Nick Sullivan - Founder of ChangeTip

Nick SullivanNick Sullivan is the CEO and founder of ChangeTip, a love button for the internet.

Interview with Nick Sullivan on bitcoin changetip

Trace Mayer:  Welcome back.  We have with us an excellent interview.  We have Nick Sullivan.  He is the founder and CEO of ChangeTip.  ChangeTip recently raised $4 million from investors, including Pantera Capital and some others.  Welcome to the podcast, Nick.

### PODCAST INTERVIEW TRANSCRIPT Nick Sullivan:  Great to be here, Trace.

Trace Mayer:  So can you give us a little bit of your background.  How do you get in the bitcoin changetip?  Like, why in the world would you start a bitcoin changetip company?  I mean, there's just so much going on and so fast the innovators are moving so quickly like.  How do you get into this?  Why are you doing it?

Nick Sullivan:  Yes.  Well, I've been doing startups for 17 years now since 1997.  I have been in Silicon Valley for a long time.  Love being at the forefront of technology waves.  Politically, I got real excited in my early 20s, and hated the way that government's taking control of our lives.  In my late 20s and early 30s, I became disenfranchised because I figured, well, if the system is what it is than the people in power are the ones that would have to change it so they're not incentivized to do so.

And then, you know, found bitcoin changetip and see that there is real hope in having something that can remove the choke points of control that center around the flow and control of money.  And, I know, it's cliché to say but give power back to the people.  So I'm excited to enable bitcoin changetip for the world, including driving its mass consumer adoption.

How Bitcoin ChangeTip is Born

Trace Mayer:  Yeah.  And, I mean, we're talking about an industry that's just completely chocked, this FinTech.  You know, nothing really has been innovated FinTech in 20, 30 years.  You know, being in Silicon Valley dealing with startups, you probably have looked at this market also.  And then, like, "Man, there is a lot that we could do here."  And now we actually have the technology to do it.  So at ChangeTip, like, how are you harnessing this block chain technology, how are you harnessing bitcoin changetip in these micropayments, for example?

Nick Sullivan:  So micropayments have been talked about at least going back as far as the late '90s.  There's the W3C spec on micropayments.  It's actually dead now.  But the idea at the time was to include a set of HTML tags that would allow people to pay by the hour for viewing say The New York Times.  Obviously, that didn't take hold.

I think one of the reasons why was because the payment channels that existed before didn't allow for small amounts of money to be moved around easily.  Going further, I think that we need the marriage of bitcoin changetip and social media to have true low friction payments and mass consumer adoption.

So if we can reduce the thought of moving money from one person to another to a simple as a tweet or a like.  Right now there's a donate with PayPal button on the side of a lot of websites and we don't click on it.  Not because we're cheap; we don't click on it because we're lazy.  We do the thought process of "oh, this is going to break my flow, it's going to take me off the site.  I'm going to be entering my username and password.  What is that again?"  And that's way too much work.  So we'd rather just stay on the site that we're on.

But with something like ChangeTip, since it's in-flow experience, the friction -- not just in terms of cost and time -- the friction on that act is low.  And that's when it's going to take to enable micropayments.  So once that happens, I'm actually really excited, we're going to see a bunch of new human behaviors created.

I look at this micropayment infrastructure for the web.  It's a big hub and spokes model.  And one of the interesting spokes.  But I think everybody wraps their head around pretty cleanly is content monetization.  Not only just an easier paywall, but let's reinvent the concept of freemium content and let's stop lazily accepting the ads are the only way to monetize content online.

What we've been missing is a low friction payment mechanism between people producing the content and the people consuming it.  And once we have that, we're going to have all kinds of better incentives around the way the content is produced and consumed online.  That's just one of the spokes.  The social mission for ChangeTip in 2015 is actually another one of the spokes, which is fund-raising, charities, causes, donations.

Looking back at the -- I don't know if you remember the Haiti earthquake.  A bunch of Google employees set up SMS short code that allows you to donate 10 dollars by sending a tweet.  And quite a few people did it.  And then we also saw the Ice Bucket Challenge recently, which took advantage of the morality of social media in order to spread a good cause.

Imagine, when we're going to see this in 2015 with ChangeTip combining the two, low friction payments and the virality, and then there's another element which is the human ego bragging about the fact that they supported something.  We're going to pull all of those together and show a great use case for bitcoin changetip, which is enabling fund-raising for causes.  So, hopefully we can stop talking about Mt. Gox.

Trace Mayer:  Yeah.  I mean, charities like BitGive, for example, we interviewed Connie Gallippi on the podcast about what she's doing there.  You know, really just helping anybody who's got the plate out, you know, passing the plate and make some money.  Even with this podcast, for example, I don't take anybody's time or attention for money, and by extension we haven't had any advertising in it.

