Bitcoin Earns Reputation for Poor Payments Standards Participation
When it comes to online payment standards, the World Wide Web Consortium (W3C) is finding it difficult to engage the bitcoin community.
"It's proven easier to get a bank to participate in payments standards than a bitcoin community company," says Manu Sporny, chairman of the W3C Web Payments community group and founder and CEO of web platform startup Digital Bazaar.
Because it's still early days for the bitcoin industry, he says, these companies aren’t looking to interoperate, but instead want to dominate the web payments market.
Founded by Web creator Tim Berners-Lee, the W3C is the preeminent organization for developing international standards for the web. Its work in online payments started about five years ago with a simple goal – sending a payment should be as easy as sending an email in the digital world, a value proposition familiar to many bitcoin enthusiasts.
Toward this end, the group has discussed how to ease the process of adding new payment mechanisms to the web, expanding consumer choice. But web payments groups have struggled to get participation from the bitcoin industry.
When competing at the standards level, the blockchain community is of the verge of creating the same "walled gardens that we're always criticizing on the Internet," says Primavera de Filippi, founder of COALA, a research and development initiative for blockchain technologies that also set up a W3C community group on crypto-ledger solutions.
Saket Sharma, chief information officer at BNY Mellon's Treasury Services unit called out similar drawbacks of working without a standard. "So the underlying technology itself is so fluid that there’s no stack as a standard, right? So unless you have a standard, you will not be able to interoperate, eventually," Sharma told CoinDesk this week.
The decision could also hamper the technology's pervasiveness.
"[Bitcoin] is not going to be as big as the Internet if they don’t start coordinating on some core standards," Sporny says.
Sporny likens the issue to the web browser battle in the mid-1990s.
During that time, Netscape, built by Marc Andreessen – whose venture capital firm Andreessen Horowitz has invested in Coinbase and 21 Inc among other bitcoin startups – was competing against Microsoft, which owned the majority of web browsing sessions.
According to Sporny, Microsoft opposed standardization, which in turn led to significant backlash.
Eventually standards were created making it easy and accessible for competing web browsers to start up and advance the technology.
"These things tend to go through cycles: one player takes over the market centralizing it, then there are calls for standards to break that up and decentralize things so people can compete," Sporny says.
The problem with centralizing an Internet system is that it can result in a single point of failure.
For instance, he says if sidechains are only built off the bitcoin blockchain, and the blockchain then failed for some reason, all the sidechains it was connected to could go down as well.
Instead, he argues a decentralized solution would allow the creation of separate blockchains that can all communicate with each other.
While recent reports have claimed that the W3C is bullish on bitcoin and blockchain technology, Sporny says, "Web payment isn’t focused on ledgers and decentralized clearing and assets."
Ian Jacobs, W3C payments activity lead, commented:
"To the extent that there are new payment methods, we’d like to make sure those payment methods are accepted online … and various payment flows are supported. We don’t favor bitcoin any more than we favor credit cards."
But there are a number of people within the Web Payments group talking about bitcoin and how the protocol could be useful for solving some web technology problems, Jacobs says.
While the W3C would welcome members of the bitcoin community, Jacobs says: "We have not seen the bitcoin community flock to the W3C to do work.
Because executives from Ripple and members of Ethereum have joined the Web Payments work to discuss their alternative cryptographic payments protocols, Sporny thinks the rationale is a bit different within the bitcoin industry.
He believes there's a tendency from within the industry to see bitcoin as the standard other blockchains will be built around.
"The bitcoin community seems to have a chip on their shoulder," Sporny says. "The hype around bitcoin is a big part of it. Bitcoin didn’t exist a few years ago and now it’s this big thing with venture capitalists and companies throwing money at bitcoin startups. That tends to embolden people."
Sporny’s sentiment stems from several years of reaching out to industry stakeholders and getting ignored or rejected.
For instance, he had a conversation with a large, venture capital-funded bitcoin company that seemed interested, but the lead developer became dismissive about standards and how long the process takes, he says.
However, it’s just as likely that cost is a prevailing factor.
"Startups rarely collaborate," says Erik Anderson, co-chair of the Web Payments interest group and a researcher and developer at Bloomberg. "Startups are generally being directed by their investors towards developing a single, universal use case their existing technology can be applied to. Startups need to show investors short-term value."
To be a member of a W3C working group, startups pay $2,000 for a two-year membership. Annual fees for more established companies range from $8,000 for small organizations and nonprofits to $88,000 for large organizations like Google and Microsoft.
Members also send an employee to work on the project, and those fees then go back to the members of the group. The W3C puts working group staff on at a 50% full-time employee rate, which Sporny says, amounts to tens of thousands of dollars per year.
Control over standards
Standards work has never been easy. It’s slow because it rides on consensus, and issues frequently become contentious.
But ultimately the W3C has continued to be an influential player in the Internet standards and technology space. Several thousands of engineers from organizations around the world work in W3C groups, many of whom are the same people that crafted the standards for the open, robust web we see today.
The Web Payments working group will be meeting in mid-February in San Francisco to go over two proposals for web payment API infrastructure. A month later, the group should have a working document of the API.
During the meeting, stakeholders will also be trying to decide on the group’s next priority, ranging from verifiable credentials; regulatory changes in Europe; coupons built on the API layer; Fed faster payments and blockchain initiatives – including Interledger, a protocol created by Ripple but that now is an open, community effort, and bitcoin for peer-to-peer payments via mobile devices.
The Web Payments group has continued to see momentum; currently it has 175 members made up of some of the biggest names from all areas of the payment chain, including Alibaba Group, Apple Inc, Google and Visa Europe. Plus several large merchants and mobile telcos have joined the group.
But momentum for the standardization of blockchain or distributed ledger solutions is unlikely to happen soon. Sporny sees banks and legacy payment providers as more interested in investing in companies like R3.
Banks would prefer to own the ledger solution as a value add, he continued, adding:
"A lot of this has to do with control."
Image via Shutterstock
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