Noelle Acheson is a 10-year veteran of company analysis, corporate finance and fund management, and a member of CoinDesk’s product team.
The following article originally appeared in CoinDesk Weekly, a custom-curated newsletter delivered every Sunday, exclusively to our subscribers.
As you’ve likely heard, Circle announced this week that it had closed down its bitcoin exchange, a move the mainstream press interpreted as a “surprising” pivot away from bitcoin and another nail in the cryptocurrency’s coffin.
The reaction is understandable, given Circle’s significance in the bitcoin space.
But it is wrong, on many levels:
- It is not a surprise.
- Nor is it a pivot.
- It is not a rejection of bitcoin.
- Nor is it bad news for the sector.
Let’s go through these points in order, and then take a look at the trend this news highlights.
The move is not unexpected: Circle has for some time been signalling its intention to focus on payments. When the company’s first consumer products were revealed in March 2014, the emphasis was already on “deposits and withdrawals” rather than “buy and sell”.
As early as May 2014, the company was downplaying bitcoin, calling itself “an Internet-based consumer finance company”.
For the same reason, it’s not a pivot. It is true that the company was “born” on bitcoin, but even at the time of its launch in October 2013, CEO and co-founder Jeremy Allaire recognized that standards would evolve and that bitcoin might not end up being the main digital currency.
In other words, even at the beginning, Circle was cryptocurrency agnostic, only at the time bitcoin was the only significant one around.
As far back as November 2014, Allaire told CoinDesk that the focus was less about bitcoin than about how people use money. The latest news is merely the confirmation of a strategy initiated some time ago.
Why not the how
Circle has not “pulled the plug” on bitcoin, as many have reported.
Users can still store it in their Circle account and send it to others. Bitcoin will continue to be a settlement token and Spark, the new protocol unveiled this week, is partly based on the bitcoin system.
What Circle has done is communicate a conviction that bitcoin will not be a significant form of payment in the near future.
While it may be a disappointment for bitcoin fans, this does not deal the sector an unexpected blow. Frustration with the slow evolution is spreading. Nevertheless, the price has been increasing. Innovation on variations of the protocol continues. And progress is being made on scaling solutions, sidechains and much more.
Bitcoin may be stuck. But it is not dead.
Looking at the bigger picture, Circle’s decision highlights a quiet but fundamental trend: the focus on applications rather than mechanics.
While bitcoin, ethereum, Corda and many other protocols continue to make noise, the real action is happening elsewhere.
Startups like Circle are putting blockchain efficiencies directly in users’ hands. The technology is important, but users are generally more interested in what the protocols can do.
The why has a potentially greater impact than the how, and appealing applications (rather than technicalities) will give blockchains the mainstream acceptance they need to kickstart widespread implementation.
So, the main news in this development isn’t that Circle is stopping a service that was never a main feature. It’s that functionalities have improved, and more people than ever will have access to what this progress can offer.
Hand puppet image via Shutterstock
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