Selling Shiny Gold Bitcoins — at A Premium

Will luddites pay more to hold the digital cryptocurrency in their hands?

Titan Bitcoin

One has a copper brass alloy, another has an ounce of silver, the last an ounce of gold, and all feature the profile of what appears to be an ancient Greek soldier. Together, they represent the newest iteration of the oldest form of currency — coins — with a rather puzzling twist: they are bitcoins in physical form.

A California entrepreneur has crossbred the volatile and riveting new digital currency with a fixture of late-night television sales pitches, the commemorative coin, to produce what he hopes will be an accessible and comprehensible version of a virtual currency — at a massive premium to investors.

Founded earlier this year, Titan Coins are shiny, expensive metal collectible coins that you need either a money order or bitcoin to buy. Each coin features a unique digital identifier that lets you spend the bitcoin.

Tim Fillmore, Titan’s 30-year-old founder, offers two reasons you should consider paying a premium of as much as 200% for his product: You like coins and you like Titan’s security.

“Titan bitcoins are like a gift card for bitcoin,” said Fillmore, a former aerospace engineer, “a lot of the people who buy them are interested in Bitcoin but don’t have time and wherewithal to learn about new technology or install software, but they want in on the Bitcoin boom.”

Titan Coins afford luddites a way to acquire bitcoins without the hassle of having to take responsibility for securing their own private key, which uniquely identifies bitcoins against hackers. They are also a way to market bitcoins to anyone who wants to get in on the supposed Bitcoin boom. If the price of Bitcoin goes up another 7,000% in 2014, a consumer might forget the premium he payed for the metal in the coin.

Titan has produced 10,000 copper coins and 1,000 silver coins so far. (Fillmore wouldn’t disclose how many gold coins it has produced or is planning on minting.) As it currently stands, the copper, silver, and gold Titan coins each represent one bitcoin, though the company says it plans to make the silver and gold coins in denominations of five and ten bitcoins. Part of the value proposition of the Titan coins, according to Fillmore, is in the metal used to make them.

Indeed, Fillmore said that some of the company’s earliest customers were paying as much as a 200% premium for Titan’s coins, in essence making a speculative bet both on the value of the physical and the associated bitcoin increasing.

“They intuitively understand it’s valuable,” Fillmore said.

As a result, Fillmore said that the copper coin — dubbed the Titan One — retails at an $85 premium over the current value of a bitcoin, meaning it costs $969 based on the value of the metal and the going rate for a bitcoin. The Titan One Silver retails for a $220 premium, or a cost of $1,100, and the Titan One Gold has a $1,700 premium, which puts its cost at $2,600.

The price of Titan’s coins has increased in proportion to the gain in value for bitcoins. In October, for instance, Titan’s copper coin only cost $269, or a 39% premium to one bitcoin. Today, that same Titan coin is worth $1,009 based on the $860 current value of one bitcoin.

Titan coins are currently unavailable for order on its website because PayPal stopped transmitting payments for the company; it says it is now looking into working with other processors.

Aside from betting on an increase in value, the other reason to buy a Titan Coin is for its supposedly better security. That’s an important consideration given that Bitcoin has no country or central bank supporting it and is always at risk of being stolen by hackers, though the physical security of the coins don’t defer much of that risk.

Titan coins feature the traditional Bitcoin “private key,” the unique string of numbers and letters you need to spend the currency that are available on the coin itself, under a tamper-proof hologram that the coin’s owner peels off. The coin can then easily be transferred into a Bitcoin wallet — a digital storage service for bitcoins — to spend.

The company also offers a security step Fillmore says is similar to two-step authentication for email passwords. Instead of the private key, each coin has another unique code under a hologram that you then register on Titan’s website so that your bitcoin is sent to a specific email address.

“It’s a little more secure in terms of coin transfer,” said Fillmore.

Fillmore isn’t the first guy to come up with the idea of minting coins attached to specific Bitcoin keys. Wired reported Thursday that the man behind Casascius bitcoins, the most prominent Bitcoin coins, would stop accepting any form of payment besides Bitcoin. Mike Caldwell, who had sold over 90,000 coins worth today about $82 million, told Wired that Financial Crimes Enforcement Network, FINCEN, the anti-money laundering division of the Treasury department had sent him a letter saying they considered his coin business to be a money transmitting business that comes along with a raft of requirements and regulatory approvals that Caldwell had not received.

“We keep a database and we do a delivery confirmation process that the person who purchased the coin received the coin. We’re going to be complying with anti-money laundering laws by default,” Fillmore said. “The problem with [Caldwell] is that he doesn’t want to comply. We do want to comply.”

Fillmore’s ultimate ambitions are to get some regulatory certainty around his business — he thinks it would be more appropriate to be regulated the way coin and metal dealers are as opposed to money transmitters — and create “custom solutions for any company that wants to attach digital value to a physical commodity.”

Until then, he’ll continue to work with less than ten other employees. Their mailing address is in La Habra, a city in northern Orange County, California, while its actual mint and the cold storage for its bitcoins — computers not connected to the internet — are in an undisclosed location.

“We don’t tell people where we produce the coins, we have a lot of gold bullion and sensitive cryptographic information that we would rather not publicize,” Fillmore said.

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