Last week at Stanford University a small team from Ljubljana, the capital of Slovenia, gave a presentation with a provocative title: “Growing ‘Bitcoin Cities’ Across the Globe.”
The pitch: Imagine a world where you can buy everything with bitcoin. No fiat needed. For a legion of cryptocurrency enthusiasts, this has been the Holy Grail: Use bitcoin to buy a cup of coffee. See a movie. Get a haircut.
In reality? Bitcoin payments are still a novelty. Even though the number of bitcoin ATMs doubled in 2018, trying to use “crypto only” is a goofy stunt with a fuzzy purpose—like the woman who went on an all-emoji diet, only eating foods that have an emoji counterpart. Cute, but what’s the point? Crypto-only living, like an all-emoji diet, is possible but frustrating. It’s nice to dream of a decentralized utopia, but the hard truth–for now, at least—is that if a merchant can accept crypto, there’s a 99 percent chance she can accept a credit card. The world just isn’t ready for bitcoin-only transactions.
Unless you come to Ljubljana, Slovenia.
In June 2018, a company called BTC launched a pilot program for what some have called a “Crypto Shopping Mall” or “Bitcoin City” or “BTC City.” Supposedly it’s an actual, functional, real-world integration of cryptocurrency into a shopping ecosystem. This is not just an oddball cafe that takes bitcoin, but an entire network of crypto-infused merchants. Supposedly you can leave your fiat behind and use bitcoin (or Ethereum or Bitcoin Cash) to buy things like martinis, microwaves, or tickets to a water slide park. Slovenia’s Prime Minister, Miro Cerar, even paid the spot a visit, drinking a cup of coffee that was paid for in crypto.
I wasn’t at Stanford when the team from Slovenia gave their presentation. I didn’t need to see it. As it happens, I’ve been curious about Bitcoin City for some time. Last summer, when the program was still in beta, I paid a visit to Ljubljana to see this crypto-wunderland with my own eyes.
Was this just a marketing gimmick? Or is Bitcoin City real, and if so, what could that mean for crypto going forward?
I’m standing at the top of a skyscraper in Ljubljana, gazing at the panoramic scene below. The Alps are in the distance. Between us and the mountains are countless shops, restaurants, warehouses, office buildings, hotels, and parks. It’s more than a “shopping mall.” It’s an entire city.
“This is BTC City,” says Jože Mermal, the chairman of BTC. He gestures at the scene below, soaking in his life’s work.
“This is all BTC City?” I ask. How is this possible?
Mermal nods, amused by my incredulity. “This is all BTC City.”
Mermal is an unlikely agent of change. At 65, he’s a living link to the pre-’90s Socialist era, when Slovenia was still part of Yugoslavia, and the government directly owned and controlled much of the economy. He’s tanned and athletic—he swims, skis, and competes in golf tournaments—and paces the balcony with a young man’s energy. “We have a lot of technical talent here in Slovenia,” the young old man says. “And we wanted to attract more of it. BTC City is a way to build an ecosystem—creating an environment where you can go shopping, do some fine dining, go to the theater.”
This ecosystem, according to the company, now includes over 70 bars and restaurants, a barbershop, pharmacy, mini golf course, water park with 17 swimming pools and 15 saunas (?!), three banks, a “culinary park” with street food, innovation labs, ice-skating rink, and the presence of blue chippers like IBM, Microsoft, and BMW. There’s a blockchain think tank, a crypto mining rig, three bitcoin ATMs, and a virtual reality start-up. (I tested out their VR goggles and scaled a virtual skyscraper—legit.) Mermal also intends to use the space as a testing ground for self-driving cars.
“Four hundred and fifty shops and more than 3,000 companies,” Mermal explains, pointing at the mini-economy below. “But none of that matters if you don’t have culture. Without culture, art, and innovation, you have a city without a soul.” The role of bitcoin and blockchain, it seems, is to help nourish the soul of this city.
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Mermal has created BTC City and he has also created Bitcoin City, but the two are not one and the same, and this confusion is something of an advantage. The company called “BTC” has been around since long before Satoshi Nakamoto mined the first bitcoin, and likely before he (or she) was even born. BTC launched in 1954 as a warehouse company, initially called the Centralna Skladisca (Central Warehouses), and then the “Business Trade Center.” Over the years, the acronym has also morphed into “Business Transport Center” and then “Blagovno Trgovinski Center,” or “Business Transit Center.”
