than 46 million Bitcoin wallets had been created worldwide. Bitcoin offers the promise of transaction fees that are cheaper than traditional online payment mechanisms, and it’s operated by a decentralized authority, unlike government-issued currencies. It’s not legal tender and exists only as balances kept on a public tender, but it’s gaining in popularity. Finder, an Australian financial services firm, surveyed more than 2,000 Americans in 2019 and found that cryptocurrency use in the United States had almost doubled to 14.4 percent from the previous year.
And, it’s spawned a whole side industry of virtual currencies and related ventures. Examples include Grayscale Investments, the world’s largest digital-asset management firm, which saw a 90 percent increase in the number of shares issued between the first and second quarters of this year. The firm also increased its total assets under management by nearly $1 billion in 11 days in July alone. As of Aug. 14, Grayscale had $5.9 billion digital assets under management, with Bitcoin representing $4.9 billion.
One publicly-traded business intelligence company, MicroStrategy, adopted Bitcoin as its primary treasury reserve asset just last month. It purchased 21,454 bitcoins, accumulating 0.1 percent of the total supply, with $250 million.
MicroStrategy CEO Michael J. Saylor said in a statement that its investment reflects the company’s belief that Bitcoin holds more long-term appreciation potential than cash.
“Since its inception over a decade ago, Bitcoin has emerged as a significant addition to the global financial system, with characteristics that are useful to both individuals and institutions,” he said.
Bitcoin was created in 2009 as a decentralized, peer-to-peer network that allows users to instantly send and receive payments with little to no transaction fees. All Bitcoin transactions are permanently recorded and stored in the open-source blockchain. However, each user has a wallet, in the form of a physical hardware device or software program, to store and trade bitcoins.
One Arkansas native from Greenbrier is making sure that Bitcoin users have a safe and secure wallet that is easy to use. Jacob Johnston, 23, was first introduced to Bitcoin in 2012 by a friend on Minecraft, a popular video game. Today, he is the co-founder and head of supply chain for Foundation Devices.
“When I first heard about Bitcoin, I read the white paper because it was only a few pages,” Johnston told Arkansas Money and Politics. “I barely had a bank account at this point in my life, but I was lucky that my parents and grandparents taught me how to manage my finances at a young age.”
After a trusted friend offered to sell a portion of Bitcoin to him, Johnston set up a wallet on his computer and used PayPal to send the initial payment.
“I didn’t do much with it after that until I ended up in boarding school at the Arkansas School for the Sciences, Mathematics, and Arts in Hot Springs,” he said. “As an incoming junior, you are tasked with creating a research project to work on to present at the yearly science fair. I chose Bitcoin, and decided to write a program that would estimate how much it was being gambled online.”
Johnston’s interest in Bitcoin “never really wavered” as he continued to accumulate and trade after graduating high school. He also told friends about it and became involved in the different communities centered on the idea of an open-source method to store and trade value.
While Johnston attended Hendrix College to pursue a bachelor’s degree, he ended up taking a leave of absence in 2016 and moved to Boston to start a career in the cryptocurrency hardware industry.
Foundation Devices was founded in April 2020 by Johnston and three peers: Zach Herbert is the CEO and head of product; Ken Carpenter is head of software; and Matt Beach is head of circuit engineering. The team previously worked at Obelisk where they crowdfunded, manufactured and sold more than $26 million in cryptocurrency mining hardware.
The company recently launched its first product — Passport — an air-gapped, cold-storage Bitcoin hardware wallet assembled in the United States which has a camera for scanning QR codes, a physical keypad, open-source software and a screen with the circuitry etched directly into the glass.
According to Johnston, Passport is a “premium device” with its security features and materials used. It does not have any USB ports or wireless communications which minimizes the possibility of attackers trying to access the device. Instead, transactions are conducted by scanning a QR code or using an encrypted microSD card.
Passport is intended for “every Bitcoiner” to use whether it is their first hardware wallet or part of their multisignature setup. The device will cost less than $300.
Foundation Devices will continue to introduce new open-source hardware products that are more functional and secure than existing products.
“Our main focus right now is the wallet, which is basically just a way to store bitcoin and keep it secure for people who are holding large amounts of it,” Johnston said. “It’s really critical that someone won’t be able to just come in, find a way into your email or phone, log into your account and steal everything. That’s the big reason why we’re building Passport first.”
