Bitcoin in the Headlines: Blockchain Scores Economist Cover

FEATURE
Pete Rizzo
Oct 30, 2015 at 17:40 UTC  |  Updated  Nov 2, 2015 at 14:08 UTC

Bitcoin in the Headlines is a weekly analysis of industry media coverage and its impact.

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First Bloomberg, now The Economist.

In yet another sign that mainstream news coverage is all about blockchain technology, one of the world's most prestigious financial publications devoted its front cover to the emerging technology – and the week was not without reasons why.

Brand-name financial firms such as Nasdaq and Visa were eager to court attention for cutting-edge blockchain technology projects at the annual Money20/20 conference in Las Vegas, as were representatives from banking giants like TD Bank, Royal Bank Canada and BBVA, all of whom were represented on industry panels.

The buzz around the blockchain was so strong at press time, it arguably overshadowed the biggest rise in the price of bitcoin, the digital currency whose transactions are recorded on the blockchain, this year.

Bitcoin peaked at more than $330 this morning, and so far, major news outlets have been slow to herald the news.

'The trust machine'

Despite the torrent of positive news, the cherry on top for the week was perhaps the validation of bitcoin's underlying technology in The Economist, and the positive way in which it was positioned.

The magazine is notably the second to make these comparisons in recent months, following the October edition of Bloomberg Markets, which featured Digital Asset Holdings (DA) CEO Blythe Masters on its cover.

Indeed, while The Economist's piece began by noting bitcoin's "bad reputation", "wild fluctuations" and associations with cybercrime, the piece quickly sought to debunk this narrative.

The article read:

"The value of bitcoin has been pretty stable, at around $250, for most of this year. Among regulators and financial institutions, scepticism has given way to enthusiasm (the European Union recently recognised it as a currency). But most unfair of all is that bitcoin's shady image causes people to overlook the extraordinary potential of the blockchain, the technology that underpins it."

"Simply put, it [blockchain] is a machine for creating trust," adds the article, in what might be the simplest and most powerfully concise statement on the technology to date.

The notion of distributed public ledgers, the article says may not sound revolutionary or sexy, but "neither did double-entry book-keeping or joint-stock companies."

The article concludes:

"Yet, like them, the blockchain is an apparently mundane process that has the potential to transform how people and businesses co-operate... The real innovation is not the digital coins themselves, but the trust machine that mints them – and which promises much more besides."

Blockchain or database

Arguably one of the more important dates on the finance industry's calendar, Money20/20 saw a slew of mainstream companies discuss bitcoin and the blockchain over its four-day run, and the technology benefited from the event's wide reach.

There, Nasdaq debuted Linq, which uses blockchain technology to facilitate the issuance and trading of shares in private companies, while Visa previewed a proof-of-concept that uses blockchain technology to change the way cars are currently leased.

Both proofs-of-concept were developed through partnerships with industry startup Chain. Both Nasdaq and Visa are also investors in the startup.

Covered by American Banker, Forbes and the New York Business Journal, among others, the Nasdaq announcement was the latest sign that the stock market giant is serious about capturing a first move advantage when it comes to understanding the technology and shaping it for its use.

Still, the announcement was not without its critics.

FT Alphaville's Izabella Kaminska also covered the news, adding her take on the announcement, which was largely critical of how Nasdaq is framing its use of "the blockchain" in relation to the projects.

Kaminska noted that Linq is a "permissioned blockchain", a ledger controlled and operated by Nasdaq and its approved users – a key difference between its design and that of the open, public bitcoin network.

"Remember, a permissioned blockchain is supposed to be a distributed ledger which harmonises clearing and settlement between independent parties whilst improving security. It does this mostly by forcing the network to share responsibility over each other's databases," she explained.

Kaminska also sought greater insight into the specific technical underpinnings of Linq, stating that it is not connected to bitcoin's blockchain, and is therefore nothing more than a high-powered, shared database.

"In reality, however, we suspect the use of the term 'blockchain' is mostly a distraction," she said.

According to representatives from Chain, Linq runs on a federated blockchain, meaning that while private to Nasdaq, the blockchain is theoretically interoperable with the main bitcoin blockchain.

CEO Adam Ludwin was also at the event to clarify his take on Chain's work, which he characterized as intended to compete with traditional databases.

Elsewhere, mainstream news outlets covered Visa's partnership with DocuSign on a proof-of-concept that uses blockchain for car leasing and the announcement that Barry Silbert's Digital Currency group had closed a new fund of an undisclosed sum that would be put toward industry investments.

Bitcoin's price spike

Last but not least was bitcoin's bull run this week, which while mentioned at Money20/20 was still overshadowed by announcements related to blockchain technology applications.

Unsurprisingly, news coverage has so far mirrored the real-world interplay at the event, with Reuters and City AM being among the few news outlets to pay attention to the digital currency reaching its highest value to date this year.

City AM's piece began:

"Bitcoin's on a roll. The digital currency has been gaining speed all month, and just zoomed past its July peak to hit a new high for 2015 at $320."

CoinDesk's BPI recored $330.75 as its highest value, reached at 08:16 UTC on 30th October.

The article continued by positioning this against the asset's performance over the past few years: "Bitcoin prices plummeted over 2014, from a high of $1,150, and 2015 didn't start much better. The currency began the year by falling 43% to crash through its $180 floor."

Still, the publication heralded that bitcoin is now on a "winning streak", suggesting that its gains, positioned against the wider attention for blockchain technology, could be long lasting.

This article was co-authored by Yessi Bello-Perez.

Image via The Economist 

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