Bitspark's 5 year anniversary: how it all started
It is with great excitement we celebrate 5 years at Bitspark today.
It has been a journey of ups and downs to get this far but we are luckily in the position to look back at what worked, what didn’t and the lessons along the way.
Maxine and I met in Australia in 2013 and by early 2014 we had come to the conclusion that this Bitcoin thing was something we had to be involved with (I had been involved in Bitcoin since 2011 so had an idea on what was needed in the market).
Back then it was a different world in crypto, there was only 3-4 actual exchanges, no YouTube influencers, Mtgox was 70% of market volume, altcoins were not really a thing and there was only a few, no ICOs, no institutional anything, no smart contracts just a bunch of internet freedom fighters interested in non-state issued sound money for the world.
Our intent was to initially be an exchange then branch into 2 other areas- merchant processing and remittance. The exchange had to come first in our estimation because without liquidity provision none of the other ideas would work.
After settling on a crowdsourced logo and the name ‘Bitspark’ we then looked into the optimal jurisdiction. After googling for a bit, it was clear that it was either going to be Hong Kong or Singapore- it was not going to be Australia for sure given the tenancy for the government to be over regulated and its expensive with a small market.
The only place that really mattered was Asia...
The same was true in the US where you spend 90% of your time raising money to pay for licences for every state instead of actually building a cool product. The only place that really mattered was Asia and given Hong Kong’s position as the freest economy in the world 25 years in a row and Maxine's connections in HK that seemed like the place to be, so we incorporated a business there and got on a plane.
2014 was an interesting year since there was a lot of learning, building and finding the right people to join the company. We launched the exchange, in fact we were the first exchange in Asia to list 20+ coins as well, and later was the first exchange to have multisig when partnering with Bitgo.
It was that year however when people started talking more about Bitcoin’s potential for remittances, too. Everyone was saying how useful it could be but nobody was actually doing it- so we decided to do it. Hong Kong has a lot of foreign workers who send money overseas every Sunday- approximately 213 000 Filipinos and 167 000 Indonesias, in a region with a population of 7 million, it was fairly significant.
This was an excellent learning process for a small 2 person startup to do, we got first hand insight into the remittance world, how money moves and the realities were far from what you’ll read from the World Bank or in a news outlet.
We continued to do this for a number of months however as you can imagine this was not a scalable endeavour. If you want to target the remittance world you needed a lot of money or not to go retail, as everyone in retail is scratching at scraps to make a living, margins are tiny. We had the new technology that was cheaper than the competition for sending money however scaling a business is harder than building tech.
Through this however we learned that given the majority of transaction happen at physical shops equivalent to Western Union, helping them conduct payments cheaper was a more scalable approach. If we got one shop on board we'd access their thousands of customers and it was easier to convince one shop than thousands of customers.
Therefore in 2015 we embarked upon building a platform specifically designed for money transfer companies. The exchange at this point was just emerging from the bear market of 2014, banks were closing our accounts and altcoins weren't a thing. We decided to close the exchange in 2015 and focus on the remittance platform which had shown a lot of traction at the time for Indonesia and the Philippines.
During the early years, I lived in a capsule hotel for 3.5 years and as founders, we didn’t pay ourselves much above minimum wage in Hong Kong.
Throughout much of 2014-2016 in parallel to what we were doing on the product side, it was also a matter of finding enough funding to continue to survive. Hong Kong is a pretty terrible early stage startup funding ecosystem, couple that with a thing called Bitcoin that nobody understood and was afraid of, it was quite difficult to raise money to do what needed to be done, usually it was only enough money to keep going on a skeleton crew for another 6-12 months.
During the early years, I lived in a capsule hotel for 3.5 years and as founders, we didn’t pay ourselves much above minimum wage in Hong Kong. That's about 600 USD a month in a city which is the most expensive place in the world to live- that meant a lot of 7-Eleven $1.5 sandwiches for dinner (not just as a side note, literally for 50% of the diet).
In 2015 and 2016 we took part in a number of accelerator programs. Firstly we were part of the Cyberport Incubation program which is a Hong Kong government backed incubator for early stage startups. They provide some money, discounted office space and access to useful events.
Secondly in 2015 we were selected by Accenture from 400 companies around the world to join the 7 companies in their APAC Fintech Innovation Lab. This was a great program if you are selling your product to banks, you get to pitch to all the C level people at banks in Hong Kong and from that made a number of useful connections. However we were a Bitcoin company and not exactly a product banks wanted to engage with. Thanks to the connections we made in that program, we were able to build the right technical team and find the right people to build a crypto company.
By the end of 2015 we had just started to onboard some of the first money transfer shops onto the new crypto based money exchange platform. The thesis was that as new entrant like us, with a limited budget cannot sustain a 6-12 month lead time on closing a deal with a large remittance company. Therefore we should target the low hanging fruit- small individual entrepreneur businesses with 1-3 employees who are usually agents of 2-3 other larger agent networks and who can act quickly.
