Welcome to the CoinDesk Weekly Review 20th September 2013 – a regular look at the hottest, most controversial and thought-provoking events in the world of digital currency through the eyes of skepticism and wonder. Your host … John Law.
What’s in a name?
You’re nothing without a name. That rather glib bit of advice to the would-be famous goes far deeper than just deciding whether to call yourself MC Dethrod or Anthony Featheringale for your next X Factor outing.
Our entry into human society is marked by a naming ceremony, and the Genesis creation myth symbolises mankind’s domination over the natural world by Adam giving all the animals and birds their proper names.
(Think about that if you ever get caught up in an endless “What shall we call our new project?” discussions at work – or, worse, see a few hundred thousand quid disappear into a marketing and branding consultancy in exchange for getting called Qoxiqotica. You can have that one for free, by the way).
In fact, the naming of things is second only to their creation in terms of getting them into our heads and into our society. A nameless thing cannot be talked about, let alone used, in anything other than the most basic fashion. Only when named is it properly part of our world.
So it is with the machineries of finance. The physical part of money is practically vestigial; when your pay arrives in your bank account or a company gets bought for $10bn, nothing involved in those transactions knows or cares a fig about what a £10 note or a $20 bill looks like.
Instead, the codes GBP and USD are used to change strings of digits into actual value. It’s a common language that all financial systems speak. No code, and the money just doesn’t exist.
Bitcoin lacks such a code; BTC has been a useful stand-in, but with no official status. Without the code, a currency can only ever live in the shadowlands of ad-hoc systems, with none of the interchangeability that defines modern global finance.
Getting your code is an important part of any new currency – the most recent being the South Sudan Pound, code SSP, created on independence in 2011 – and normally one of the simpler aspects of the complex political, financial and logistic process of currency creation. And it’s not that difficult – with nearly 40 countries created since 1990, systems are in place. The world knows how to do it.
Bitcoin is in the interesting position of not having a national sponsor but awkwardly existing anyway. It was created, like Adam, out of the dust of the Internet, and is busy thriving on its own recognisance. It just needs its code.
And now it looks as if it may get it. A consensus is rapidly forming in the bitcoin world for XBT, while the financial engineers who run the mainstream transfer systems are making the by-now traditional “can’t see why not, guv” non-approval approval noises.
With Jon Matonis of the Bitcoin Foundation presenting the case at the heart of the beast in Zurich, it seems plausible that the International Standards Organisation committee that runs the ISO 4127 master list of codes will press the button.
But why XBT? As Matonis points out, non-currency value items like gold and silver have their own codes, XAU and XAG created from their chemical symbols, so there’s precedent – never underestimate how good that makes decision makers feel. And there’s no element with the symbol Bt, so that’s one potential cash clash avoided. At least until someone creates Britishtelecominium.
That’s unlikely to happen (and, given BT’s history, even more unlikely to become a major international unit of value). The day that XBT becomes an official code, however, has every chance of being a real piece of history.
Numbers to love, but dangers to watch
Not that the shadowlands of unofficial trading systems are that shadowy these days. American outfit BitPay, which flogs BTC – sorry, XBT – payment systems to merchants, said this week that it had got over 10,000 customers, most in the US, while European company BIPS has some 15,000 customers on its books in the Old World – only 1,000 are merchants, but eyes are being cast at the American market. Plus, BitPay said that Quickbooks, a very popular accounting system, could now import its sales records directly.
One of the key attributes of bitcoin is that it combines a good track record on security with an even better one on ease of implementation – if you want to put bitcoin capability into a system, all the parts are freely available and you don’t have to worry about the underlying safety of the system.
It’s hard to find a good analogy in history; one might be the swift and ruthless assassination of the sheet music industry by records and radio. You probably don’t have a piano in your apartment. Or look at the Internet itself, which has thoroughly murdered all opposition – and there used to be a big global market in unconnected, proprietary networks.
