Blockchain vs Xapo is early adopter trustless vs mainstream trusted institution

To research the Bitcoin ecosystem healthcheck post yesterday, I immersed myself in the numbers on

Bitcoin is only one subject that we cover on Daily Fintech – albeit an important one – so I had not planned to do two Bitcoin related posts in a row.

However I was curious to see who was behind all the high quality data presented on I don’t trust a source until I understand who is paying the source – thanks to my History Professor for that insight.

What I see is an open source model. is the free and open part. is the commercial part. I am comfortable with that model. It has been proven many times (and it is the model we use at Daily Fintech – free content plus paid advisory services). is a Bitcoin wallet.

We recently looked at another Bitcoin wallet – Xapo – that looks like a winner. also looks like a winner, but with a fundamentally different proposition.

Xapo is the kind of proposition that appeals to people who are approaching Bitcoin carefully such as wealthy investors looking for inflation protection. Xapo has vaults and insurance and top tier investors that says: “do your diligence, this is an institution that you can trust”. has a different type of proposition. First, here is Jeremy Liew of Lightspeed Venture Partners (who led a $30m investment into Blockchain in October 2014) on why wallets are important:

“Wallets own the relationship with the consumer and every transaction begins and ends with a wallet.”

He calls Blockchain a “user controlled architecture” to contrast it wIth a custodian model.

In Bitcoin terms, Blockchain lets you control your private keys. In gold terms, this is like keeping gold in your safe at home vs storing it in the bank’s vault.

The reason for not giving your private keys to any institution is that all the power of Moore’s Law is also at the disposal of criminals.

As Liew puts it:

“The more successful a wallet becomes, the greater the prize available to a successful attacker”

Or, to quote Will Sutton on why he robbed banks:

“Because that is where the money is”.

What is truly impressive about is that they reached 2.3 million wallets before raising a dime of outside capital.

That is not just an impressive management achievement, it indicates a compelling value proposition.

It is possible that Blockchain has cracked the code that combines security with ease of use. As Techrunch explains:

“The company only stores encrypted files on its servers as a backup, but it doesn’t actually hold your bitcoins. When you log into a Blockchain wallet, the wallet fetches that file and decrypts it. It means that Blockchain is immune to hacker attacks and can’t take transaction fees.”

This is “in crypto we trust”.

Blockchain’s revenue comes from ads on their content sites – that is how they bootstrapped. It is unclear how they will monetize their wallet, but at scale they will have plenty of options.

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