Payments Firm Backs 'Crazy' Offline Bitcoin Transactions Experiment

As an Internet-based payment system, most bitcoin transactions today necessitate that users are online or otherwise can print and exchange private keys.

However, Romanian mobile payments provider Netopia mobilPay is now backing a proposal that strives for a middle path. Called OffCoin, the proposal is for a system that allows microSD cards in mobile phones to generate, store, transmit and delete bitcoin private keys.

In effect, OffCoin would be capable of moving digital currency between mobile phones without requiring users to be connected to the Internet or needing to pay the cost of using the bitcoin blockchain. By transacting with NFC, Bluetooth, QR codes or a combination of these technologies, Netopia suggests it can allow users to send and receive bitcoin without paying fees for sending funds over the bitcoin blockchain.

CEO Antonio Eram called the project one of the company's recent "experiments" with bitcoin, which also include the new exchange product, BTKO.in it debuted at a recent Silicon Valley event. An established mobile payments company, Netopia boasts an estimated 24 million customers and relationships with telecommunications giants T-Mobile and Vodafone.

Explaining his firm's interest in the OffCoin project, Eram told CoinDesk:

"Decentralised bitcoin for offline usage is a reality with our solution. As I have presented, there is only positive impact on the public ledger. We've just created a trusted offline, off-blockchain infrastructure."

Project developers argue that the system is decentralized, since there's no central entity that guarantees the funds. Further, parts of the transaction process are segregated, as the bitcoin wallet would only have part of the private key, to be completed by the microSD cards.

Netopia indicates that OffCoin now works with most Android phones version 4.1 or higher that accepts microSD cards, though the company is seeking to expand its capabilities.

"We have an USB version available for testing and soon one that is compatible with iPhone. This was designed to be universally acceptable and not a solution for high end phones," said Eram. "Our vision is to enable offline bitcoin transactions anywhere in the world. Including the areas where phones are not exactly high end."

Project origins

OffCoin as a concept and project dates back to late 2013, as it is a rebranding and furthering of development of the Othercoin project started by Romanian developer Razvan Dragomirescu.

Under its former name, OffCoin attracted the attention of notable bitcoin developers such as Gregory Maxwell, Adam Back, Mike Hearn and Peter Todd, who offered early and varying opinions on the concept. Maxwell, now a CTO at Blockstream, called the proposal a "fantastic idea", but suggested issues could arise should the issuers of the microSD cards compromise the system. Similarly, Hearn expressed his optimism that advancements with smartphones and Internet connectivity would negate the need for such solutions.

Dragomirescu ultimately developed the project alone, but he attracted the attention of Netopia, which began negotiations to invest and promote the project this year.

"This solution is revolutionary in terms of enabling bitcoin payments and transfers for offline usage," Eram said of the move. "We may be in avant-garde, however, we know the applicability can be expanded exponentially."

Because OffCoin maintains security while keeping transactions private, Eram went so far as to say it could be a potent development tool as the network seeks to increase its transaction processing capabilities.

For example, the recent debate over bitcoin's standard block size rests on the number of transactions able to be transmitted over the network each second. By conducting transactions off-chain more widely, the number of transactions broadcast on the network could theoretically be reduced.

Solution viability

Given the offline nature of transactions, Eram framed the project as one that could have relevance in context of proposals such as the Lightning network that are seeking to reduce the number of transactions that need to be entered directly on the blockchain.

"Offcoin is about real privacy. Achieved offline without any changes in the blockchain, as in forks, or expensive hardware. This is an elegant solution that accomplishes a lot," he said. "Releasing pressure from the blockchain is in line with the discussion of changing the block size for allowing more transactions. With OffChain, we can do this and use the blockchain as a settlement layer."

Still, some observers caution against the widespread use of the tech, with developer Justus Ranvier suggesting a more thorough analysis of the cost of extracting private keys through illicit means would be needed.

Other factors could also limit the usefulness of the system, however, such as the decline in the use of microSD cards in mobile devices, a trend attributable to the cost phone manufacturers can charge for more data space.

Eram, though, believes developments such as Google's Project Vault, which seeks to build a secure computer on a microSD-sized device, demonstrate a continued interest in the technology.

Question of scale

One of the most frequent criticisms levied against the project, while interesting to developers, has been the difficulties in achieving scale, which is where Netopia believes it can help take the project forward.

As a mobile payments specialist, Eram said, the company already has a network of consumers, merchants and telecommunications providers it could leverage to promote solutions like OffCoin as well as bitcoin more broadly.

"Since we are big enough, we can push bitcoin to various markets. We're pretty confident that our investment in the ecosystem will pay off in some time," he added.

Eram said that interest in bitcoin is growing among members of these industries due to the use of bitcoin amongst Romania's freelancers.

"They want to be paid in bitcoins now. That's an income that is in bitcoins, and they have to be used, and so what we have done in the last six to seven months is that we enable a lot of merchants to accept bitcoins," Eram said.

He estimated BTKO.in is now doing roughly 5 BTC in daily volume, but that the service has yet to open to the general public.

No launch schedule

As for when the project may be more widely announced, Eram indicated Netopia is currently looking for the "best opportunity". He suggested this could coincide with the launch of BTKO.in.

Eram noted that Netopia will likely use its standard strategy in promoting the technology, placing an early bet that may be advantageous later.

"We are in a very good position to start a bitcoin business in that region, also we are very well known for innovation, even if we do like crazy experiments," Eram continued.

In particular, Eram said that Netopia is currently investigating how it can enter the European, Latin American and Middle Eastern markets later this year, concluding:

"With OffCoin we think is the same. Huge potential. Maybe not the right time, considering the acceptance of bitcoin, but we are confident that we can make a difference."

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