PoF 25 – Directory Service for Virtual Currencies

by George Peabody on August 12, 2015

in Bitcoin, Payments on Fire, Podcasts, Virtual Currency

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The Internet’s designers quickly realized that no one’s very good at remembering IP address numbers. Unless you type the same number over and over again (and I did when I ran an ISP) a human readable version is a lot easier. That’s what the domain name system or DNS is all about, connecting human readable names to specific IP addresses.

You can imagine then that Bitcoin, with its long alphanumeric addresses, suffers from similar challenges. That insight is what this podcast is about and the reason Justin Newton and Dawn Newton formed Netki. Try it out by sending bitcoin to me at wallet.geopeabody.bit (kidding) or, better, take a listen as the Netki leaders discuss their directory service for virtual currency wallet addresses.

Transcript is below the fold.

Payments on Fire 25

Netki

George: Welcome, once again, to another Payments on Fire podcast.  I’m George Peabody with Glenbrook Partners and that noise was from the phone of my guests today, who are Justin Newton and Dawn Newton, CEO and COO respectively of a company called Netki.  Well, welcome you two, I’m really glad to have you here.

Justin: We’re super happy to be here; thanks for having us today.

George: I found Netki because Dawn and I had met at a virtual currencies conference this spring in Boston, and we’ve also discovered that we have backgrounds in the ISP business.  We bonded a little bit over that, recovering ISP operators.  Why don’t you guys introduce yourselves just a little bit, and then we’ll start to talk about Netki and its roll in virtual currencies.

Dawn: Sounds great!  So my background started out in tech pretty early in the early 90’s.  I worked for Microcom, which was the modem manufacturer.  The internet had yet to take off for mainstream, but we were doing connectivity for for huge banks, like Bank of America and Chase, companies that did shipping, like UPS and FedEx; just massive clients that needed network connectivity within each other within their own operations.  Then I moved to the internet, as you said, and I worked for a small local regional ISP in Chicago called InterAccess and then moved to NetZero and my payments background on that is when NetZero decided to start charging for services.  I got drafted from tech over to the business side and was responsible for the entire payment processing of NetZero, and we were doing about $750 million a year.  From there, I took a little break from tech and became a chef for about 10 years.  Then my CEO convinced me that I needed to get back in the game, because bitcoin was going to be the next internet, and I agreed with him.  So here I am.

George: Great.

Justin: On my side, I spent about 20 years also working in the internet space for a variety of ISPs and really got into that because of the transformational aspect that we saw in it.  There, I had experience both on the technology side and was involved in creating early internet standards, and on some of the community and regulatory side I actually co-founded what became the largest trade association for internet providers.  While I was there, because we were an all volunteer organization, I was also public policy director.  At 23 years old I was helping with some of the early internet legislation and regulation.  Some of the wins included helping to protect online anonymity and being involved in the early internet tax moratorium and sales tax moratorium that we had for the first 10 years of the internet.

George: All of those issues are all put to bed 100% aren’t they?  Just kidding.

Justin: They never are.

George: They get bigger and bigger.  So, let’s talk about Netki.  I was really taken with it, as a bitcoin holder and a very occasional user, the idea of having to copy and share bitcoin wallet addresses, it’s a little awkward.  I saw that you guys basically have done what I call sort of a DNS for virtual currencies.  You’re giving addresses, those long hexadecimal addresses that are associated with bitcoin and other virtual currencies.  You’re giving them a friendly username, basically.  If anyone wants to send me some bitcoin, I am wallet.geopeabody.bit and you can send value to that address via Netki.

Dawn: You are absolutely correct.  DNS was literally the inspiration for what we’re doing, as well as the technology stats that we leveraged.  There’s nobody that would remember a slew of IPs, and the internet would have never taken off if we all had to remember numeric strings.  We just go to google.com and it routes to their applicable IP that they’ve got behind it.  That was one of the things that we saw as a great barrier to enter in the space.  We wanted to make it easy for people to just remember, share, and use their wallet name while still maintaining their privacy, which is just like how people use DNS to go to websites.

George: Sure.  One of the reasons that DNS is successful is the human friendly nature of it, it is also its ubiquity.  DNS basically sits on, well it can sit on every internet connected device more or less, but it’s really at the heart of the network itself, and there are plenty of pure play providers that do nothing but fast or high-performance DNS services.  

Netki, you guys run it.  How does it get propagated out over the bigger world?  Or is that part of the plan?

Justin: A few things.  One is we actually do sit on top of DNS and DNSSEC itself.  We leverage all of that infrastructure that’s already out there and all of that technology that’s already built-in to every operating system and mobile device.  So by just adding a couple of libraries to help do the lookups and the parsing to an application, our service and standard basically immediately works inside of those applications.  What we’ve been doing, is going out and finding partners in the ecosystem who see the value in creating this easier, more private, more secure way of sending bitcoin and getting them to build this standard into the stack.

George: Into the bitcoin stack or into DNS?

