Sometime in October 2013, as the Bitcoin price was headed for the

highest point ever -$1147.25, three young men were busy putting the

last touches to the newest Bitcoin startup. Their names are Tom

Robinson, James Smith and Adam Joyce, and the company they were founding

was Elliptic.

As you would expect of any other entrepreneur, they must have thought

that they clearly saw the road ahead for Elliptic. Their business plan

document must have indicated that they would be one of the leading

Bitcoin storage solutions service providers by 2016. Or something along

those lines.

However, the London-based company did not stick to its plan for long.

Providing storage solution services to individuals and enterprises using

Bitcoin was just the beginning. The firm has since significantly changed

its business model.

Changed from a Storage to a surveillance firm

It has morphed into a selling Bitcoin surveillance services. And now its

primary clientele is the law enforcing agencies in search of the

technical know-how for tracking Bitcoin-related criminal activities.

Aside from working with law enforcers, the company is also designing

Bitcoin security products for private enterprises. When everything falls

in its place, Elliptic is supposed to be the go-to place for brands and

individuals seeking to protect themselves from fraud as they engage in

transactions involving Bitcoin and other cryptocurrencies.

“We wanted to jump in and start getting to know the industry, so we

started we something fairly basic……….it was something to get out feet

wet and to start to get to know the industry and figure out what was

really required,” James Smith, CEO and co-founder, has explained away

the change of services on offer.

With the company already counting law enforcement agencies in the US, UK

and continental Europe, as part of its clientele, it has continued to

attract the attention of investors as well.

Just this week it raised $5 million in a Series A round. Investors who

took part included Digital Currency Group, KRW Schindler Private

Ventures and Santander Innoventures. Others are Octopus Ventures and

Paladin Capital Group.

This followed a seed fund raise of $2million that happened in July 2014

with Octopus Ventures and John Power taking part.

Elliptic is getting more than just capital boost

James Smith has pointed out that, apart from capital, Elliptic is also

getting a lot of technical capacity boost from the investors who have

acquired a stake in it. “They’ve got a great advisory board,” he said of

Paladin Capital Group (whose managing director is a retired Lieutenant

General), “they’ve got a lot of people who are ex-NSA or FBI or DEA or

whatever, which is great as we come to understand that a bit more.”

As a matter of fact, and by all accounts, Elliptic is doing very well,

and it is an encouraging case. Or is it?

Indeed, it is quite in order for anyone to wonder what this development

holds for Bitcoin and the Blockchain technology. This is especially on

the backdrop of many people initially adopting the technology because it

promised to put them beyond the reach of government’s spying eyes.

Is Elliptic redefining Bitcoin and the Blockchain technology? Should it

be viewed as a traitor enterprise for making it easy for the government

to spy on Bitcoin users?

Of course, an answer to this question depends on how you see Bitcoin and

the Blockchain technology regarding its goals. If you see it as just

another innovation to improve commerce, then Elliptic is doing nothing

to warrant admonition.

It is time to develop better privacy capabilities

However, if you take it as an innovation that is supposed to help secure

the privacy of people, then Elliptic is probably a company whose

activities you will not approve.

“This demonstrates the great ideological chasm in the bitcoin

community,” one redditor has

reacted

to the news of the capital raise, “People who are looking to make a buck

vs. people who care about the type of world that this technology was

designed to bring about.”

Indeed, going through various bitcoin forums, there also those who have

stated that the success of Elliptic should signal the need to hasten the

development of better privacy tools on the Bitcoin protocol.

There is even a Bitcoin enthusiast who hopes Elliptic turns out to be

all words but no tangible success. “Hopefully like most other startups

in the Bitcoin space (or all startups….?), this company will talk big

about their product, but then it will turn out vaporware,” read a post

on Reddit.

Even Jon Matonis, Founding Board Director of the Bitcoin Foundation,

appeared not to like the idea of the startup raising capital to develop

Bitcoin surveillance tools. He shared a link to the news on Reddit with

part of the title reading “Tools War on Financial Privacy Escalates.”

It is not all gloom; there must be a brighter side

Nevertheless, even with all this seemingly negative reaction to the

news, it is still possible to argue that the success of Elliptic stands

to benefit Bitcoin and Blockchain Technology. It is not all gloom.

For starters, the argument that Bitcoin is anonymous and thus attractive

to criminal elements is being put to rest. At least, Elliptic is letting

everyone know that it is possible for fraudulent and illegal activities

to be unmasked.

It is also likely to give confidence to those who want to get involved

with Bitcoin that they have a place to go to in case they want to find

out whether whomever they are dealing with is not out to scam them.

Even more importantly, though, is for Bitcoin enthusiasts to realize

that if there is a way to mount surveillance on Bitcoin users, someone

is bound to take advantage of it anyway. That means, if it is not

Elliptic, it will be some other startup or even a law enforcement

agency.

Perhaps, as someone put it on Reddit, every effort to do bitcoin

surveillance should only serve to hasten the development of better

privacy tools.

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