In 1993, after the collapse of Yugoslavia, Mermal overhauled 4.3 million square feet of warehouses into a real-life version of Sim City, adding a micro-brewery here and a flower garden there. Soon it became a destination, and BTC could rent out properties and function as a real-estate company. Then more restaurants, more trees, more cycling paths, more start-ups, more art. (Art seems particularly important to Mermal, who, in his crisp dress shirt and navy blazer, looks like the kind of guy who could swoop in to win an auction for a recently discovered Manet.) When I asked a random taxi driver where I should go to buy replacement AirPods (RIP), she immediately said, “Try BTC City.” The company says it now attracts 21 million visitors each year.
Years after Mermal began the grand project, in an astonishing turn of good luck, the acronym of “BTC” just happened to be the exact three letters of the hottest asset on the planet. Why not convert BTC City into Bitcoin City? And if people think that BTC stands for bitcoin, is that so bad?
It’s time to get my crypto on. Now, at long last, after months of frustration, I can actually use bitcoin for something besides financial speculation. The moment feels like a year in the making. (The last time I used crypto for goods or services: In Bali. I paid $5 in bitcoin to reserve a conference room at the Hubud coworking space, and was slapped with a $12 transaction fee.)
Using crypto in Bitcoin City comes with a catch. To spend your bitcoin, you need to download an app and use a specific wallet, called Elipay, so that it can synch with the crypto-accepting Point-of-Sale interfaces used by the participating merchants, which also use Elipay. (Hang on—this is about to get confusing.) Elipay is the flagship product of a blockchain company called Eligma (see?), which is partially owned by BTC—you can see the corporate synergy. BTC invested 1.5 million Euros in Eligma for a 20 percent chunk of the equity, says Mermal, with the hope that Elipay will emerge as a mainstream—perhaps the mainstream—crypto-POS for merchants, edging out the competition of Bitpay, GoCoin, and Cryptopay.
I head to a skyscraper called The Crystal Palace, also in BTC City, and the tallest building in Slovenia. On the 20th floor, with a jaw-dropping view of BTC City, Eligma’s CEO, Dejan Roljic, and his development team give me a walkthrough of how it all works, and they intently watch as I download the app. “Now you’ll just need to answer a few questions from our lawyer,” says Roljic.
I think he’s joking. He’s not.
The lawyer asks to see my passport. He carefully examines the photo as if he’s a security agent at the airport. “We need to meet in person with each applicant,” the lawyer explains. “It’s the KYC Process—Slovenian law.”
At that point in June, Elipay was still in beta-testing (they went live in September), and 150 early-adopters had already traveled to the Eligma offices to meet with this lawyer, in person, and set up their app. This strikes me as hilariously inefficient; more than a mild nuisance, it feels like an existential undercutting of crypto’s value proposition of being easy and “frictionless.”
Roljic knows that it’s a potential barrier to adoption—“we’re working on it”—and says that in the future, customers will be able to verify their identity with a video call. Okay, but still… Knock the banking system all you want, but I’ve never had to speak to a lawyer to swipe my credit card. [Editor’s Note: After publication, BTC City reached out to us to clarify that now that the Elipay system is live, it is generally not necessary to go through this process in person.]
“Does this mean you guys are responsible for tracking the transactions of customers, and reporting it to the government?” I ask, and I can sense the discomfort in the room. “The law gives you a framework,” explains the lawyer, and he says that they’re required to report everything above $15,000 and flag “suspicious activities.” This is true for every reputable European company, he assures me, and it’s required by anti-money laundering regulation. “If you’re spending 500 Euros on a monthly basis, like buying groceries, that doesn’t raise any alarms. And then suddenly if you do a transfer of 10,000 Euros…this raises…not a red flag, but just a flag. We’d ask, ‘Do we know the recipient of that transaction?’ So if the recipient is a known store and you bought a TV for 10,000 Euros, maybe that’s not surprising. But if you’re a writer, and you suddenly make 50 transactions of 10,000 Euros in a month, we might need to give you a call and ask, ‘How’s your writing going?’” He laughs, and we all chuckle at the absurdity of a writer having large sums of money, and I get that Eligma is simply complying with the law—they have little choice—but the setup strikes me as troubling.
This cuts to the core of a fundamental challenge for crypto: In order to become mainstream, it will likely need to comply with certain regulations, yet that very compliance threatens to twist it into a pretzel that’s unrecognizable to its original, anti-regulation supporters.
Legal messiness aside, Eligma, like so many blockchain startups, has big plans. Eventually, in theory, you can use the app to keep track of everything you purchase, or at least the things with material value (like a laptop), and then Elipay will keep track of these assets and their fluctuating values. Let’s say you buy a new MacBook. This would somehow be tracked on your Elipay app (details TBD), and then, three years from now, the Elipay blockchain would be smart enough to know that the MacBook has depreciated and would only be worth, say, $600, and when you’re ready to sell the laptop you could do it with Elipay, because now you’re a trusted reseller. There are also plans for a loyalty program, integration with debit and credit cards, and an “Artificial Intelligence-based personal shopping assistant.”
