Why This Internet Pioneer Believes Bitcoin Has the Power to Break the Cycle of Poverty

Why This Internet Pioneer Believes Bitcoin Has the Power to Break the Cycle of Poverty

Xapo CEO Wences Casares

Image credit: Xapo

When millionaire Wences Casares speaks of poverty, and he often does, he’s not blowing hot air. He’s speaking from firsthand experience.

The Argentina-born serial Silicon Valley startup investor and bitcoin entrepreneur grew up on his parents’ sheep ranch, 20 miles from the nearest neighbor and 100 miles from the nearest town. Isolated in the rugged Patagonia region, he watched his family lose their life savings, not once but three times due to hyperinflation.

“I remember my parents losing everything,” Casares told TechCrunch. “I was 14.” Bearing witness to his parents’ devastating consecutive losses cut deep, fueling his ongoing global mission to leverage technology to help spare others from similar straits.

Related: NYC Wants Drivers to Pay For Parking Tickets Via Apple Pay, Mobile Apps and Bitcoin

He set out to help impoverished and underserved people gain access to critical financial services that often only the well-to-do throughout much of Latin America are privy to. In 1994, at the age of 20, he made history when he founded Argentina’s first Internet Services Provider. In 1998, Casares founded the online brokerage Patagon, an Internet-based financial services portal. The startup was eventually scooped up for a cool $750 million.

Casares later launched a successful video game development firm that gaming goliath Activision acquired. He also created a retail bank that grew to more than 7,000 branches in marginalized neighborhoods throughout Brazil and provided 15 million customers with their first bank accounts. It was another triumphant venture acquired for a hefty sum. Steamrolling ahead, Casares then founded Lemon, a digital wallet startup that LifeLock purchased for $43 million in 2013.

Today Casares, now 40, a college dropout and self-taught coder, is the chief executive officer of yet another promising technology startup, Palo Alto, Calif.-based Xapo. He co-founded the bitcoin wallet, bitcoin storage and bitcoin debit card provider, described as “an FDIC for BTC,” in 2012 with payments industry veteran Federico Murrone. To date, the company has secured $40 million in venture capital, with backing from some of Silicon Valley's biggest players, including Benchmark, Greylock Partners, Index Ventures and PayPal co-founder Max Levchin, Yahoo co-founder Jerry Yang and the Winklevoss twins. 

Related: Bitcoin in 10 Years: 4 Predictions From SecondMarket's Barry Silbert

An early bitcoin adopter and bitcoin miner himself, Casares told Entrepreneur he went into the bitcoin business because he thinks bitcoin “may be the best form of money we have ever seen in the history of civilization.” Its value lies in its ability to be transferred for free, in real-time and without an intermediary, he says.

Those properties resonate with him particularly given his childhood roots. “It gave me hope for the 5 billion people in the world who have cell phones but don’t have a bank account or a credit card, who have to live mostly with cash and are terribly taken advantage of in the process, neglected people who would die without a bank account if they relied on the traditional banking system.”

Casares wasn’t always such a staunch bitcoin believer. When he first got wind of the fledgling cryptocurrency in 2011, two years after it was invented, he was “very skeptical.” His passion for bitcoin, he said, didn’t ignite until a friend of his from Argentina asked him to send him some of the virtual cash for a project that they were working on.

Related: Why Bitcoin Is Still a Blank Slate Ripe for Disruption

“I bought some [bitcoin] in Palo Alto from some person that I found on Craigslist,” he recalled. Casares met the seller at a cafe and paid him in good, old-fashioned U.S. greenbacks for BTC. He sent the funds to his friend using a desktop bitcoin client and was amazed when his friend actually received it. “It was like science fiction for someone like me, a person who has been in the finance and payments technology space for a long time. That’s when the lightbulb clicked on and made me kick into overdrive, reading and learning and meeting people and trying to understand what bitcoin is.”

It wasn’t long before he became a bitcoin fanatic and evangelist, mining bitcoins himself and eventually exploring ways to expand mass adoption. He had his work cut out for him, and, to a large extent, still does. A full three-quarters of Americans don't know what bitcoin is and have no interest in using it, according to a recent study. Plus, the digital currency's use within illegal drug-trafficking platform Silk Road as well as several Ponzi schemes hasn't exactly boosted consumer trust.  

“I quickly realized that, in addition to misconceptions about bitcoin being used for porn or fraud, security was one of the main hurdles holding it back to wider use,” he said. “It poses security challenges that we’ve never seen before as the first digital asset that is scarce and very valuable, so how to safeguard it is anything but trivial and probably beyond what the average consumer should undertake or have to worry about.”

Related: Why Bitcoin Is Like 'Email for Money'

So he took up the challenge himself. The result was an early secure bitcoin wallet platform that later evolved into Xapo, which Casares describes as “the Swiss bank of bitcoin” and claims is “the first bitcoin vault fully protected and insured against hacking and bankruptcy.”

Xapo locks down the private keys to its customers’ bitcoin wallets via multi-signature authentication and encryption, and by copying them “onto external drives and paper” offline. The data is distributed to several secret underground “deep cold-storage” servers scattered across different continents and protected by 24/7 video surveillance, biometric sensors and armed guards. The servers are housed in radio wave-blocking Faraday cages. We’re talking “security fit for a super villain’s hideout.”

The startup, insured by its own Xapo Insurance Limited, formerly monetized its services by charging an annual fee of 0.12 percent for each vault deposit made. It recently nixed the fee and began offering its vault services for free. Customers who use Xapo's bitcoin debit card are charged fees laid out by its card service provider. 

Related: Why Bitcoin's Future Is Bright

With the security arm of Xapo well-established and thriving “as the largest custodian of bitcoin in the world,” Casares claims, his next quest is to bring bitcoin to remote, underserved communities throughout the world, places similar to where he grew up, where access to money makes “the difference between having clothes for winter or not,” between eating and going hungry. (Xapo does not share the number of customers it has.) 

“We don’t want to just expose people in need [to bitcoin], we want to make it a lot easier for them to get, understand and use as a payment mechanism. I truly believe bitcoin is the best hope for the 5 billion people who don’t have bank accounts to take part in the global economy.”

Correction: A previous version of this article misstated that Wences Casares sold his Internet Services Provider company for $750 million which was incorrectly disclosed to us by Xapo.

Related: 50 Insane Facts About Bitcoin (Infographic)

Edition: October 2016

Get the Magazine

Limited-Time Offer: 1 Year Print + Digital Edition and 2 Gifts only $9.99
Subscribe Now