Cash of the titans, bitcoin diets and ATMs: The CoinDesk Weekly Review

Digital currency has many mysteries. Our man John Law explores them all in this edition of the CoinDesk Weekly Review

AccessTimeIconMay 10, 2013 at 3:43 p.m. UTC
Updated Sep 10, 2021 at 10:44 a.m. UTC

Welcome to the CoinDesk Weekly Review — 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.

Digital currency has many mysteries. Who created bitcoin? How does an umpire use it to decide who goes into bat first? And if the whole idea is to remove transaction costs and expensive intermediaries, just like real cash, who’s going to make any money?

But it doesn’t pay to be too skeptical at the beginning of a bright new age, especially when so many entrepreneurs are queuing up to build exciting and profitable digital currency outfits. One such is Evan Rose, co-founder and CEO of BitcoinATM. This -- oh, you’ve guessed -- is a physical cashpoint, just like the ones in the high street, which happens to accept and dispense the eponymous e-dosh.

Rose demonstrated a prototype bitcoin ATM in LA at the the end of last week. This, he said, would solve the problems of it all being too technical and weird for the average punter, and could even let you carry your virtual stash around on paper in a real wallet. John Law couldn’t agree more: if you don’t think cryptocurrency is costly and confusing, you ain’t tried it yet.

There are just a couple of tiny snags. First, bitcoin transactions take ten minutes -- on a good day. Only muggers and beggars hang around cashpoints that long. That’s OK, says Rose, you can monitor progress on your mobile. (But then, do you need an ATM at all?) The other small issue is our old friends the regulators, who want to see $25 million or so posted as a being-good bond before you can do street banking. We’ll work with people who already have such things, says Rose.

All this was too rich for one Jeff Berwick, who had been signed up by Rose some time previously (over Skype, while looking for gold in Ghana: Berwick is nothing if not colorful) to do marketing and venture capital work for BitcoinATM. Berwick explains why he parted company on the site he runs, otherwise devoted to surviving the destruction of the dollar and the grinding underfoot of the regulators. Nobody is as devoted to total removal of government as he, he claims proudly.

Perhaps not the ideal partner to help ease bitcoin onto the high street. Rule one, man: don’t scare the straights.

Bitcoin: the path to righteousness

Over at Forbes, one of the staff journalists has been writing up her week living on just bitcoins. Kashmir Hill went Tuesday to Tuesday on five BTC, around $600 worth. That seems comfortably over minimum wage -- even in San Francisco, where Hill took the plunge. After all, there can’t be anywhere more in tune with digital currency. It won’t be long before San Fran’s famously outgoing panhandlers find a way to take it.

So you’d think. Instead, Hill discovered, bitcoin is the key to health and moral rectitude. You can’t get taxis with it, so you walk and cycle everywhere. And while you can order up the illicit stimulant of your choice via Silk Road, you can’t buy a latte for love nor digits. As for food: it helps enormously if you’re vegan; you’re not going to get a Big Mac, but most of the people who take bitcoin for services or products are cyber-idealists with a hipster streak. A week of what she called the Bitcoin Diet and she’d lost five pounds.

All good clean fun, and John Law admires her resourcefulness in just about keeping body and soul together in a city where she could no longer pay for yoga sessions.  Some existential issues defied easy fixes -- there was no way to pay for her mobile phone service in BTC, but she needed it to run her wallet through which all her transactions took place.

The worst thing? Violent currency fluctuations. The best thing? San Francisco has loads of people who really want to make cryptocurrency work, and there’s a real start-of-something buzz, magnified by the need to work hard just to make it happen at all. Especially heroic without coffee.

And there’s a belief, which even the cynics admit to if you catch them in a good mood, that it doesn’t matter overly if bitcoin itself doesn’t pan out in the long term. Something like it will.

Where there’s a bit, there’s a writ

Mostly, of course, if you want to spend your cryptocash, you have to convert it into the coin of the realm. That’s where the real money-generating action is, with loads of people setting up various forms of exchange. The business is dominated, however, by the mighty Mt. Gox, the Japanese-based trading house that handles around 80 percent of the global action.

There are downsides to being in Japan, mostly revolving around the rather expensive and regulator-vulnerable need to move lots of real currency in and out of the big markets in the US and Europe. Which is why US-based Coinlab stepped up with lots of stateside moxie and inked a deal with the land of the rising sums. Coinlab would extend Mt. Gox’ reach and provide some top tech; Mt Gox would have the profile and experience (albeit painfully earned) of dealing with large numbers of transactions. And Coinlab would get exclusive rights to Mt Gox’ US business for a couple of years.

Oh dear. It all sounded so good ... but turned out so bad. Last week, Coinlab hit Mt. Gox with a legal claim for $75 million because of "contractual issues". As well as providing lots of lawyers with the wherewithal to buy all the coffee they could drink, it was also blamed for a midweek slump in BTC.

John Law is not surprised. These are febrile days, and if you can’t afford to lose your shirt when dabbling in digital currency - or investing in startups -- you should keep it firmly on your back. Nobody knows what the risks are, except for large; nobody knows how up the upside might be. And nobody knows when the fiscal fog of war will lift.

Yet even as the lawyers cluster and journalists faint for lack of caffeine, there is good news. For bitcoin itself isn’t touched by any of this: the technology continues to work, no matter what outrageous fun us analogue humans have with it. That’s the digital gold at the heart of the standard, and like gold it will adapt to the economic ups and downs and frantic experimentalism.

Hang on tight.

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.


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