Bitcoin in the Headlines is a weekly analysis of bitcoin media coverage and its impact.
After weeks of relative quiet, the bitcoin and blockchain industry got a much needed publicity boost this week as startups raised $45m in newly announced venture capital rounds.
The vast majority of the attention was awarded to one blockchain technology startup, San Francisco-based Chain, which turned heads for attracting an impressive cast of VC investors to its $30m Series B round.
Investors involved included financial incumbents such as US bank holding company Capital One, financial services technology provider Fiserv and global credit card giant Visa. Also contributing to the round were US stock exchange Nasdaq; Citi Ventures; and former Bank of America CEO David Coulter.
The outpouring of venture capital comes amid the second quarter in a row in which the industry has seen declines in new investment.
According to CoinDesk’s forthcoming Q3 State of Bitcoin Report, $81m was invested in industry firms in Q3, a figure that was down from $145m in Q2. The size of the average funding round also declined from $10m to $8m during the period.
Money on the move
Chain wasn’t the only startup to have a funding round enter the mainstream news this week, as Silicon Valley-based Abra raised $12m for an app that allows users to act as mobile bank tellers.
Writing for TechCrunch, Fitz Tepper delved into the sophisticated inner-workings of the unlaunched app, noting that users are entered into contracts meant to offset fluctuations in the price of bitcoin.
“[CEO Bill] Barhydt stressed that users will be able to use the service without knowing [or even seeing] any of the complexities of bitcoin and the blockchain,” the article explained. “So two users could send each other $100 USD, and even though bitcoin is actually being transferred, both will just see the transaction denominated in dollars.”
In its coverage, The New York Post took a more negative view of Abra’s approach, hinting that the larger pressures affecting user adoption of bitcoin influenced the app’s design.
Author James Covert wrote:
“Bitcoin, an unregulated digital currency that has struggled to gain traction with mainstream businesses, will stay behind the scenes for Abra users.”
Elsewhere, notable funding rounds were raised by bitcoin hardware wallet provider Case, which added $1m to its seed round; blockchain data platform Coinalytics, which took in $1.1m in capital; and altcoin exchange ShapeShift, which raised $1.6m in new funding.
Of the three, ShapeShift was the only company to garner media attention outside of bitcoin blogs and trade publications, with the news appearing in a TechCrunch article.
The piece explained why the exchange has become popular with heavy users of alternative digital currencies, emphasizing how the website – which does not accept fiat currency – also collects no personal information from users.
Scalability gets spotlight
“A debate over the future of bitcoin seems to be getting ugly,” MIT Technology Review wrote of the ongoing discussion over how the bitcoin network might be altered to process more transactions.
A staple of the headlines in recent weeks, bitcoin XT is a fork of the bitcoin network that would raise the amount of data the network processes roughly every 10 minutes to 8MB. This figure would then scale over time in line with expected demand for the payment protocol’s use.
Contributing to the attention is former Bitcoin Core maintainer Gavin Andresen’s decision to back Bitcoin XT, though other solutions to the issue are being debated.
In the MIT piece, writer Tom Simonite delved into reported attacks against businesses supporting Andresen’s effort, including Trezor creator SatoshiLabs, which enables miners in its Slush Pool mining pool to signal support for Bitcoin XT by casting votes with processing power.
“Alena Vranova, director of SatoshiLabs, said the company received a message saying that the attack would end once it turned off the ability for customers to declare support for Andresen’s idea. SatoshiLabs was forced to comply with that demand because the attack was powerful enough to cause connectivity problems for some Slush Pool miners,” the piece explained.
Also targeted was web hosting company ChunkHost, which saw one of its customers targeted for reportedly supporting the proposed upgrade.
The debate was further tackled by Forbes, which offered a high-level overview of Bitcoin XT and the philosophies underpinning its approach to scaling the network.
In particular, it examined the way the bitcoin network incentivizes miners to process transactions, and how the process by which it rewards these parties with new bitcoins will eventually be replaced by a fee structure.
VICE stresses out
Issues with the approach the community is taking to experimenting with the bitcoin network were given a more brash treatment by Motherboard, the tech-focused online magazine run by VICE.
Motherboard devoted two articles this week, both penned by Jordan Pearson, on attempts by bitcoin brokerage CoinWallet to call attention to what it perceives as the inherent weaknesses of the network’s ability to process only 1MB of information every 10 minutes.
Formerly unknown, CoinWallet rose to the forefront of industry conversation in June when it announced that it would subject the network to a “stress test”, overloading it with small transactions in an effort to show the blockchain will need to scale to handle more users.
At the time, CoinWallet planned to spend $5,000 on bitcoin to send 200MB worth of data over the network, though it sent transactions totalling just 15% of this proposed amount.
While some of the nuance and context of CoinWallet’s proposed stress test this week was present in an initial piece, the article’s title – “This Company Is Giving Away $48,000 In Bitcoin” – took an oddly ambivalent tone on the news.
A follow-up piece was similarly patronizing in tone, labeling the process by which CoinWallet gave away bitcoin to users “another totally batshit day in the world of bitcoin”. The article was also alarmist in its characterization of the results.
“The number of backlogged transactions is currently above 90,000 and climbing, and the size of the ‘memory pool,’ the database that stores them, is shooting past 150MB,” Pearson wrote. “It usually sits below 10.”
Unmentioned was that the framing of the event as a giveaway could have perhaps been inspired by legal concerns that suggest CoinWallet or other institutions performing stress tests may be liable for under UK law.
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