Welcome to the CoinDesk Weekly Review 27th 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.
Cashing in with cryptosalaries
Was it like this when money was invented? Imagine being a member of a tribe where you get your tools by giving the axe-maker a couple of goats, eat what you reap, and swap ten hours’ stonework with a bloke from the next village for a handful of beads for the wife.
It all works well enough, until someone turns up with a handful of metal bits and says they’re worth so many goats or so many arrowheads and why not make the leap?
Would you believe them? What if nobody else agreed? And what if the bloke from the next village would only give you metal bits in exchange for your work?
It’s certainly like that for the early bitcoin pioneers – some of whom are now getting their salaries paid in BTC.
As Carrie Kirby reports, these hardy types aren’t really getting much in return for their courage, but they’re not losing out either.
If you’ve got enough old-fashioned money to make your cryptocurrency earnings part of a balanced portfolio, don’t mind the extra paperwork at tax time, and live somewhere with a nascent bitcoin economy, it’s actually quite fun.
It’s a bit self-selecting. You have to have a pioneer’s mindset not only to want to do this, but to enjoy the less-obvious results.
For once you’ve got a regular supply of bitcoins, the real problem is spending them on quotidian life items – rent, food, clothes, transport – and mostly, you can’t do that. So you have to go out and make that happen, persuading local suppliers to start accepting the things.
The good news is that in places where bitcoin pioneers live, so do open-minded vendors. Bitcoin salarymen and salarywomen report that restaurants, bars and other small businesses are happy to take their digital money, once the details are explained and the mechanics sorted out.
Then the real rewards start, at least for the true pioneers, because once a business is in business as a bitcoin business, it’s open to anyone to spend that way.
With a lot of the original objections to BTC drifting into history, the big question is how and why do the non-geeks get on board.
Getting small businesses signed up will answer a big part of that, and having people paid in bitcoin prepared to help that happen is just one more link in the chain.
After all, it worked before. When was the last time you bought a can of Coke with a goat?
It’s widely accepted that hunter-gatherer societies, far from living on the edge of starvation, only had to spend two or three hours a day actually hunting or gathering.
The rest of the time was their own: it wasn’t until the Neolithic Revolution created agriculture that work expanded to fill all the hours available. John Law has yet to be persuaded that this was necessarily a good move.
So what did our idle ancestors do? Gamble.
Still a very big thing with nomadic societies, it encourages social cohesion, emphasises the role of chance in life, and when structured well helps distribute useful things while rewarding a careful approach to risk management. It’s a model of useful work, and thus useful in its own right.
Bitcoin-powered games of chance may not be totally wholesome engines of society, but there are some intriguing parallels. A good case in point is Just-Dice, where you can throw a bunch of bitcoin into the pot to win or lose in a very straightforward and open manner.
It’s very much like a game around a table, in that it’s fast, very easy to join, and brings groups of strangers together.
What’s more, the Just-Dice system is set up so that the house has a one percent advantage – if you play for long enough as a punter, you’ll get 99 percent of your money back, with the tantalising chance of a big win.
Or you can join the house, putting a lump of bitcoin in as part of its liquidity, getting 101 percent back over time, with increasing certainty the longer you stay in – and the option of pulling out after some other punter’s unlucky streak. Luck is a two-way process.
Lately, there’s been something a bit more – the biggest win in bitcoin history. In one weekend, one gambler called Nakowa scored nearly 11,000 bitcoin, comfortably over a million dollars’ worth.
Of course, not everyone believes that story. There’s certainly a colourful history both of Just-Dice and Nakowa’s interactions with the site: he’s been gambling intensively and with varying amounts of success for quite some time.
But is he a group of gamblers, using their combined bank to try and score a big win? An insider? Just lucky? Choose your story.
There are lots of reasons why bitcoin is popular in online gambling – uniquely so.
If you can program web stuff, you can open a bitcoin casino. You don’t need all that legal stuff that comes with real money, you can be anonymous, you can be a one-man band. And there are plenty of people with plenty of bitcoin from the early days, when it was easy to mine or cheap to buy.
Cashing out a million dollars’ worth may not be a good idea, and there are only so many gins you can buy in hip Hoxton drinkeries.
Hunter gatherers gamble because it’s good for their group and, through choice, they’ve got nothing better to do: a geek with all the online-ordered pizza they can eat and a giant stash of BTC may well be driven by the same curiously non-Galbraithian aspirations.
Just-Dice has done rather well out of such factors. It’s been going for around three months, and has clocked up $160 million in bets, which makes the one percent house edge worth roughly what Nakowa has trousered.
But he or they are still betting away; if the maths is right, then most of that money will come back to the site over time.
It’s the curious mix of transparency, anonymity and personality that makes the story so compelling: nobody knows who anyone is, but the process is utterly visible, the creator of the site – Dooglus – and Nakowa both have active, approachable, loquacious online persona, the maths behind the site is fully described, and the whole thing has the same engaging street-level vibe as your favourite punk band.
It’s just that most punk bands don’t do over a hundred million dollars worth of business in their first quarter’s trading.
Like punk, it’s best to enjoy these entertainments while they last. For if bitcoin is successful and becomes mainstream, then it may be the Neolithic Revolution all over again.
The early hunter gatherers will slide off into history – or, as the !Kung and Inuit have, fade into other undeveloped lands.
The rest of us working stiffs will be left with dreams of million-dollar wins that don’t seem to mean very much, even if we do collect our salaries in the same cybercurrency that once made some punk rich.
Anarchy in the IP
The mainstream media – MSM, in hipsterspeak – had a whale of a time earlier this year when another young punk created and fired The Liberator, a plastic gun mostly built with 3D printing.
Moreover, the plans were put on the web. Is this the end of gun control? Quiet nights? Civilisation? Well, no: it remains quicker and easier to make a gun from household items and the tricky business of making ammunition remains beyond the scope of the sort of printer you can lash together with bits from Maplin.
But the 25-year-old creator of the plastic doom-machine has got a taste for publicity: as an ardent liberarian who dreams of the state ‘simply fading away’, Cody Wilson has now turned his attention to bitcoin.
He funded a lot of the Liberator’s development through bitcoin, when his chosen crowdsourcing site threw him off for arms dealing (nonsense, he said, it’s just information).
And as someone who is both smart and market-savvy, he has correctly identified one of the reasons that BTC is still a minority interest. It’s too darned hard to use.
His solution, which is a good one, is to build what he calls a Dark Wallet in conjunction with a bunch of like-minded coders.
What sets this apart from existing wallets is that it will be a browser plug-in working with Firefox or Chrome, making it largely platform-independent and potentially extremely simple to get going.
Wilson’s libertarianisn has set him at odds with all those who are working to make bitcoin part of the existing financial mainstream – he calls them counter-revolutionaries who are trying to uphold crony capitalism.
For their part, the lawyers, financiers and other pro-bitcoiners in suits tend to disagree.
John Law, being a veteran of such noisy fights, merely notes that since Dark Wallet is going to be open-source and open to everyone, it doesn’t really matter what people’s motivations are.
It matters somewhat more that it has a really simple user interface and doesn’t scare your granny, and that detail remains to be be seen.
Crypto-anarchists, even really keen ones with a knack for being oddly media-friendly, are rarely strong on design.
Bitcoin may or may not need another William Godwin, but it could surely do with its own Steve Jobs.
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.
Disclosure Read More
The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.