Ben Thompson today published an article on Bitcoin and the start-up company 21 Inc. I then somehow found myself in a twitter debate about Bitcoin and 21 Inc.’s business model with Walt French.

It turns out that it’s very hard to express your ideas on Twitter. So below I’ve outlined my thesis:

• Bitcoin is valuable for internet-of-things devices, allowing devices to algorithmically exchange property rights.
• Ideally, IOT devices should be convenient to use with a “plug and go” design, just as normal devices exist today.
• One solution to achieve this “plug and go” is for IOT devices to have access to bitcoins somehow embedded into its design, without the need for the user to “set it up” and link it to their own Bitcoin address. But how?
• 21 Inc. aims to solve this issue by embedding IOT devices with its bitcoin-mining chips.
• 21 Inc. will provide bitcoins on demand to the IOT devices that use its chips and in return, 21 Inc. will keep all bitcoins mined from those devices.
• This works because the amount of bitcoins each IOT device needs is small and with high frequency. On the other hand, the amount of bitcoins each IOT device earns is large but with very low frequency.
• Similar to a bank that borrows short-term and lends long-term, 21 Inc. will profit from the difference in bitcoins mined and consumed over the life of all the devices in its portfolio. This is also analogous to how insurance works by pooling risk.
• In the end, 21 Inc. will be providing users a way to “pre-pay” for bitcoins that their IOT device will use over its lifetime without the hassle of set-up.

I think that’s pretty much 21 Inc.’s plan at the moment.