Meet the kibbutznik who wants to disrupt the global banking system
Daniel Peled, founder of GetGems, is trying to bring bitcoin to the masses with his new messaging app. Why are the world’s biggest banks playing along?
Simona Weinglass is an investigative reporter at The Times of Israel.
Why does WhatsApp have 900 million users worldwide? It’s cheap. Before the instant messaging app burst onto the scene in 2009, phone companies charged a pretty penny for text messages. WhatsApp is free the first year and costs $0.99 per year afterward.
But what if you could use an instant messaging service that was not only free but paid you, the user? What if, in the course of using the app, you actually earned pocket money for activities like inviting new users and watching ads? Not only that, but what it allowed you to send money, in the form of bitcoin, to any other user instantly for free?
Sound fishy?
Daniel Peled, the 29-year-old CEO and founder of GetGems, said his goal was to create a social messaging app that lets users earn the lion’s share of the advertising revenue and also one that doesn’t invade users’ privacy by harvesting their personal data. Earlier this year, Peled’s startup earned the title of “most visionary social media solution” at the Citi Mobile Challenge for Europe, the Middle East and Africa (EMEA), a competition for startups in the financial technology (fintech) sector. GetGems was one of more than 750 applicants from 101 countries.
Citi described the app as “truly inspiring” and “a solution that could transform financial services and fuel progress in other industries like transportation and education.”
But if you ask Peled about his primary purpose for GetGems, he says it is to get as many people as possible to embrace his passion, Bitcoin, a tool that allows people to take control of their money away from concentrated power and big banks like Citi.
The problem with Bitcoin
“A lot of people have heard of Bitcoin,” Peled tells The Times of Israel. “The beauty of it is that it allows you to transfer value anywhere in the world instantly in a decentralized. way. But only about 3-4 million users have a wallet that holds bitcoin.”
In fact, the average bitcoin user is a tech-savvy male aged 25-34.
“The problem is the technology is not very intuitive. If I were going to send someone their first bitcoin, it would take me 20-30 minutes to explain it to a tech person sitting next to me. To explain it to my parents or brother, it would take over an hour.”
What GetGems does is dumb down the process, by making money transfers part of a WhatsApp-like messaging app that also contains a secure bitcoin wallet.
“Everyone knows how to use messaging apps like Facebook, Messenger and SnapChat. You don’t need to know the other person’s public address your or own private bitcoin key. All you need is their user name.”
But there’s a second problem. Where do you get the bitcoin?
Peled realized that most people are wary of entering their credit card information to buy bitcoin that they can then transfer, so he decided every new user would be awarded a bitcoin-based cryptocurrency, called gemz, just for inviting friends to join. In the future, users will get gemz for agreeing to watch advertising, on the principle that a user’s attention is a scarce commodity that deserves compensation.
“If you invite someone, you get 25 gemz, which is worth 33 cents. If you invite three people you get a dollar.”
Peled says the network has 15,000 users so far. The iOS and Android apps are currently in public beta.
Users can then play with these gemz by sending them to friends, converting them to bitcoin or other currencies, or redeeming them for gift cards at e-commerce sites like Amazon and eBay.
GetGems completed a crowdfunding campaign at the start of this year in which it raised the bitcoin equivalent of $780,000.
Although his company is for-profit, Peled says that the company’s founders and employees (a total of eight people) only hold an 8 percent share of the gemz.
“In total, we will issue 100 million gemz. Fifty percent were sold in the crowdfund. Thirty percent will be given away for free in the next few years to people who join and use the network, and twelve percent will be given to developers and community efforts.”
Right now, a gem is worth about approximately 0.015 dollars, but the more people join the network, the more its value will grow.
The idea, he says, is that “more value can flow to users and the pie can be shared in a more equitable way.”
Is this an altruistic project or are you looking to get rich?
“The goal is both. I think someone can become rich and also build a fair ecosystem for users. There is also a difference between rich and insanely rich, which is what is happening right now with the founders of Instagram, WhatsApp, Facebook, Snapchat. I think the gap should be much smaller. Social network users should get to enjoy more of the wealth they help create.”
Peled shares a YouTube video he edited that encapsulates his philosophy.
A kibbutznik in Tel Aviv
Peled belongs to Kibbutz Ramat Yohanan in northern Israel, and the son of Udi Peled, who until recently was the economic director of Israel’s kibbutz movement.
“The values behind GetGems are the values of the kibbutz,” he says. “Ramat Yohanan is one of the remaining Israeli kibbutzim where everyone is still equal, where people still share their salaries. It’s a prosperous community; our factories are successful. I think it’s amazing that such communities can prosper.”
On a personal note, Peled, who is 29, has a year to decide whether he wants to formally join the kibbutz.
