I was first introduced to Gene Kavner in 2016, later writing an article about iPayYou, the online bitcoin wallet he founded. Pragmatic, focused and a tireless evangelist for the emerging world of peer-to-peer cryptocurrency, Kavner ushered in one of the only online communities site directly targeting the intersection between bitcoin and eCommerce.

Today, iPayYou and many other digital currency exchanges are facing a key inflection point in their evolution due to exploding transaction costs and new cryptocurrency marketplace competitors.

How will all of this eventually shake out? And will the Bitcoin ecosystem survive the unrelenting criticism it’s receiving from prominent business leaders amid a tumultuous period of growing pains. This was the essence of a conversation I had with Kavner by phone last month. From a busy coffeehouse in San Diego, I peppered him with an endless stream of questions about Bitcoin past, present and future.

Here are a few insights from our chat:

I’d like for you to start with a basic introduction to Bitcoin for those who are new to it.

As we know all of this started about nine years ago when Satoshi Nakomoto, Bitcoin’s creator published a white paper outlining his vision. To him bitcoin was a solution to a number of problems that existed in our society, in our economic systems. First and foremost, he designed it to serve as a peer-to-peer network, allowing people to transact directly with each other while bypassing the need for centralized entities to validate transactions. Moreover his vision enabled e-Commerce based purchases utilizing bitcoin. As we know, Satoshi has since disappeared. But because everything he did was predicated on an open source model, the community at large was able to to take over, and drive his vision forward. Today, many now view Bitcoin as an experiment in pure democracy.

With bitcoin’s growth in popularity there have regulatory attempts to reign it in. How do you believe the cryptocurrency landscape will eventually shake out in the face of these headwinds?

While there will always be barriers to democracy, in the cryptocurrency world it has really meant no constraints at all. In other words anybody can decide to do whatever they want with bitcoin and other crypto as long as they can convince the majority of others to follow suit.

What then is the main value proposition driving bitcoin’s massive, worldwide interest?

There are actually two. One certainly is that it is a peer-to-peer currency. But another of equal importance is that holds the possibility of being extremely secure. This security comes in a couple of forms. One is that it is maximally decentralized — no single group has control thereby allowing users to have maximum freedom with it. Secondly, blockchain allows it to be tamper resistant, a key element in a world where a lot of forces would like to destroy it.

So where is bitcoin currently in its evolution?

As we moved into 2017, it became somewhat apparent that the [Bitcoin] community’s desire to keep the mining system in tack or tamper resistant could potentially compromise bitcoin’s ability to serve as a peer-to-peer currency. To remain tamper resistant, in accord with Satoshi’s vision, it was felt that bitcoin would need to develop not only a reward system for miners, but a fee market where miners would collect funds from block rewards.

What have been the ramification of this?

Because that reward has diminished over the years, miners are having to collect money in addition to what they’re receiving from the transactions themselves. This means that everyday users that transact in bitcoin would need to pay a fee. The reason for this is because the more money miners make, the more miners there are going to be. And the more miners there are, the more tamper resistant the bitcoin network is.

So what’s ensued from this development?

The challenge centers around the fact that transaction fees rose significantly in 2017. At the beginning of last year you could send a bitcoin transaction with fees in the range of say .15 to .20 cents. This eventually changed to where the minimum fee to send a bitcoin transaction was $30–40. So in order to purchase, say, a $5.00 coffee, you’d have to pay another $30.00 in fees. That of course is astronomical and a huge hindrance to mainstream bitcoin adoption.

How is this playing out?

So a group of people made the decision that these fees needed to be addressed, recognizing the importance of winning over the hearts and minds of the Bitcoin community first. Because let’s face it, bitcoin users shouldn’t have to endure a negative experience, one where the sticker shock of fees pushes them away. So this group philosophically split away from the original Bitcoin stating: “Let’s first get people using bitcoin and then we’ll figure out how to up the fee market.”

And this philosophical split as I understand it has been problematic

It has. The early group disagreed, saying that security is so much more important and should be the primary focus. In their mind, all of this could take place while allowing a second layer solution that solves the peer-to-peer and fee aspect of it to emerge. The fact that the second layer solution is not yet available has fueled a creative disagreement that the two parties have not been able to find common ground on.

Where does all of this stand now?

What ended up happening is the group that wants inexpensive, peer to peer transactions split off and created something that’s became Bitcoin Cash. The way they solved this problem was by deciding that each block of the blockchain for Bitcoin Cash would be significantly larger than the blocks in the original bitcoin network. The original network was right at about a megabyte and expanding very slightly due to the implementation of something called Segwit. Nevertheless it is still too low to manage Bitcoin’s growing network demand.

