Bitcoin in the Headlines is a weekly analysis of bitcoin media coverage and its impact.
Following months of silence, one of bitcoin’s best-funded startups sparked a frenzy of reporting after it revealed its first consumer product, to debut in November.
21 Inc, which has raised $121m to date across multiple, undisclosed funding rounds, revealed in an exclusive with The Wall Street Journal on Monday that it would be launching its bitcoin computer for developers.
Elsewhere, the topic of regulation weaved itself into coverage again this week after Circle Internet Financial said it had been granted the industry’s first BitLicense.
Less positive news came from Australia, where bitcoin companies and traders complained of the bank’s perceived crackdown on firms or individuals involved in activities with the digital currency.
FT Alphaville‘s Izabella Kaminska, notoriously skeptical about the inherent economics of the bitcoin network and industry practices, was among the highest-profile writers to comment on 21 Inc’s bitcoin computer.
Kaminska’s latest piece, entitled “21 grams of digital coke”, began:
“In movie parlance, 21 grammes is said to be the weight of the soul … Keep this in mind as we explore 21 Inc’s big product reveal this week – a $399.99 Raspberry Pi that’s also a “bitcoin computer” – which, according to endorsements from Larry Summers (he of secular stagnation fame), Marc Andreessen and others, could be as big as the internet if not a solution to world peace.”
21’s device, Kaminska added, allegedly lets users mine bitcoin in the background, while they engage in regular computing practices.
“Yet the sum of bitcoins earned is so small that 21 doesn’t even pretend that you can cover the original upfront cost of the device, let alone make a profit. You’re paying for the right to waste electricity servicing the bitcoin network in return for a bitcoin shaving that earns you some sort of ‘node’ stake in the system,” added the journalist.
Kaminska then cited Vitalik Buterin, inventor of the blockchain-based decentralized application platform Ethereum, who she said had analyzed the product’s capabilities, noting:
“So you’re paying $399 upfront and getting $0.105 per day or $38.3 per year, and this is before taking into account network difficulty increases, the upcoming block halving (yay, your profit goes down to $0.03 per day!) and, of course, the near-100% likelihood that you won’t be able to keep that device on absolutely all of the time. I seriously hope they have multiple mining chips inside of their device and forgot to mention it; otherwise you can outcompete this offering pretty easily by just preloading a raspberry pi with $200 of your favourite cryptotokens.”
The journalist the adds that readers can find out more about “how the 21 device is fundamentally loss making on 21.co (yes, a Colombian domain)”.
A killer app
Writing for the The Wall Street Journal, Paul Vigna cited Andreessen Horowitz co-founder Ben Horowitz in his coverage, which focused on presenting the views of both the company and its investors on the announcement.
The piece noted how the product seeks to enable machine-to-machine payments, which at scale could potentially make it easier for consumers to interface with bitcoin products while also serving an important role in connecting more devices to the Internet of Things.
Horowitz, Vigna said, reflected on the company’s potential revenue strategies and how the devices could transform how Netflix or media companies monetize, adding:
“If I could read stuff on the web for a small amount of money, and didn’t have to open myself up for repeated charging or subscriptions I didn’t want? That’s a relatively straightforward application if you have machine-to-machine payments.”
Vigna then continued to note that although bitcoin had risen to fame as an alternative currency, it’s underlying distributed ledger technology has been gaining attention “for its potential to modernise the financial system.”
Australian banks’ alleged run-in with bitcoin businesses and traders dominated much of the news flow this week outside of the US.
The news was first reported on by The Australian Financial Review, with Paul Smith writing:
“Australia’s biggest banks are threatening to hobble the hopes of emerging local bitcoin companies, by suddenly withdrawing banking services from their potential future rivals. Banks have sent letters to founders of Australian bitcoin exchanges, including Bit Trade and Buyabitcoin, informing them their accounts will be closed, without further explanation.”
CoinDesk reached out to Ronald Tucker, chairman at the Australian Digital Currency & Commerce Association (ADCCA) and managing director at Bit Trade, and although he declined to divulge specifics he said: “To the best of our knowledge all, or nearly all digital currency business have received letters from their bank, or in many cases banks, advising of the closure of their accounts. This includes at least 17, with 13 of these closed permanently.”
Tucker added: “Our members have been unable to obtain any formal clarification on the reasons for closure, except for references to policy or risk. Just what policies or risks these are have not been specified.”
Smith’s initial report about bank closures was followed by a subsequent piece in which the journalist reported on the possibility that the Australian Competition and Consumer Commission (ACCC) was looking to investigate the banks’ behaviour.
“The competition watchdog is considering an inquiry into the actions of Australian banks for shutting down accounts of local operators, after being contacted by Queensland Nationals Senator Matthew Canavan,” began Smith.
CoinDesk reached out to a spokesperson from the ACCC, who said they had no further comment at this stage.
The first BitLicense
Writing for American Banker, Tanaya Macheel, started off by noting that Circle Internet Financial had become the first company in the crypto space to receive a BitLicense from the New York State Department of Financial Services.
“The announcement Tuesday comes amid an outbreak of worry from virtual currency startups in the young industry that has led many of them to pull their services from customers in the Empire State.”
Indeed, the looming BitLicense application deadline saw various companies in the space decide to stop serving New York-based customers, with many citing application costs as the decisive factor behind their decision.
The New York Business Journal also covered the news, with reporter Michael del Castillo reflecting on the BitLicense’s origins:
“Two years after New York initiated its research into bitcoin, the state on Wednesday awarded the first ‘BitLicense’ officially allowing the recipient participate in the business of crypto-money-transmission.”
The very same day, del Castillo added, Circle announced it also began accepting US dollars, thus marking a second milestone.
“It’s the first company to have both a traditional state money-transmission license and a cryptocurrency BitLicense,” he noted.
Shocked man with newspaper via Shutterstock
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