But it does cost money to have the audio editor take out the ums and the pauses, and I go through and I calculate how many hours it saves just taking out like one or two minutes per episode.  And so, yeah, it justifies paying the audio editor 50 bucks.  But that's 50 bucks out of my pocket and it provides a better listener experience.

But, like, I don't have ads.  So, you know, it's 50 bucks out of my pocket when I could just let anybody who's listening to it bear the cost of the extra couple minutes or insert advertising or something else.  But with ChangeTip the listeners could actually come and be, like, "Hey, here's 25 cents, or here's 50 cents, or here's a nickel."  Right?

Nick Sullivan:  Let's fundamentally give the power back to the listeners for paying for content that they appreciate.  This will not only make for content creators having a better existence, but it also allow them to make better decisions on the type of content that they produce.

I know Larry and Sergey, one of their big initiatives or frustration points within Google right now is the quality of journalistic content has gone down because people are having to create sensationalistic headlines in order to stand out.  It's pretty easy to monetize mesothelioma, insurance and diabetes.  But if you actually are creating a meaningful blog around zen and wellness, that's very difficult to monetize.

So just from a macroeconomic perspective, the incentives are wrong right now in the content production ecosystem.  And so I'm excited to give tools to people that appreciate your show the ability to contribute so that you can do more of it.

Trace Mayer:  And another thing I've seen with bitcoin changetip is like in the Reddit comments, I actually saw an e-commerce transaction take place with a tip.  And I thought that was absolutely fascinating.  Have you seen any of that yet with ChangeTip or you want to, kind of, speak to the nature of e-commerce merging with these types of tools?

Nick Sullivan:  Let me go on a little bit of a ride here.  But, yes, we'll come back.  And it's the final point to --

Trace Mayer:  Okay.  Strap yourselves in.

Nick Sullivan:  -- to social commerce.  It's what we're labeling that spoke off the micropayment infrastructure for the web.  I look at emerging markets, Southeast Asia and Latin America currently have 20 percent-ish bank account penetration and single-digit percent credit card penetration.

Just as China and India left over traditional landline internet access and went straight to mobile for internet access, I think we're going to see a set of leap frogs in this emerging markets where they go straight to digital currencies for the way that they perform electronic transactions.

And there's a few pieces that have to come into place for that to happen.  One is good last-mile infrastructures. is a notable example.  Ron Hose has done an amazing job.  He's an incredible founder at building that best last-mile infrastructure for bitcoin changetip anywhere in the world.

Trace Mayer:  And just because the listeners might not know what is, I actually had a virtual assistant in the Philippines.  And there was a hurricane and then a typhoon and then his wife actually had a baby.  And I was supposed to send his monthly salary and PayPal froze my account, wanted me to verify my address.

And they sent out a physical letter.  It took about a week and a half for me to verify my address before I could send him his PayPal for his salary and it still costs him fifty dollars, which was about ten percent of his salary in order to convert it into Philippine pesos cash in his hand.  But, you send the bitcoin changetips within an hour they're there on a motorbike with cash Philippine pesos in someone's hand.  It's just absolutely amazing.

Nick Sullivan:  He's done an amazing job.  So step one is the --

Trace Mayer:  Yeah.  And not to get too distracted, I mean, these are really cool.

Nick Sullivan:  Totally agree with, yep.  Step two, and he's working on this as well is getting payroll companies to pay in bitcoin changetip.  So imagine a world without direct deposit.  You know, everybody's cash.  So the accounting nightmare that comes during payday.

The ZenPayroll of the Philippines, it's called PayrollHero.  And he's working closely with them to get it so that people can accept their payments in bitcoin changetip.  And then step three is NFC or the smartphone-enabled POS systems, where people can start to purchase their goods in bitcoin changetip.

Trace Mayer:  Which we've done at BitPay already.

Nick Sullivan:  Uh-huh.  And then step four is what you originally brought up, which was social commerce.

We've seen a number of different startups already taking hold in these countries that are building e-commerce platforms on top of social networks, Facebook and Instagram, namely.  There's a startup in San Francisco called Soldsie that this is their business, which it seems a little bit silly at first, but if you examine the marketplaces within these countries, the social networking adoption rates are off the charts.  Everybody is on Facebook.

There's a lot of people that think in the U.S. at least that Google is the internet.  There, it's Facebook is the internet.  It's very hard for them to untangle.  So it's very natural for people when they think, "Oh, I'm going to start to sell small goods online, or I'm going to put my storefront presence online."  Their first reaction is take a bunch of pictures and put it on Instagram, or put it on Facebook.  And I see that it's great, it's super exciting, and then, "Oh, but we need payments."

So when we have an ability for something like ChangeTip to do a purchase right within that social networking site, you add all four of those up and you start to run out of reasons why we need credit cards and bank accounts in the first place because --

Trace Mayer:  Which weren't built for the internet anyway.