Far-fetched? Maybe. But Eligma does have one thing going for it that 99 percent of blockchain startups do not: They’re actually doing something. Bitcoin City is not just theoretical. Once I finished my chat with the lawyer, I transferred $20 of bitcoin from my normal crypto wallet to my new Elipay app, and now I’m up and running. I use a Bitcoin ATM in the Crystal Palace to load up more crypto—easy peasy—and now, finally, I’m ready for my cup of crypto-coffee.
I order a decaf cappuccino (don’t judge), tap my Elipay app, and scan a QR code. Presto—the cappuccino is paid for. It was no easier or harder than using my credit card. It’s maybe two seconds slower than using the magic wand of ApplePay, which lets you spend money even when your phone is locked.
I’m not the only one who’s tested out the Elipay ecosystem. Roger Ver visited Bitcoin City a few months after I did. The verdict? “I’m amazed at BTC City here. I bought a bunch of different things with Bitcoin Cash in my Elipay wallet, including food and socks and iPhone accessories,” he gushes in the video, while wearing a Bitcoin Cash t-shirt, because of course. “It was amazing that there were so many shops that already had Elipay there, and I could spend my Bitcoin Cash at all of them. … It was like a normal shopping mall, yet all the businesses are accepting cryptocurrencies through Ellipay. It was amazing…I hope and expect it [Elipay] to become mainstream as soon as possible.”
Sure, it’s possible that this could trim transaction fees and help the merchants and then, indirectly, this would pass savings to the customers. And sure, theoretically, maybe this could drain power from the banks. Yet even the architects of BTC City are skeptical of whether cryptocurrency, truly, will amount to anything.
The optimist in me wants to join in the exuberance, but the realist in me is still skeptical. I love the idea of a Bitcoin City. I love that merchants have already bought in. (Elipay says it can be used in 300 locations throughout Slovenia.) Yet my transaction for the decaf cappuccino, while successful and “frictionless,” feels anticlimactic. How does this really help people? Who is it benefiting? What would the hypothetical “Bitcoin Cities across the globe,” as they pitched at Stanford, actually accomplish? And will the crypto community want to trust a company like Elipay any more than, well, a Facebook coin? Is it decentralized enough?
Besides, as so many of my friends have said when I tried to explain bitcoin, My credit card works just fine. Sure, it’s possible that this could trim transaction fees and help the merchants and then, indirectly, this would pass savings to the customers. And sure, theoretically, maybe this could drain power from the banks. Yet even the architects of BTC City are skeptical of whether cryptocurrency, truly, will amount to anything. Over a lunch of pasta and white wine, one of the senior execs of BTC repeats that now-familiar refrain, “The blockchain technology is what’s sexy.”
He shrugged. “We’ll see. If cryptocurrency fails, we’ll still have learned a ton about blockchain.” (BTC, which has those ancient roots in Yugoslavia warehouses, still runs a logistics division, and like seemingly every other logistics company, they’re exploring blockchain supply-side technology.)
For BTC and Bitcoin City, in a sense, the blockchain is just another form of “content.” BTC is now a real-estate company. They decorate the city with things that will attract people—art, food, music, flowers, start-up culture—and now crypto is another spice to sprinkle into the stew. “A smart city is where people want to be,” Mermal told me earlier in his office, flanked by giant pieces of art. For decades, Mermal has excelled at giving people what they want, and now he’s betting that the people want bitcoin.
Is that so wrong? Some people are into crypto for idealism, some are trying to get rich, and some are trying to scam others. Mermal seems to be in his own category: an aesthete who sees bitcoin as a way to compliment a portfolio of taste and culture.
Before I leave, I realize that I still have some leftover bitcoin in my Elipay wallet. What should I use it for? I happen to need a haircut, and I remember that Bitcoin City has a crypto-friendly barbershop. Perfect. I swing by the place, whip out my phone, and I’m ready to embrace the bold future of fiat-less haircuts. I’ll get a haircut in a way that would make Satoshi Nakamoto proud.
“Do you have an appointment?” the barber asks me.
I do not. I look around—the place is empty. Unused chairs, no customers, idle barbers.
“There’s no way I can get a haircut now?”
It’s a reminder that the blockchain, even when it works, and even in the best-case scenario, will not solve all of our problems.
Jeff Wilser is the author of The Book of Joe: The Life, Wit, and (Sometimes Accidental) Wisdom of Joe Biden. Follow him on Twitter. Featured image courtesy BTC (BTC d.d.). All other photos by Jeff Wilser.