HTC develops ‘blockchain phone’ – but how does it work?

The race to launch the world’s first blockchain-enabled smartphone is poised to heat up as Taiwanese consumer electronics firm HTC said its device would be made available this third quarter.

HTC’s Exodus blockchain phone, which it first announced in May, has already received “tens of thousands” of reservations globally, said Phil Chen, the chief crypto officer at HTC, in an interview on the sidelines of the RISE technology conference in Hong Kong on Wednesday.

The impending launch of Exodus would put HTC ahead of Switzerland-based start-up Sirin Labs in introducing a blockchain phone to market.

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Sirin had said in April that its Finney blockchain phone, which will be made by Hong Kong-listed FIH Mobile, had pre-orders of more than 25,000 units and is expected to ship in October priced at about US$1,000. FIH Mobile is a subsidiary of Taiwan’s Hon Hai Precision Industry, the world’s largest electronics contract manufacturer and known under its trade name of Foxconn Technology Group.

Both HTC’s Exodus and Sirin’s Finney smartphones feature a built-in digital wallet application that will enable users to securely store and use cryptocurrencies, such as bitcoin and ethereum, in daily transactions.

Those smartphones are designed to replace the special memory sticks, which employ complex usernames and passwords to access, that cryptocurrency investors use to store their digital money. These investors typically store most of their cryptocurrencies in such hardware, which are kept offline as a means of security.

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“There are things that a phone manufacturer can do with a chip that nobody else can,” said Chen. “We want to be safer than the existing hardware wallets … HTC has a track record of making trusted hardware.”

The company’s Exodus smartphone, for example, can serve as a “node”, which can connect to certain blockchain networks to enable trading of tokens between users. It will also be able to act as a so-called mining rig for users to earn new tokens tied to the Exodus blockchain.

“At some point, we’ll do our own utility token,” said Chen, adding that there was no timetable for such a token release.

HTC’s foray into blockchain, the distributed ledger technology behind cryptocurrencies like bitcoin, represents a strategy to keep the company relevant in smartphones, which is a market dominated by Samsung Electronics and Apple, followed by Huawei Technologies, Xiaomi and other major Chinese brands.

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It follows HTC’s US$1.1 billion deal with Google in September last year, which involved about 2,000 HTC employees joining the world’s biggest internet company to develop smartphones and other devices. Many of those HTC staff were already involved in making Google’s premium Pixel-brand smartphones.

In addition, that deal enabled Google to obtain a non-exclusive licence for HTC’s intellectual property.

Google’s investment in HTC would provide HTC “with another lifeline to build its business – focusing on a narrow portfolio and becoming a leaner, agile and better operation”, said Neil Shah, the research director for devices and ecosystems at analyst firm Counterpoint, in September after that deal was announced.

Before the Google deal, HTC had pinned its hopes for a turnaround on the company’s virtual reality business, as global demand for the technology was expected to potentially rival that for smartphones.

Virtual reality immerses a user in an imagined world with the aid of a headset, such as HTC’s Vive. This headset was launched by the company in April 2016.

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The Exodus smartphone will also serve as a platform for HTC to distribute the popular CryptoKitties game on Android, according to an HTC announcement on Wednesday. The blockchain-based game involves collecting and trading unique cats with certain digital genes, which also allows players to understand how the technology works.

Despite its apparent lead in releasing a blockchain phone, HTC is likely to contend with plans of other major smartphone brands to compete in this new market segment.

Shenzhen-based Huawei, the world’s third largest smartphone supplier, was reported in March to be in talks with Sirin to license the start-up’s operating system to run blockchain applications on its devices.

The company would represent the first major smartphone brand to engage in blockchain. Other Chinese handset makers, including Lenovo Group and Sichuan Changhong Electric, had previously announced plans for a blockchain phone, but provided no details.

Still, Chen expressed optimism about HTC’s blockchain phone initiative. “Every 10 years, we see shifts [in technology],” he said. “We think that crypto and blockchain will be the next shift.”