By Jake Gostylo | http://numisalis.com

The world of physical bitcoin is nothing new. Mike Caldwell started selling his Casascius physical bitcoin in 2011 and there are close to a dozen people or groups minting physical bitcoin today. While I believe that physical bitcoin is a very important part of the Bitcoin ecosystem, I also believe that none of these physical bitcoin minters are keeping up with needs of this growing community.

For those that are new to the concept of a physical bitcoin, this is how it works. A minter prints out a private key. That printed key is placed inside an object (usually a coin) in such a way that it is evident whether or not the private key has been accessed. Most of the time the coin has a hollow center where the key is placed and a tamper evident holographic sticker covers up the hollow space. The public address is printed on the outside of the coin. With the public address known, you can verify the bitcoin value of that address. If you open the coin you can import the key into a Bitcoin client and send the bitcoin to another address (redeeming the bitcoin). If the sticker is not broken you can be assured that no one has accessed the secret key (except the minter) and the coin can be given to someone else transferring full possession of the bitcoin.

Now let me explain why I believe physical bitcoin are important. Physical bitcoin are one of the most effective evangelical tools in the world of Bitcoin. They work because they are hard to ignore. When you talk to the uninitiated about bitcoin all you can offer is explanation. You talk concepts mixed with ideologies and are faced with rationally skeptical questions. That is easy to ignore and walk away from. If you show someone a coin or, even better, give it to them, suddenly they are presented with something they cannot ignore. It bridges the gap between what they already know and engages them to explore this new concept. I see that it does exist, now how does it work? And according to a recent study published, there is still a lot ground to cover when only 24% of Americans have even heard of Bitcoin.

Where I believe the world of physical bitcoin falls short is that all the minters are treating the concept of physical coins as the creation of collector's items. They lose their effective evangelical force when you store them away and are afraid of giving them out to others. While it is possible to trade today's physical bitcoin, owners of these coins are given every excuse possible not to pass them on. This is what I think people are doing wrong:

High denomination - Do you have a 1 BTC or 0.1 BTC coin? Not many people are willing to give away $80 let alone $800. And with each coin being such a large value they are not very useful for trade.

High margin - Demand for physical bitcoin justifies a large minting fee. If you are trading your physical bitcoin for something else it has to be with someone who already appreciates the collector's value of a physical bitcoin.

Low durability - The numismatic value of today's physical bitcoin depends on the integrity of the holographic sticker. Don't carry them around in your pocket, don't store them anyplace hot, warn everyone about the sticker before you allow them to handle it. They are not practical as tradable coins.

Verification and Counterfeits - Verifying physical bitcoin is an arduous process. Most coins print the first part of their public address and provide lookups on their own servers for finding the full address (in case firstbits services are down, which they are). At this point you can look up the value of the coin. But these coins are such high value individually they are starting to attract counterfeits. A counterfeit would look the same, have a correct address printed on the outside, sport a tamper evident sticker, and have nothing inside. This creates a situation I like to call Schrodinger's coin. Valid and invalid coins are both alive and dead until the first brave soul opens the coin.

I am creating NumiSalis coins to address all these issues and provide a physical bitcoin that is tradable. An order will provide a case of over 200 plastic coins roughly the size of a poker chip and varying in denomination from 1 mBTC to 100 mBTC. The private key will be embedded in the middle of the coin and accessing the key will require the holder to break the coin. This will take care of the issues of high denomination and durability. With the inevitable rise in bitcoin value it will be a quick process to produce even lower denomination coins because I am dealing with plastic. The minting margin I will charge is my choice and because my goal is to make a tradable coin I will choose to keep the margin low.

The real improvement in utility, however, is the NFC tag that will be embedded in each coin. The tag will provide the full public address of the coin for quick and reliable access of the address without having to rely on a third party. It will also provide a verification code that will be used to verify the integrity of the coin and let you know it was produced by me. With my companion smartphone app you can scan a coin to get a verification response, bitcoin value of the coin, and fiat value of the coin in seconds. We are still in the early chapters of the Bitcoin story. Physical bitcoin has played a key role in delivering the message to new converts and the use for physical bitcoin has not ended. It will not end as long as there is a physical bitcoin that keeps up with the changing needs of the Bitcoin community.

Views: 4,435