And the Bitcoin Cash blocks?

They are eight megabytes in size which allows them to handle eight times as many transactions a day. There is also a process built into Bitcoin Cash to allow growth of that block size over time as well.

So a debate is ensuing?

That’s correct. But I believe the biggest misconception is that Bitcoin and Bitcoin Cash cannot coexist. One of the key reasons why I believe the two parties are warring with each other is because they both feel like they are THE BITCOIN. Bitcoin is not just a currency nor is it just a blockchain. Bitcoin is also a brand and because brands are not controlled by a government in the world of Bitcoin, there is a desires on the part of both parties to control it.

How do you believe this will this eventually get resolved?

In the end, whatever one is the most popular, the one that’s most widely used is the one that will win that brand name. They both feel like they need to control that single brand. But I believe that you can absolutely have both. Each solves certain problems and both sides need to recognize the problems that the other one solves and accept the fact that there is value to both.

What are the downsides of each?

The downside for Bitcoin Cash is that the fee market will need to develop eventually. Like Bitcoin, Bitcoin Cash’s supply of new bitcoin’s isachieved through mining. But the block rewards are going to be diminishing just as fast as the original bitcoin’s block reward. Therefore the Bitcoin Cash miners will have no reward or compensation coming to them as a result of the fee market. So they may not have any incentive to keep mining. Moreover, there is also the possibility that the network will not be as secure long term.

So a fee market will need to develop for it, even if it’s not for a number of years?

Yes. And when it does, the questions will be whether that fee market will create the exact same problem that we are seeing with the original bitcoin today. Or will the volume of transactions rise so significantly that even though the fees are small, they will more than make up for the reduction in the reward compensation. All of this remains to be seen.

And the original Bitcoin, what are its weaknesses?

The challenge for itis a bit different. Resolving the high prices will eventually entail a second layer solution such as the Lightning Network. The challenge with the Lightning Network is that its off-chain, and off-chain solutions go contrary to the whole on-chain protocol advocated by Satoshi Nakomoto.

How has all of this uncertainty impacted your company?

At iPayYou we run a wallet that effectively allows consumers to start using bitcoin, simply and easily. But the challenge we are all having at present, the challenge within the Bitcoin Blockchain, is that we’re seeing fewer and fewer transactions because the fees are so astronomical. So the question we’re faced with is in how to grow the brand with these very large fees.

What sort of misconceptions are your hearing about these fees?

People are not necessarily aware that the fees on the blockchain have absolutely nothing to do with the dollar amount of the transaction they are making. So whether you are making a $200 transaction or a $200,000 transaction, the amount of fee is going to be substantially based on things that are not tied to the dollar amount. In the end, there are myriad other complex factors that create fee variability, probably too complex to discuss in this article.

Despite all of the issues we’ve discussed, it appears that people are still willing to jump in and try bitcoin out?

No doubt. They hear about it in the mainstream media, and that it’s the future of money. Not wanting to seem behind the times, they decide to give it a shot. Many of these people are starting to realizing, however, that if they have, say, $200.00 in bitcoin and want to spend it, there can have upwards of $75.00 of fees. This leads many of them to say ‘I’m not coming back to this again, this is crazy.’ We hear these sorts of stories daily at iPayYou.

How then are you addressing this ever present narrative?

That’s why we’ve made a very large investment in Bitcoin Cash. Because as an e-commerce wallet, we believe very soon that the overwhelming majority of transactions will occur there.

Another hot topic of conversation in the Bitcoin world is the regulatory landscape. Can you share a few thoughts here?

This is bit complex to answer because the reason regulations exist is because governments have built in requirements to do whatever they can to prevent crimes. As they observe increasingly amounts of bitcoin and cryptocurrency use for various means, they try to seek to regulate it in order to minimize illegal activity.

Can you elaborate more?

Different governments are taking different approaches. China for example decided to be extremely aggressive with exchanges that facilitate exchanges between two individuals. However peer-to-peer transactions are not banned, its just that exchanges are. Other countries like Venezuela have banned all bitcoin use including peer to peer. And yet we see that bitcoin is still in use in that country because it solves fundamental problems for the people who live and do business there.

What effect to you believe this bitcoin regulation will have over the long-term?

That’s a bit of an unknown because these developments are relatively recent. It really does remain to be seen what effect it will have on global usage of bitcoin, but as of right now, bitcoin solves more problems for people than whatever counter effect regulations are having.