Nick Sullivan:  Right.  So I'm excited for our piece of that, just enabling micropayments more broadly so that we can get emerging markets to have proper financial backing.

Trace Mayer:  So you know, there's kind of a saying: if you sit down at the poker table, and in the first couple minutes you haven't identified --

Nick Sullivan:  You are the sucker.

Trace Mayer:  -- who the patsy is and you're the patsy.  Time for some of the tough questions.  If we're using ChangeTip, I mean, are we the patsy?  Are you going to be collecting our personal information, our user information, all that big data you're going to be selling it to Verizon, the NSA? I mean, where is all this information going?  How are you guys going to make money?  Are you going to make money with those additional routes?  You know, some of the tough questions.

Nick Sullivan:  Yeah.  So I really appreciate you bringing this up, Trace, because that's definitely been something that a couple of our critics have brought up.  So first a little important background about me and I'm not bragging here, but this is important to understand.  I actually am a privacy champion.  I worked at a company called Krux, my last full time job, who are the good guys in the privacy war.

These are the privacy safe data companies that that big guys like New York Times, Wall Street Journal and 28 of the other ComScore 100 work with when they want to deal with consumer data in a privacy safe way.  One of the key elements that we've identified that that is choice and transparency.  So I've worked to build tools, for example, a Firefox plugin called Krux Explorer that produces a TreeView for people to see where the bad actors are being brought in so that, as a content producer, if you want to be privacy safe you can actually weed out the people that are spewing your and your customer's data all over the internet.

I've built a set of tools around data protection that all of these large publishers use.  I've participated in privacy hackathons that the Wall Street journalists put on it because I'm a privacy expert.  I also informed the Do Not Track specification and participated in its implementation in two different countries.

So, I mean, it makes my skin crawl a little bit when I'm accused of privacy missteps because it's all about what I stand for.  So and now for the background, what we're actually doing.  When I sat down with all of my investors and started to talk about the revenue models and these are smart people, you know, not only people in the bitcoin changetip cryptocurrency space like Brock Pierce, Ben Davenport, the Winklevie and Michael Terpin, quite a few folks that are on board with me.

But also big name investors from broader FinTech like Howard Lindzon, Ed Sim with BOLDstart Ventures, NYCA Capital which includes Max Levchin, the CEO of Visa, the CTO of Citigroup.  You know, all of these people.  It's pretty simple when you start to say that you're going to provide a platform that's enabling micro transactions for the entire web.  There's just a giant checkbox next to how that's going to be monetizable.

And so it's laughable that people jump to the conclusion that we're going to monetize data when we're building a FinTech platform.  It's nowhere on our radar.  I've said publicly and I'll go on record all the time, saying we will never sell users' data without their explicit permission.  That does get into some interesting ideas.  Not that we're considering this.

But let's say, for example, you could choose to get paid for your data with micropayments.  And then it's all up to you to decide, "Okay, when I visit these sites, here's some ideas for additional data that could be passed along.  Yes, I'm willing to say that I'm a male, age 34 to 40, and I might be looking at buying a car in the next 12 months and I'm interested in interesting trips for new experiences."

Trace Mayer:  And so you could actually get advertising much more accurately targeted to what you're interested in learning about.

Nick Sullivan:  Well, not only that.  But then I could have the choice.

Trace Mayer:  And get paid for it.

Nick Sullivan:  And get paid for it.  And so rather than the practice right now, which is all of your data is leaked all over the place and everybody's trying to prevent that from happening.  Let's, I mean, reuse the cliché, give the power back to the people and let them decide what's known about them, under what conditions they're in complete control of it.  And like you're saying, get paid for it.  And if they don't want to do that, it's turned off.

Trace Mayer:  Yeah, be able to opt-out, or opt-in.

Nick Sullivan:  Uh-huh.

Trace Mayer:  You know.

Nick Sullivan:  And again, that's nowhere in our wheelhouse or the way that we're thinking about any of our revenue models because it's so easy to just make money off of the core platform from a transactional perspective.  Why would we touch the difficult third rail, like, with all of the privacy implications of user data?  It's a messy proposition that we're not at all interested in pursuing.  But I do think sometime in our future there's the right way to do it, which is consumer-driven micropayments for their data in a way that they're in control of.

Decentralization of Bitcoin Changetip

  Trace Mayer:  Well, what about just not having the ability or the power to do it anyways?  You know, right now ChangeTip, I think, is fairly centralized.  I don't think we necessarily have the tools to completely decentralize this idea with the blockchain itself.  But it's that something that's on the radar screen, just like removing your ability to even going to be that intermediary, this in a position to be able to sell user data at all?

Nick Sullivan:  Yeah.  So there's two pieces of that conversation.  So we do require that you log in with the site that you're connecting with.  And we do that not because we're harvesting data; but we do that because we need to authenticate you.  We need to know that when you click on that link that says collect this tip from Twitter, that it's actually you collecting that link and not somebody else.