Don’t get too excited, though: the very ease with which you can build bitcoin into things means it’s a simple decision to make – and you don’t have to see a significant increase in revenues to justify it.
With the majority of bitcoin-enabled merchants being e-commerce companies, and the physical retailers of goods and services being heavily invested in the hipster universe, there’s a good risk that a lot of this is driven by fashion rather than fiscal probity. And fashion has a terrible habit of looking intensely important for a moment or two, then vanishing into nostalgia.
Cryptocurrencies won’t vanish as a group – they solve too many problems. But the only thing that will mark any particular currency as properly arrived will be when appreciable numbers of real people start spending the things on a regular basis; without that, all the carefully prepared infrastructure and widely deployed systems will count for nothing.
Social networks and massively multiplayer gaming environments are here to stay, but the predicted online world dominated by Myspace and Second Life never quite panned out.
Thus, enjoy all the metrics that show bitcoin’s supporters pushing out ever further into the real world, and the comfortable sensation from the powers that be gradually taking the whole idea seriously.
But until your next door neighbour proudly shows off their mobile phone wallet when you bump into them in the supermarket, don’t mistake any of that for a winning guarantee.
Giving Apple the finger
John Law is more than normally resistant to the seductive call of Apple. Although exposed early in life – he spent many evenings enthralled by a friend’s Apple II computer, and was transfixed by the Mac’s first appearance seemingly from another universe – he could never actually afford the stuff.
By the time his petty cash fund could bear the brunt, Apple had transformed itself into a cross between a fashion statement and a cult religion. The anarchistic atheism of open source had won his heart.
So it is with a weary eye that he regards the iPhone 5S and 5C, which eschew major innovation for mild tweaks and a chunk of catch-up with Android.
Apple, certainly at one stage, seemed to not like bitcoin, so you could spend more than £700 on a smartphone that has relatively limited bitcoin wallet options. However, bitcoin seems determined to reply in kind.
One of the new features – for iPhones, at least – is the inclusion of a fingerprint swipe on the iPhone 5S’ home key. Instead of typing in a PIN, the happy owner can access their new toy by a gentle touch. Now, increased security is something John Law is very much in favour of and applauds Apple for – if it works. Promised security that introduces new flaws is somewhat worse than useless.
Fingerprint scanners have been found vulnerable in the past. It’s pretty simple to steal a fingerprint; you can lift even the tiny amounts of grease from a normal dab with sticky tape, treat it to make it opaque, then use the image to create a fake finger from a wide variety of cheap household compounds.
John Law once successfully broke into a fingerprint-secured laptop with nothing more than gelatin and milky tea (the tea fooled the ‘skin colour’ test).
Apple hasn’t said much about the various security tests in its digital biometrics; a real finger is warm, conductive and has blood going through it, and modern scanners use a combination of techniques to check for such things.
None of this sounds too hard, though, so it is good to see The Register reporting that a Twitter-based group of hackers is running a crowdsourced competition to encourage the mischievous of the world to find ways to break in. Among the offered prizes – well, bitcoin, of course.
It would be a particularly beautiful irony if bitcoin itself proved to be the fulcrum that springs the thing open. It’s also all to the good if there are easy to implement hacks that these are known and public sooner rather than later – yes, even for Apple, which will have fewer units in the field to fix.
And it’s yet another thing that bitcoin can do, for better or worse: in making it easy for people to chip in anonymously for causes they think worthwhile but which carry a possibility – or certainty – of controversy or personal danger.
You might think that encouraging hacking is bad; it’s certainly not without consequence. But if the cause you want to support is one of impeccable rectitude, yet hugely disapproved of by state or pressure group, then you now not only have a voice but a hand in making it happen.
John Law is an 18th century Scottish entrepreneur, financial engineer and gambler. Having reformed the French economy, invented paper currency, state banks, the Mississippi Bubble and other ideas essential to modern economics, he took three hundred years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.
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