Can you talk more about your recent move to integrate Bitcoin Cash at iPayYou?

We originally wanted to support nothing but the original bitcoin. So when we designed the product a few years ago, we anticipated using a single currency. Over time as we learned that one digital currency does not offer a universal solution, we decided to introduce a new one. This is somewhat of a change in direction for us in terms of now offering multiple currencies. That certainly was not the original intention for us even though other currencies have existed for some time.

So what’s your new model?

What we’re done is adjust our system in a way that allows us to integrate any digital currency on our site with relative ease. In the meantime we’ve been evaluating the demand for other digital currencies to decide which ones should be next.

One topic we haven’t touched on is security. Can you take a moment and discuss this?

Sure. There are a number of things that a merchant or a provider such as iPayYou can do. And there are a number of things that a consumer should do as well. Every consumer needs to be aware of what the purpose of each site is and use them it for the right reasons. Let me explain what I mean by that. We basically believe that Bitcoin is designed to be used by each individual in their own wallet, in their own app. We are effectively an encryption service meaning that every consumer possesses their own address so that they can see the balance of their value right on the blockchain. So in reality, the user doesn’t even have to log into iPayYou. Rather, they have the option of going directly to the blockchain to see their balance of their wallet.

So what sort of impact does this have on security?

Many wallets out there pool consumer funds meaning, they let every consumer know what their ledger balance is but there is no way for the consumer to verify whether the funds are actually available. That to us is a bit like the problem cryptocurrencies are trying to solve with banks that engage in what is known as fractional research banking. With banks we do not know how much money they have vs what we are all being told in terms of the balances we own. So to establish that security, we take the position of ensuring that anyone who has funds with iPayYou can see that the balance of what’s in their iPayYou account matches exactly with what’s on the blockchain.

How does this tie into security?

We believe that the blockchain is the most secure ledger that’s ever been invented. We take extreme measures to make sure that private keys are protected, but because we don’t pool people’s funds in one account that could potentially be hacked, we take a much more decentralized approach to solving this problem, which we feel also provides a higher level of security.

And what sort of considerations should consumers keep in mind here?

Every consumer needs to realize that anytime you have online access to funds, no matter what you do, it’s less secure than if you have a private key in your own possession.

Let me say this. Our wallet is specifically designed for people seeking to transact over a reasonably short period of time. For some people, it may be a day, for others it may be a month. Making that process simple is what we do. And we and other online wallet should never be used as a place for someone to hold all of their funds. Because being online clearly has its own set of challenges from a security standpoint.

So for those seeking a repository to hold their bitcoin long-term, what do you recommend?

They should secure this money in a hardware wallet or some wallet where they maintain complete access to their private keys. This, however, carries its own set of challenges in that a lot of consumers accidentally misplace their private keys. While we often hear sensational stories of exchanges losing customer funds, never forget that customers themselves have to take extreme care in terms of their security practices. Personally, I believe that our industry needs to provide a lot more education to consumers on how to do that well.

Do you you believe that Satoshi’s vision of a peer-to-peer economy utilizing Bitcoin has failed?

No. I think it’s a work in progress. Failed in my view has a very terminal ring to it, as in we’ve tried, it failed, we’re done. I don’t think we’re failing because a lot of people are addressing the problems surfacing in this evolving space. Lots of new approaches are surfacing the further along we get.

Like?

Bitcoin has rested its hopes on second layer solutions like the Lightning Network to solve a number of the prevailing problems that the network is facing. Questions, however, remain as to whether they will succeed or not. And while I may have my own philosophical disagreements with Lightning, we certainly should give it the benefit of a doubt and see what happens.

And Bitcoin Cash as a solution?

Well, it certainly has its own set of solutions on the table. We are seeing more and more adoption of Bitcoin Cash daily and I think by the end of 2018, I feel that the majority of merchants that accept Bitcoin today for payment will also accept Bitcoin Cash. It will certainly be interesting to see whether this leads to a bulk migration of users to this option.

In conclusion, where do you believe the prevailing Bitcoin movement is ultimately headed?

As many of us know, there are still a lot of bitcoin solutions being bantered about. So problems will occur and problems will get solved. Did the Bitcoin community fail to predict many of these problems and solve them early on? Well, I would say that’s probably true. But we certainly cannot predict everything.

What I do have complete confidence in is that as a industry we’ll come up with proposals to solve whatever problems there are and introduce them into the marketplace. Sure some proposals are going to fail. But others will get some wind behind them and move forward. And that’s the way it should work.