What If Your Cell Phone Paid Its Own Bill? The 21 Bitcoin Chip

Executive Brief

The 21 Bitcoin Computer has attracted a great deal of excitement, and its parent company, 21 Inc., has already pulled together $120 million from such investors as Peter Thiel, co-founder of PayPal, and Andreessen Horowitz. So one of the most well-funded Bitcoin startup yet allows the user to buy a chip that allows for the creation of bitcoin. The amount right now is small -- about 10 cents per day if you leave it on -- but the potential applications are significant, beginning with the future of micro payments and then potentially moving into larger payments as well.

Read the full story below. 

Ten cents a day in Bitcoin income does not sound like a lot of money. If you're thinking about becoming a professional Bitcoin miner, this isn't the product for you -- there are more complex products that are already available for that purpose. So why would anyone pay $399 (at least to start) for a chip that will only bring in that amount of Bitcoin?

Imagine if you purchased a smartphone or a tablet that could act as an on-demand video system that did not put ads up to block your view. You open it up and choose the content that you want to watch, and your device begins to show it. You don't have to pay for it with a credit card. Instead, by simply operating, the tablet is making a small amount of money for each video you watch and sending that money directly to the copyright owner of the content. You don't have to think about it. You don't pay a monthly or annual fee (think about the subscription fees that Netflix and Amazon Prime Video take in).

There could be other devices with the 21 Inc.-made chip that work the same way. What if you could get that same tablet to find nearby WiFi networks that would let you log on anonymously without having to pay -- but your chip would send the owner of the hotspot the Bitcoin that you generate? What if you could buy a video camera that could buy the cloud space to hold as many clips as you could take? What if your tablet could generate enough bitcoin to pay for the e-books that you want to read?

Another benefit of the technology that 21 Inc. has developed is that it could help consumer devices from losing their support. Known as an "orphan device problem," this occurs when companies no longer provide support for older devices, simply thinking that the owners will buy the next innovation when the one they have breaks down. If devices could generate enough to pay a maintenance fee in Bitcoin each month, this could give companies the money to make continued support for older devices, a line that makes financial sense.

Of course, if you can already make payments through PayPal, why would the PayPal co-founder help to fund this? Well, the transaction fees that the current networks (including PayPal) charge make smaller financial transactions almost not worth the cost. Credit card networks have an overhead that eats up a larger amount of smaller transactions in fees. This is why there's almost nothing available online for less than 99 cents. In Bitcoin's current format, it's not a great place to make micropayments either, but the fact that it is an open software platform has allowed 21 Inc. to create the technology to make these tiny payments more efficient through Bitcoin than through other payment interfaces.

As more and more payment options become available to consumers, there are increased opportunities for businesses to add revenue. The solution that 21 Inc. has developed could rejuvenate Bitcoin by making it the currency of micropayments -- an area that companies have failed to capitalize on for decades.

The views expressed by the authors on this site do not necessarily represent the views of DCEBrief or the management team.

Author: Peter Boysen

Peter Boysen has been writing professionally since 2003. His articles about e-commerce, marketing, finance and real estate have appeared throughout the spectrum of Demand Media client sites, and he has also provided content on related topics for Coin Mortgage and Amansad Financial. In his spare time, he has completed 16 marathons and is on the verge of completing his first triathlon. He is a proud dad of triplets who are about to take the frightening step of getting their driver's licenses.

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