So the most convenient mechanism to do that and the best user experience to do that is to login with that site.  We're very focused on reducing friction around payments.  And I don't want to have my grandma think about what a QR code is, what a public key is, what a private key is.  She should just be able to log in with Facebook and then give her grandson $5 on her birthday.  That's what it's going to take to driving mass consumer adoption is make this process convenient enough.

So that's the driving force behind why we allow people to create accounts by logging in with social networks. It's strictly a user experience benefit.

On to the other question you brought out, which is talking about how we handle off-chain versus on-chain transactions and the fact that we're centralized, it does bother me.  Ideologically, I'd loved for ChangeTip to be a truly decentralized application that performed all of its transactions on the block chain.  And, in fact, we started out that way.  And we have to go off-chain because we realized that in architectural view, there was no way that the bitcoin changetip network at least as it's conceived today was going to be able to support the kind of volume that we needed and then the transaction fees would be too high.

So the analogy that I use all the time is if you were building a gambling website, you wouldn't have a credit card transaction every time for every blackjack hand.  You would have one when they sat down at the table and when they left the table.  And we have a similar model, so it only hits the chain when you deposit and when you withdraw.  And then it's an internal ledger to keep track of it from there.  That allows tips to be free and instant.

Now where I'd like to see this move, and as a callout to the bitcoin changetip community if you're interested in helping with this, we're definitely interested in contributing development resources to this.  Richard Kiss is one of our employees.  He's the author of picoin and we're kind of clearing his desk so that he can spend time outwardly in the bitcoin changetip community, helping to develop the bitcoin changetip for protocol to enable micro-transactions.

There's a couple of different pathways that we're exploring.  One is working with the Blockstream team and sidechains to see if we can figure out how we can do micro-transactions on a sidechain.

Trace Mayer:  Which I actually think is one of the most important projects that needs to get more traction and implementation is the sidechains with Adam Back and Greg Maxwell, etcetera.

Nick Sullivan:  Tremendous amount of potential there.  And so we're aligned with them to help execute.  We're willing to donate resources and we're willing to use ChangeTip as a notable first-use case.  Another area that we're exploring is payment channels.

Trace Mayer:  So, like Bitoff and Impulse, the BitPay has been working on?

Nick Sullivan:  Right.  I think there's a few different examples and we're still in the early stages of exploring this.  But from what I understand, sidechains can solve the problem but it's a little bit in the future.  Payment channels could happen today or now with fairly little work.

Trace Mayer:  Yeah.  I know in Miami, Jeff Garzik announced the release of Impulse and so that very well might be able to solve a lot of these issues for you.

Nick Sullivan:  Great.  So this is an example, where we made the move to off-chain reluctantly because we knew we needed to just support it.  But I'm all for proper patching and/or micro-transaction mechanisms on the existing sidechain if we can get it to work in a way that's scalable.  And I'm throwing my money where my mouth is for ChangeTip and its development resources to make it happen.

Trace Mayer:  Awesome.  What are you most like optimistic about in this space?

Nick Sullivan:  So in 2015, highlighting better use cases for Bitcoin changetip that are compelling enough for the average person to go through what is still today an admittedly painful process of obtaining it.  There's an old adage in user experience that really people are just making a trade off on whether or not what they're about to do is worth the pain they're going to go through to do it.

So you can tackle a user experience problem with two angles.  You can reduce the friction and make it easier; or you can make the reward at the other side valuable enough that they'll put up with some pain.  And I think we need both.  So it's in 2015, I'd like to see a bunch of new use cases highlighted for bitcoin changetip that aren't just looking at it as, "Here's a replacement for credit cards."  Let's actually invent some new human behaviors and showcase what bitcoin changetip can do that other previous payment channels haven't been able to.

Longer term, if I put my slightly Libertarian hat on, I'm excited about ideas.  You know, just as we've seen a number of different technical revolutions historically from books and in the publishing industry going to e-books and we saw the transition from the recording industry to MP3, to now companies like iTunes doing micropayments and then we saw Hollywood and then Napster.  And then the problem with Napster was that it had a single point of failure, so we had BitTorrent.  The lesson that's taught there is that geeks will find a way.  And I'm excited that geeks are going to find a way to disrupt the existing financial ecosystem.

Trace Mayer:  Yeah, I mean, the internet's disrupted mail, it's disrupted telephones, it's disrupted radios and newspapers, it's disrupting money and currency now and other centralized forms of property.  It's very exciting.  Thanks for being on the podcast.  We've had Nick Sullivan, CEO and founder of ChangeTip.  Thanks for being here.

Nick Sullivan:  Thanks a lot, Trace.

Written by Nick Sullivan on March 16, 2015.