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May 20, 2015

$116m Bitcoin startup wants to use cryptocurrency to slash cloud costs

21 wants to redefine currency as a protocol, but is already courting controversy.

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A $116m-funded Bitcoin start-up has pledged to put a cryptocurrency miner "in every hand", as its new chief executive revealed the company’s plans to go to market.

Writing on the firm’s blog, Balaji Srinivasan claimed 21 Inc was looking to develop Bitcoin "as a protocol" that could be used for micropayments, authentication and reducing the costs of using cloud services.

"Conceptually, we believe that embedded mining will ultimately establish bitcoin as a fundamental system resource on par with CPU, bandwidth, hard drive space, and RAM," he said.

"That is, one can imagine the ultimate thin client in which a system designer consciously chooses a relatively slow CPU but a relatively strong 21 mining chip, using the bitcoin generated therein to purchase computation in the cloud."

21 Inc has attracted interest from Silicon Valley observers for attracting record investment for a cryptocurrency firm, and its plans to install Bitcoin miners in everyday objects such as toasters.

Such an apparent gimmick is part of its move to make cryptocurrency more accessible and useful to both consumers and business, with the technology having struggled to achieve mainstream usage despite the hype.

"Crucial to this is the idea that bitcoin generated by embedded mining is more convenient? – ?and hence more valuable? – ?than bitcoin bought at market price and manually moved over to the site of utility," Srinivasan said.

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"As evidence for this, when a user writes a byte to their local hard drive, the spot price of external storage is not typically top-of-mind relative to the convenience of simply having a local hard drive."

As well as garnering big headlines, 21 has also captured the attention of such Silicon Valley luminaries as Qualcomm Ventures and Cisco, as well as the venture capital firm Andreessen Horowitz.

However the company has drawn criticism over its business model which involves taking large chunks of revenue from the mining process and has led some to question whether consumers would ever make a return on a toaster with a bitcoin chip.

Padmasree Warrior, chief technology and strategy officer at Cisco, said: "Bitcoin could be the internet’s next great protocol.

"With the blockchain’s distributed ledger and micro-transaction capabilities, it has the potential to become an enabling technology that expands well beyond digital payments."

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