Justin: Into their application stack.  We leverage standard record formats and technology and DNS, so we already work with every DNS client and every DNS server and service that’s out there.  That was actually one of the things that was important to us when we were building our service, was to try and leverage technology, not try to but to actually leverage technologies that are ubiquitously available today, so that we didn’t have to have that kind of adoption curve problem of waiting for someone to be able to implement it.

George: Justin, let’s get more concrete with this.  From a user point of view, go ahead and use my Netki wallet address (wallet.geopeabody.bit).  Take me through a use case and then tell me how that address gets its connection into DNS.  What’s the relationship there?

Justin: Absolutely.  Let me give you a slightly different use case, because I understand where everything points in this one.  One of our partners that is integrated with us is ChangeTip, which is a service to do tipping over Twitter and Facebook.  It’s basically a way to send small amounts of value to your friends or to tip a content creator who’s done something interesting.  In order to fund your ChangeTip account, you can just send to your username there, in my case it’s justinwnewton.tip.me.  So, if I go to my wallet, when I go to send money to fund my ChangeTip account, I type in justinwnewton.tip.me and I hit enter.

George: I can enter that into a Coinbase wallet?

Justin: Coinbase is not one of our partners that’s live with us today, but for example, say HolyTransaction who’s a wallet that we’re using today and we have some others that we will be announcing soon.

George: Okay.  So the wallet provider has got to support your name and convention.

Justin: Absolutely.  We have a lookup tool available on our website.  If your wallet hasn’t implemented it yet you can go to www.netki.com, you can click on the wallet name lookup, and do the lookup there, just copy and paste the address over.  I’d also recommend, you know, mail your wallet provider, because people implement features based on what their customers request.  Once you go ahead and hit enter on there, that’s where the DNS lookup starts to happen.  So if I’m looking up justinwnewton.tip.me and I send from my HolyTransaction wallet, the wallet provider, HolyTransaction in this case, does lookup using DNS and DNSSEC, they get back a text record in this case that includes your wallet address.  That record has been signed using DNSSEC so that there’s basically a chain of ownership to prove that the information hasn’t been changed in transit or man in the middled.  That’s our simplest use case.  We have some more advanced use cases where leveraging other open source technology, like HD Wallets which are standard under bitcoin as bip #32, which basically allow us to hand back a unique address for every transaction as a way to protect user privacy.

George: Got it.  Want to walk through that one?

Dawn: So with that, the thing is this, you have your wallet address and it’s static and it’s listed on the public blockchain, it’s an open ledger.  If I know that, anybody can go in and look at and find your wallet address and all the transactions that you’ve done historically.  So what HD Wallets does is it has your actual wallet address, but that’s hidden and it creates one time use wallet addresses that are only used in that instance between, let’s say you and I, to do the transaction.  So then when I go to look up the wallet address that I had sent to and that you had given to me, it’s only going to show mine and your transaction.  So then you do another transaction with Justin, it creates another unique wallet address and he only sees that 1 single transaction on the blockchain.  That protects users privacy from anyone going through and figuring out where they’ve moved their money, and it keeps everything more secure.  

George: I’m using the Netki address as a static component and then with HD Wallet I’ve got the dynamic component as coming from there.

Justin: Yeah, so basically what we do in that case is in the DNS record, instead of having a static address, we have a URL in there.  We’ll do a second lookup against that URL to get the unique address for each transaction.  As a way to make it easier for developers to include that in their applications, we’ve actually released open source server software last week to provide exactly this service.

George: Cool.  Based on that, what else have you guys got in plan for your operation?

Justin: As a part of that server release, there was another standard that we included into it.  It’s something called Payment Requests which is something under bip 70.  What payment requests are, is they’re like SSL for bitcoin.  So that in the same way when you go to a website that has validated SSL, you get that green lock in your web browser, it shows you who the validated identity is for what website you’re visiting, that same technology can be used in bitcoin to be able to sign a bitcoin wallet address and other payment details to show who the owner of that wallet is.  We’ve built that in both again to our naming standard as well as to the open source server we released to address MO and what that allows users to do from a user experience perspective is to type in an easy to remember name like wallet.geopeabody.bit and press enter and what they get back is that little green lock in the wallet and who it is that they’re actually sending to before they confirm the transaction.  We believe that this provides a much more familiar and intuitive user experience to an end user than the current bitcoin payment process.

George: Let’s talk about what’s next for Netki.

Justin: Right now at Netki we’re focused in a few areas.  One is continuing to focus on getting integrations in as many places in the ecosystem as possible.  As you rightly pointed out, that’s what makes things more and more usable.  To that end, we just crossed 100,000 names on this system, so we’re pretty proud of the progress that we’ve made so far.

Dawn: In 3 months time.

Justin: We also intend to continue to enhance our services.  The recently released address MO server that we just talked about is part of that and I think you’ll continue to see us produce products that make it easier for users to interact between services.  We want to kind of, depending on how you look at it, either be the groove that holds different services together, or the oil that makes the whole machine move a little more smoothly, and we’ll make it easier for users to interact between these servers in standard space waves.  We want to create experiences for people that are familiar and intuitive while hitting the core beliefs of enhancing user privacy and security.