The hit rate for these guys specialising in SE Asia was about 25% which was a good result, however, it was difficult to get follow through and ultimately later in 2016, the customs and excise department (the regulator for remittance companies) initiated a scare campaign on Bitcoin. Legally their statement hasn’t changed since 2014, they do not regulate Bitcoin as it’s a commodity and not money. Their unofficial position is that they don’t want companies trying new things and often their inspection teams would visit a small money transfer shop and ‘remind’ them that ‘Bitcoin is risky’. As they legally could not say “do not use it” and they had to instead result to casting dispersions, which shook up many of the smaller money remittance companies who were looking to try something new. To give you an idea, our then customers where earning 2 - 5 % more in their commissions with Bitspark than with other providers.
To give you an idea, our customers then were earning 2 - 5 % more in their commissions with Bitspark than with other providers.
Having raised some money in 2015, Bitspark entered 2016 looking for larger clients, given the issues that were with targeting small individual money transfer companies. While visiting a few of the important MTO conferences around the world, we were able to put our cryptocurrency solution in front of various established middle players who were able to see value in what we could provide. Ultimately the most interesting problem that could be solved was nothing about cash delivery or speed of settlement, it was the fact you didn’t need a bank account to use it.
One of the big issues Money Transfer Operators (MTOs) face globally is ‘derisking’, whereby their accounts at banks are getting shut as banks do not want to do business with them anymore. If your account gets closed as an MTO, your business is dead. So cryptocurrencies were an alternative to this fate and we also connected a number of new destinations (Pakistan, Nigeria, Ghana) to our service during this time.
Towards the end of 2016 we were picked to enter the Sixthirty Fintech accelerator in St Louis. This was a great program, as unlike many of the accelerators in Asia, there were introductions made to companies who genuinely have an interest in buying things from the startups. Our team was starting to grow by the end of 2016, around 7-8 people by the end of the year and the first larger money transfer companies were trialling Bitspark.
Despite the bull market in crypto of 2017, our business is not connected to rises or falls of Bitcoin and other cryptocurrencies. We don’t take a position in crypto nor did we focus on cryptocurrency retail customers.
While we had on-boarded a few new money transfer companies, there was still a long lead time when you work with old school established companies in this industry. We had to turn away many prospective MTOs from geographies we didn’t service at the time, due to low cryptocurrency liquidity.
Globally there needed to be additional incentives to sign up the small MTOs ‘low hanging fruit’ and with the intention of providing added incentives to onboard the small MTOs (which are the bulk of all money remittance globally) we launched and completed our rewards token ZEPH sale at the end of 2017.
Over the last few years it became obvious that integrating with each specific payment provider, per jurisdiction wasn’t a viable course of action. Hardly any money transfer companies have an API you can connect to and in most cases it’s unstable, has strange quirks, has entirely differently format than others and most of the productive development time goes into fixing integrations with partners.
The ZEPH token sale enabled us to start the next phase of Bitspark growth by removing all the third parties and having one system that works in every currency, in every country with no integrations with anyone. This was the only scalable way to target the jurisdictions that really need Bitspark.
Bitspark is now double the size we were last year and some of our clients are the biggest money transfer companies in their country.
For the last year, we have been focusing on realising this vision of one system that works in every currency, with the same workflow and with zero third parties. We are excited to have met 2 of the 3 major milestones of the ZEPH token sale already. Firstly launching Sparkdex, our non-custodial decentralised exchange built on Bitshares in addition to launching many of the trusted cash backed stablecoins on the DEX like Sparkdex.HKD. Sparkdex enables us to conduct all trades in house, on our own infrastructure, with custody of our own funds, with one unified system and API. Previously at one time, we relied on 11 APIs with various partners, all with varying integrations and requirement to pre-fund money with them. Secondly, we started the buybacks of ZEPH from the market. This is one of our first steps toward ensuring continued value for the ZEPH token and this will continue to be improved upon and automated in the future.
Bitspark is now double the size we were last year and some of our clients are the biggest money transfer companies in their country. Our focus for this year is to continue this progress and launch part 3 of commitment during the ZEPH token sale, which was our unified platform and mobile app with 180 currencies for 180 countries of the world.
This will be a major step forward in enabling a fast, transparent and secure financial infrastructure for the majority world. Simple tasks like knowing when a payment has been made, being able to see the proof of a transaction, being able to transfer value anywhere digitally or trade direct currency pairs and deposit or withdraw via cash. These are the essential elements required to ensure a scalable financial infrastructure for the future. We very much look forward to the next 5 years in building and contributing to a bankless world with crypto.
- George Harrap, co-founder and CEO.
Read more about Bitspark's epic journey here;
Part 1: Bitspark switching to Bitshares for remittances
Part 2 : Bitspark switching to Bitshares and banking the world's 2 Billion Unbanked
Part 3: Bitspark launches the ZEPH token sale on Bitshares
Sign up to our newsletter for monthly insights on crypto money transfers.