Jed McCaleb, the reclusive bitcoin pioneer who founded both Mt. Gox and Ripple, unveiled his latest, much anticipated cryptocurrency project on Thursday, a user-friendly product that aims to encourage mainstream adoption of digital money.
Mr. McCaleb’s new project is a network system called Stellar that promises a bridge between the virtual and traditional currency worlds . It will use a decentralized network of computers run by so-called “gateway” institutions – banks and other financial firms — to cheaply and efficiently manage and authenticate a public record of transactions. Those gateways provide the exchange services that allow outside customers to send money to others anywhere in the world.
Mr. McCaleb is media-shy, almost never talking to the press, but is well-known in the bitcoin community. He started Mt. Gox in 2010, which grew to become the biggest bitcoin exchange in the world before it collapsed this year after he’d sold it to Mark Karpeles. He also co-founded Ripple, a payments network that borrows some of bitcoin’s ideas to facilitate cheap, efficient transfers of funds and assets denominated in any currency.
In unveiling Stellar, Mr. McCaleb ends months of speculation. Until now, the project was known only as the “Secret Bitcoin Project,” with enticing references made to it in a single-page web site of the same name.
Like bitcoin and Ripple, the Stellar network will operate with an open-source protocol, meaning anybody can work to improve the software. Also as with bitcoin and Ripple, it will have its own internal digital currency, called stellar.
But Stellar is consciously different in some key areas.
One key difference is that 95% of the currency is being given away for free at the outset, the bulk of it from an initial issuance of 100 billion coins created by the not-for-profit foundation that will run the project. New coins will be later added at no cost to the circulation at a rate of 1% per year.
The decision to give away nearly all the coins was colored by Mr. McCaleb’s experience with Ripple, whose benefits as a groundbreaking technology were sometimes overwhelmed by the suspicions of digital-currency investors, some of whom derided it as a “pre-mined” scam. Whereas new bitcoins are constantly being brought into existence by “miners” who receive them as rewards for confirm transactions across network, Ripple Labs created the entire issuance of 100 billion of its own coins, known as XRP, in one fell swoop, retaining a large portion for the company and its founders. That was done so that a separate foundation, called OpenCoin, could coordinate release of XRP over time to designated gateways. But it inevitably created suspicions among some cryptocurrency enthusiasts.
Mr. McCaleb himself had a falling out with Ripple Labs management and he left the company in 2013. Then, in May, he announced that he would be selling his entire stake of XRP coins, a public display that drove down their price and which some in the market dubbed the “Jedageddon.”
In an apparent attempt to distance itself from such internal conflict, Stellar is being built on a model of giveaways.
“We think of it like ICANN,” says Joyce Kim, the Stellar Development Foundation’s executive director, referring to the group that oversees the Internet protocol. “There are certain things that can’t be owned by one company.”
Of the 95 billion coins to be distributed, half of those will be available free to applicants who place orders via Facebook. The other half will be reserved for charities working in the fields of economic development and poverty alleviation and non-profits that are early adopters of digital money.
As with Ripple, a key selling point for Stellar will be that it allows people to make payments with traditional currencies while using the efficiency of a cryptocurrency network to lower costs and speed up processing.
“This is probably the best way to bring the best of both worlds together,” said Ms. Kim.
The Stellar Development Foundation’s board is comprised of Mr. McCaleb, Keith Rabois, the former COO at smartphone credit card swipe provider Square, and Patrick Collison, the CEO of Stripe, a maker of software for payment processing.. The development team is led by Mr. McCaleb and David Mazieres, a Stanford professor who heads up the school’s Secure Computer Systems group. Advisors include Dan Kaminsky, Joi Ito, Greg Stein, Jackson Palmer, and Naval Ravikant.
Ms. Kim said the hope is that developers in different nations will tailor products and services around Stellar that will best serve their local communities.
The biggest goal of Stellar, she said, is to spur adoption of cryptocurrencies, with the team focused on overcoming three specific hurdles: education, access, and volatility.
With other digital currencies, “you either put money in or you have to mine for it,” Ms. Kim said, and that “eliminates most of the world.” Stellar’s goal, she said, is to make it cost-free for people to acquire a virtual currency.