In fall 2014, University of Iowa alumnus Chris Stewart left a stable job with State Farm Insurance to start a company based on bitcoin, the controversial cryptocurrency that, at the time, many economists and investors predicted would soon disappear.
Bitcoin has survived in the four years since, and this summer Stewart hopes to finish building the software for his company, Suredbits, which will provide real-time data on bitcoin to small businesses and individuals who otherwise couldn’t afford it.
Although it has become the center of his life, when asked whether bitcoin is a solid investment opportunity, Stewart’s biggest tip is “be skeptical.”
“There’s a lot of technobabble that goes on,” says Stewart. “And it’s very hard to distinguish between the charlatans in the field and the people who are the evangelists. But I hope people can overcome that as they become educated on the subject.”
Stewart himself was skeptical when he first read about bitcoin in the summer of 2013. He was between his third and fourth years at Iowa and was thinking about how to break into the financial markets after college.
Bitcoin appeared regularly in the news, and because its value fluctuated wildly, Stewart didn’t think it would last. When it did, he became interested and even attempted to buy a bitcoin, but the seller, Mt. Gox—then the world’s leading bitcoin exchange—crashed before he could. The collapse was catastrophic and Mt. Gox lost millions of dollars, but instead of being dissuaded, Stewart’s interest only grew.
Stewart says it’s a big leap from growing up on a dairy farm in West Union, Iowa, to programming software for the world’s leading cryptocurrency. But one day in fall 2014, as he was sitting on the couch after coming home from his 9 to 5, he couldn’t help being drawn to the bitcoin world.
“How many times do you come across these opportunities in your life?” says Stewart. “I was thinking to myself that if I was around in the early 1990s when the internet was blowing up and if I didn’t try to stake a claim in it, that would have been a huge missed opportunity. Now, this revolutionary technology is emerging and I’m at the prime age to be able to take risk. I’ve got some debt, but I don’t have a family or kids or anything like that. I really can just pack up and move. So that’s what I did.”
Within a year, he moved to the Bay Area, began working in a startup accelerator, and received his first investment.
What is bitcoin?
Suredbits has not yet launched its product, but Stewart hopes to do so by the end of the summer. In the meantime, he recognizes that many people don’t understand bitcoin or know what it is, and he’s happy to help educate them.
Stewart explains that bitcoin is the first-ever incarnation of digital cash. He calls it a “digital bearer asset.” Like cash or gold, a bearer asset is something that generally belongs to whomever is holding it.
But bitcoins are digital. No one can physically hold a bitcoin. So the owner of a bitcoin is digitally identified in the software that makes up bitcoin, the way someone’s name is tied to the money in their bank account, identifying them as the owner. The code that makes up bitcoin is encrypted (hence the term “cryptocurrency”), to protect it from hackers.
In some ways, Stewart says, this makes bitcoin more difficult to steal because you would have to be an elite hacker to re-write the software and make yourself the new owner of someone else’s bitcoin. But, as he is with most things, Stewart is skeptical.
“People like to think of these crypto-systems as super secure, can never be hacked, that they are impenetrable,” he says. “But the old joke is that none of these crypto-systems can beat the $5 wrench attack.”
Stewart says that with a $5 wrench, someone could destroy the computer storing a bitcoin, thereby destroying the currency, or threaten to harm the owner unless they transfer ownership.
Given this and other issues, bitcoin and other cryptocurrencies have elicited a range of responses, with some embracing bitcoin and others openly seeking to ban it. Warren Buffett, the billion-dollar investor and CEO of Berkshire Hathaway, has famously called bitcoin “rat poison.”
Regardless, the price of a bitcoin has soared (and crashed) several times since its public launch in 2009, reaching a price of more than $19,000 per bitcoin in December 2017. This June, a South Korean cryptocurrency exchange, Coinrail, was hacked, with about 30 percent of its cryptocurrency stolen, and researchers at the University of Texas, Austin, reported evidence that the value of bitcoin may have been artificially inflated last year.
At the publication of this story, one bitcoin is worth $6,720.00
Making bitcoin accessible to the little guy
After deciding to try to stake his claim in the bitcoin legacy, Stewart applied and was accepted to an accelerator in the California Bay Area that identifies itself as the best for cryptocurrency startups, BoostVC.
His experiences as an undergraduate at the UI proved useful. As a UI student, Stewart worked as a web developer for the Campus Recreation and Wellness Center and also as a systems analyst for State Farm. He took classes in the Department of Computer Science that at the time didn’t seem valuable—Abstract Algebra and Program Language Concepts—but became important as he hunkered down to write the software for his company.
BoostVC housed and trained him for four months, after which he received investment capital in the form of bitcoin. The funds would support him for six months living in the Bay Area but would last 18 months in Iowa City. One of the mottos at the accelerator was “Be a cockroach,” which Stewart says meant that if your company survived long enough, it was considered successful. With this in mind, he moved back to the Iowa City area.
Stewart worked first out of his apartment and now rents a space at MERGE, a co-working lab in downtown Iowa City that houses numerous startups.
To explain what his company does, Stewart says “Knowledge is power.”
“People pay a lot of money to get access to real-time data on financial markets and on bitcoin,” says Stewart, “because they can pipe this data into their software and use it to make profitable financial trades.”
Just like with other currencies traded in the financial markets, real-time data on bitcoin is available, according to Stewart, but it is very expensive and these companies don’t offer much by way of scaled pricing. Customers either buy a lot of data for a lot of money or they buy nothing, says Stewart, meaning that smaller businesses or individuals interested in bitcoin are effectively shut out of the market. They simply can’t afford to pay what current data providers are asking.
Stewart says that Suredbits is going to change that by selling bitcoin data in smaller chunks and at a more affordable price. Instead of paying for a whole month of ESPN, Stewart says, it would be like paying to watch just one game or follow only the Cubs.
“Suredbits’ long-term goal is to use this model to open up financial markets and hopefully make them fairer,” says Stewart. “Hopefully, it will allow the little guy entry into these systems rather than needing five figures of capital ready to throw down every month.”
Three years ago, Stewart would have said that most people interested in buying bitcoin or making financial transactions based on bitcoin would be like him: technical minded, mid-twenties, and interested in alternative financial systems. But that stereotype is changing.
“The great thing about cryptocurrency markets is that there is no walled garden,” says Stewart. “There is no Wall Street for crypto. It’s all these people who set up exchanges around the globe and are trying to serve individuals who are interested in crypto. Not institutions—it’s actual individuals who are interested.”
Despite the vagaries of the bitcoin market, Stewart remains hopeful.
“When I started this company, it was not apparent whether crypto was going to succeed,” says Stewart. “There are still a lot of unknowns. Like with any startup, you’re making bets, right? You’re saying, ‘I’m betting there are enough people out here interested in this product that would pay me enough money to cover my overhead and my employees’ salaries and still be profitable.’ But, you know, I’m bullish.”