What We Have Been Up to at Circle

By Jeremy Allaire and Sean Neville

Last year (2013), we grew obsessed with evolving consumer finance, giving people greater control of their own money, and enabling Bitcoin as a mainstream solution globally. We created Circle to make this happen.

Why? We felt that Bitcoin — and the broader idea of a new global digital currency — was a brave, natural step toward modernizing our global monetary system. Like the best of the Internet, it represents an open, democratic, distributed, decentralized architecture owned by everyone.

This is deeply transformative, and consumer financial products and services (and more broadly, the global banking system) sorely need disruption and transformation. An open, global, digital-native platform for transacting trust is required for constructing the next phase of our planet, and elements of Bitcoin offer the best foundation for building that today.

We also felt, at the time, that the mass market could not embrace the products built to enable the use and benefits of Bitcoin. To the average consumer, early Bitcoin products and services were complex, full of friction, unfamiliar, and some were also of questionable reputation in terms of the safety and security of money. To make Bitcoin a part of their lives, mainstream consumers needed a new kind of company and a new set of product experiences.

What is Circle? We’re an Internet-based consumer finance company. We believe that digital money platforms and associated consumer products and services will revolutionize the way the world uses money. We want to help people store and use digital money anywhere in the world.

Today, at Bitcoin 2014 in Amsterdam, we publicly showcased our first commercial consumer product at Circle.com.

Rather than a list of features, we wanted to contextualize the features around key needs in bringing Bitcoin mainstream:

Utility Value vs. Speculative Value

First, it’s really important to understand that our focus is on promoting and supporting Bitcoin as a payment utility and as a secure store of value. We’re not interested in or focused on the speculative value of Bitcoin. In fact, the rise in the value of Bitcoin relative to global reserve currencies has been a de facto call option on the future adoption of bitcoin as a payment medium. Talk to any smart investor who has been “betting on bitcoin,” and what they will tell you is that “if bitcoin is adopted globally as a system of payment and money transfer,” that each unit on the block chain will grow dramatically in value – it’s the physics of a fixed monetary base that sees increasing usage.

How does this translate into our product? Today, if you are a consumer and want to start storing and using Bitcoin, almost all of your choices are presented through sites that promote buying and selling bitcoin, if not acting as actual open order books aimed at currency and commodity traders.

With Circle, rather than buying and selling bitcoin, customers can create an account, send and receive money, and make deposits and withdrawals. When you deposit, Circle can instantly convert your fiat currency into bitcoin and store it. When you withdraw, Circle can instantly convert your money from bitcoin back into local currency and transfer it to a bank. Our goal is to make it easy for consumers to deposit and convert currency into a digital form that they can then use globally and instantly, not offer a trading exchange where they can bet on a speculative asset.

Reducing Friction

A huge theme we saw with digital currency was that an enormous amount of friction exists for the average consumer trying to acquire and use it. Whether it be products that require users to understand public key cryptography, or install and manage desktop software, or navigate user experiences oriented toward traders not retail consumers: we saw complexity everywhere.

The “best in class” experience in the market still required consumers to wait almost 10 days to get their first digital assets, and presented a user experience focused on buying and selling bitcoin, not storing and using digital money.

Circle aims to reduce the friction associated with general consumer use of Bitcoin.

Here’s how:

• We’ve built a** streamlined user experience** that should be familiar to any consumer, and can be easily accessed from any smartphone, tablet or PC. The metaphors are deposits, withdrawals, sending and spending, not buying and selling and exchanging.
• Circle is free to consumers. There are no fees for deposits and withdrawals, and no fees for our secure storage, theft insurance or any bitcoin-to-bitcoin transactions. We don’t think consumers should be charged for using their own money.
• Instant access. To go mainstream, the curious consumer needs to create an account, make a deposit, and access and use digital money in minutes -- not days. With Circle, new users can instantly access bitcoin.
• Phone support. In an area as new and innovative as digital money, end-users need to have trust and confidence in the companies that store their digital assets. To build confidence and provide a great quality of service, Circle is investing in customer support, including offering telephone support from day one. If a large transaction doesn’t go through, you want to be able to pick up the phone and talk to someone.
  Safety and Security

To Bitcoin enthusiasts, the fact that you can download and run bitcoin software on your own computer, manage your own private keys, and even take them offline and store them in your own secure location, is liberation. To the mainstream consumer, this is terrifying complexity and risk. While it’s vital that end-users maintain the freedom to control their own digital assets, and be their own bank, it’s also important for mainstream consumers and businesses to be able to rely upon online services that they trust with custodianship of their digital assets. During a time when large Bitcoin exchanges have collapsed from the theft of digital assets, this is certainly a tall task.