“I live in Tel Aviv now. My salary goes to myself. At the age of 30 I need to decide whether to become a member (which means to go live back on the kibbutz and give my salary to the kibbutz). I can also make this decision at a later stage but I would lose some of the benefits.”
Peled doesn’t divulge which way he is leaning, but it is possible that if GetGems does become the next WhatsApp, Kibbutz Ramat Yohanan, and not Peled himself, will be raking in his share of the revenue.
P2P money transfers
Sending money through social networks is the hot new thing. Earlier this year, Facebook enabled users to send payments through Messenger.
But Peled says that because it uses bitcoin, GetGems’ system of money transfer is superior.
“In the United States you have to comply with AML and KYC (anti-money laundering and know your customer regulations).There are fees, it takes three business days, you’re limited to about $500.”
GetGems, he says, doesn’t have such restrictions, and because it is built on top of Telegram, (the nonprofit messaging platform regarded as a serious challenger to WhatsApp), it is much more privacy sensitive.
Banks, understandably, are terrified of social media payment apps, which may be why Citi approached GetGems to create a modified version of the app (one that uses regular currency instead of Bitcoin) for its own customers’ use.
Did your bitcoin friends think you were selling out?
No, says Peled. “In order to make GetGems go mainstream we need to connect with industry. They wanted to leverage our knowledge of social networks, native mobile apps and payment security to give them a similar solution using fiat currency.”
But why would banks empower the technology that could lead to their irrelevance?
“A lot of them see the financial industry evolving. They see the power of the blockchain and they want to incorporate it into their business. In the future, banks will become hybrids–they will use blockchain technology [the decentralized ledger underlying bitcoin] to transfer value and they will combine that with fiat currency for stability.”
But despite his deal with Citi, bitcoin, not traditional currencies, is where Peled’s focus lies. That’s because bitcoin allows for micropayments.
“If WhatsApp wanted to give one, two or three shekels to every user, that’s not possible with the current financial system. Just to transfer one shekel costs half a shekel. The fees are too high and you need to transact through a bank.”
But with bitcoin, your customers can share the wealth, he says.
“You can have an Uber that pays the users the lion’s share of revenues like Lazooz or a Facebook that is trying to pay users the lion’s share of ad revenue like Synereo. This wasn’t possible before the blockchain.”
Yes, but why haven’t any of these decentralized apps you mention taken off yet?
Because the developers are purists, he says.
“The blockchain community ecosystem is in a state of mind to decentralize everything. I agree that in the end everything that can be decentralized should be decentralized, but it’s a long process. If sending a text message with the blockchain is not instantaneous, if it takes two seconds, users won’t use it.”
That’s why GetGems compromised a bit. While the transfer of gems is decentralized, the actual messaging app, based on Telegram, is not.
“The technology is not there yet, to make blockchain transactions fast enough. This was a smart move that will help us reach a mainstream audience.”
The point of alternative currencies
Bitcoin and gemz are not the only alternative currencies out there. Since the 2008 financial crisis, a local currency movement has gathered momentum in Europe and the United States. In another development, the radical Islamic State announced it is issuing its own gold-based coins.
What does your currency have in common with the local currency movement?
“One of the biggest problems with fiat money is that 1 percent of the world owns 50 percent of the wealth. Look at Mamazone, it’s this online network of 50,000 mothers in Israel. The mothers have their own currency and they trade goods and services amongst themselves that they wouldn’t be able to do in shekels. Some of the mothers are in a financial situation that doesn’t permit them to spend fiat money.”
What about Islamic State issuing its own currency? Does that have anything to do with bitcoin?
“I’m not sure. Ask Meni Rosenfeld.”
Meni Rosenfeld, a mathematician by training, is the chairman of the Israel Bitcoin Association. The Times of Israel asked him whether Islamic State’s plan to issue its own gold-based currency has any conceptual connection to bitcoin.
“Maybe they want to topple the dollar. The dollar is the reserve currency of the entire world, countries that don’t have their own strong currency use the dollar. This gives the United States a lot of power.”
What kind of power?
Rosenfeld explains that the fiat money system allows the United States to print money whenever it wants. This is effectively a transfer of wealth from anyone in the world who holds dollars to the US government. The government can use this money to buy arms, go to war and then tax the population in the same currency.
“ISIL is trying to weaken the United States,” explains Rosenfeld, “but they have no chance of succeeding.
Does that mean bitcoin could potentially weaken the United States?
“Yes, if it is adopted on a large scale, it could reduce the power of the dollar. So if people in the United States want to hold on to their position and power, it makes sense that they might oppose bitcoin. But I don’t think they will. I look at banks. Banks have an interest in bitcoin not succeeding but the people inside the banks are very drawn to it. I think the ordinary citizens in the United States will adopt bitcoin, because it is fairer and more efficient.”
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