George: I really see you as a foundational technology provider as opposed to your ability to control the user experience.  You’re going to give tools to make the user experience better than it already is, you’re not planning on building wallets and that kind of thing?

Justin: Correct.  We intend, like I said, to build the kind of services that help interconnect the different other services that people are building:  wallets and exchanges, purchasing platforms like Purse and all those different things.  There’s so many entrepreneurs that are out there building these beautiful best of breed experiences for their end users.  What we’re really doing is helping ensure that all those great services and products, instead of becoming silos, become an interconnected web.

George: I think of you guys as, let’s say, a virtual currency directory service.

Justin: That’s sort of a way to look at it. 

George: It’s more fundamental at the DNS level, there’s a lot of baggage that a directory has.  Can I go to Netki and search on George Peabody?

Justin: No, you could not.  We didn’t want that, because then that would be potentially a privacy issue.  We wanted to be sure that the only way someone knew what your wallet name was is if you shared it with them.

George: Got it.  Okay, cool.  Let’s step a little higher now from Netki.  What are you seeing in the virtual currency space that you think is important for the payments professionals to keep an eye on?  I’ll preface the question a little further in that a lot of folks in the payment space have looked at bitcoin after the currency point of view had gone in developed markets.  Why?  We get the economic side of it, but it’s really not solving any particular problems in developed economies.  Where are things going?  To answer my own questions, it’s more towards the blockchain itself, building applications based on the blockchain that really aren’t so currency or payment related.  What are you seeing out there?

Dawn: I just got done speaking at a full on banking conference.  It wasn’t even a bitcoin conference, it was a banking conference up in Canada.  They were all about blockchain and not really about bitcoin.  I totally get that, but just for a point of clarity, the bitcoin is a way to pay the minors and the minors are what support the entire blockchain ledger.  It’s just easier to have a currency that is globally based and you’re not trying to pay out minors in yen and dollars and that they’re just paid in bitcoin.  What they do with it after the fact is completely up to them and they can turn it into fiat.

George:   That’s how the processors get paid.

Dawn: Exactly.  It’s a way the processors get paid, and so we’ll always be married together in some form, but it’s just easier to have a universal currency since we have now a universal ledger.

Justin: I would expand on that maybe further personally real quick.  I do a ton of international travel, I probably leave the country on an average of once a month.  I’m always joyful when I see a merchant oversees that accepts bitcoin, because I understand what’s happening with all the foreign exchange fees and interchange and transaction rates and all that other kind of stuff, and don’t worry that every time I take a card out of my pocket or show up at a money changer that in this instance I happen to be using the wrong combination of place, time, and everything else that quadruples my exchange rate.

George: How often are you running into bitcoin accepting hotels or restaurants?

Justin: I see more and more because I actually look for it when I travel.  I will choose to do business with those places if I can, because they do make my life easier.  On the blockchain issue, which is what you were really asking about, I would say, for me, I actually believe that most of the growth over the next 12 to 18 months in bitcoin ecosystem is going to be in these assets on blockchain.  The reason for that is, as we’ll get into in just a moment, with bitcoin today, you just basically have to convince users 1 by 1 that they’re using bitcoin and why and all that other sort of stuff, and it’s still a long discussion to do that, even in use cases where the value is clear.  In the cases where people have an existing use case that they’re doing, so for example gift cards, people use a lot of gift cards today.  Instead of being backed by a proprietary database that those gift cards are backed by the blockchain.   Like the effort that Gyft announced at the Money Conference over in Belfast, along with Chain, something like that, they can potentially move millions or tens of millions or more users over into the bitcoin and blockchain ecosystem in one go.  One of the things that’s exciting about that is, I think, for payment processors is once you start to have wallets that can handle multiple assets, let’s say gift cards and for another let’s say Tether USD which is basically dollars on the blockchain instead of bitcoin on the blockchain.  You have a service like that, then the consumer can actually walk up to a check out and their wallet can negotiate with the check out about what order and form of payments to make.  For example, in something as simple as purchase of a cup of coffee, their wallet could automatically apply a discount and get points from Starbucks for their Starbucks card, if there was a deal from the coffee manufacturer, they could apply that and then they could pay for the rest of it in their Tether USD.  It actually provides a more robust and interesting experience for the users in a way that can help provide greater loyalty to the merchant.  Really, one of the prime drivers behind it is not actually this better user experience you can drive, which you can, but by moving the assets onto the blockchain, it will reduce the amount of fraud in the ecosystem.  There’s benefits for the consumer, there’s benefits for the brand, there’s benefits for the card issuer all by moving over onto the blockchain.

George: It sounds like it’s a good idea to take a dive and look at Gyft.

Justin: I think they’ve written both the white paper on what they’re doing and there’s also some videos available online; Gyft and Chain did the work with them.

George: Alright; we’ll check it out.  Justin and Dawn, thanks so much for spending a little time with us today and talking about what Netki’s up to and the current state of bitcoin in a transactional sense.  Really interesting.

Dawn: Thank you so much for taking time to interview us.  We really had a fun time.

George: Alright.  Talk to you all later.

Justin: Thanks, George.

Dawn: Take care.  Bye-bye.

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