As a digital custodian, there are a ton of features and processes that we’ve developed to increase confidence and trust in Circle as a new kind of consumer finance product.

• System Security. We’ve invested in a network security architecture that has been audited and pressure-tested by a national cyber security firm. We leverage military-grade hardware encryption of keys, and work with white and black hat hackers to consistently penetration test our systems.
• Multi-Sig Architecture. We employ multiple-signature transactions. The physical isolation of keys means that the ability to spend funds requires would-be attackers to breach multiple secure locations.
• Offline Cold Storage Vaults. The vast majority of customer balances exist in cold storage, inaccessible to cyber criminals. We maintain several geographically distributed secure vault facilities protected by multiple layers of access control, monitoring and armed guards. Offline funds can be brought online only through multi-signature transactions, and no active private keys are ever moved or accessible in physical transit.
• Insurance from Theft. We take our role as digital asset custodian so seriously that we have undertaken to provide free insurance on deposits with Circle. What does this mean? If our warm or cold storage are breached and funds stolen by cyber or physical criminals, we have insurance to protect our users from losses.
• Account Security. We enforce rigorous password policies, two-factor authentication for critical account activities, password retry rules, and appropriate customer support procedures aimed at stopping bad actors.
• Full Reserve Bitcoin. As a regulated Money Transmitter in the United States, we are required by law to maintain full reserves – e.g. we must maintain 100% of customer deposit value and are not permitted to invest those assets for our own profit. Moreover, we are required by law to provide audited financials that prove our full reserves and associated accounting to government agencies.
  Compliance

From day one we’ve focused on building an institution that is compliant with all relevant laws in all jurisdiction that we operate. Today, in the United States, that means registering as a Money Transmitter with the US Treasury Department and complying with Federal law regarding KYC (Know Your Customer) and AML (Anti-Money Laundering) considerations, as well as acquiring licenses from any US states that require a license to operate a digital currency business such as Circle.

Specifically, a company such as Circle, which provides a gateway between the existing US banking and payment system and Bitcoin, must comply with all KYC/AML laws that govern banks.

What does this mean?

• Identity Verification. You need to verify only your phone and email in order to store your existing bitcoin with us, but if you choose to connect a bank account or credit/debit card to Circle, you must also verify your name and address, and your bank and/or credit account must be in good standing.
• Anti-Money-Laundering. If we detect suspicious activity that could represent criminal activity in the gateways of our platform, we are obliged to report it to law enforcement.
• Risk-based Compliance. We take a risk-based approach to identity verification and associated compliance requirements -- e.g. a customer merely holding bitcoin with us is not subject to the same process as someone linking a US bank account; likewise, someone making a large number of large transactions is likely to be required to provide more information than another consumer who sends and spends smaller amounts at smaller velocities.
  Global

Circle was formed to be a global company, reflecting the inherently global nature of digital currency. We have operations in the United States, and our international headquarters rests in Dublin; we are building a company with the expectation that the vast majority of our customers will live outside North America.

We’ve incorporated this global approach into our initial product release – any existing or new user of Bitcoin can create a Circle account and get free and insured usage and storage of bitcoin. Bitcoin is a global movement, and we want to provide a service to users on every inch and in every corner of the planet.

Invites to Circle

While we have launched publicly, the service is not available to everyone quite yet. We’re still in invitation-only mode. We want to make sure that all of our customers have a great experience and are carefully throttling customer access to ensure that we can deliver that exceptional experience. You can apply for an invitation at circle.com.