Welcome to the CoinDesk Weekly Review 2nd August 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
Exchanging panic for patience
Once upon a time, people got their news from papers and the six o’clock news. Both were delivered daily, which gave the journalists involved time to pick up telephones, check with sources, and generally get the story right before passing it on.
You can forget about that now. Once something happens - and often if it doesn’t - the first frantic take by J Random Blogger gets thrown around the planet faster than the smell of cabbage through a school kitchen. Such was the case with the shock-horror news that “Thailand has banned Bitcoin!”. Microseconds later, as predictably as a schoolkid’s instinctive revulsion, comes the insta-analysis of delighted disdain and doomsaying. Either Thailand was being idiotic, or cryptocurrencies were in serious trouble: ideally, both.
At a very basic level, none of this seems to be true. A decision by Thailand’s central bank, the Bank of Thailand, certainly said ‘don’t play with bitcoin or its ilk’, but that’s not the same as a government ban. Rather, an independent agency with considerable corporate and political power was slamming the brakes on while not perhaps being quite prepared for the global attention it attracted.
John Law, who learned long ago that governments make bad companies and companies make bad governments, is unsurprised. Central banks, with their dual role as economic cornerstone and de facto regulator, are deeply conservative and not prone to quickly understand things that they have not encountered before.
This is good and bad; a lot of dangerous fiscal engineering gets closed down, but if you wrap unstable ideas up as things the bank thinks it knows about, you can get them through without too much trouble - credit default swaps, anyone? Bitcoin has been too busy being born to have learned the skill of disguise, so it can trigger the “unknown, therefore risky, therefore stop it” instinct.
Which seems to have happened in this case, a response amplified by the Bank of Thailand having exceptionally broad powers. These include a very close regulatory interest in foreign currency exchange for the Thai Baht - which until 1997 was pegged to the US dollar, when the Asian financial crisis forced it to float and devalue. Unsurprisingly, forex still gets a lot of attention, and since bitcoin looks like a foreign currency but isn’t handled by any licenced exchanges, it can seem like a good idea to put the brakes on while its real nature is scryed.
Fortunately, despite its extreme youth, bitcoin is rapidly evolving the ability to talk to central banks and other regulators in their own language, so you can be sure that contact is being made and discussions started. The upside to having a central bank that can make arbitrary decisions with almost the strength of law is that they can be undone just as easily - undoing actual government decisions is far harder.
So the lesson is, as always, not to panic, not to jump to conclusions and not to assume that everything is done the same way all over the world. And you don’t have to eat the cabbage.
There’s nothing CoinDesk readers like more than a good pun. Waxing lyrical with “what a buzz” and “hope it’s not a sting operation” comments, they responded in typically a-pollen fashion to the story of the Bees Brothers.
Which is as feel-good as you like, and a splendid antidote to international machinations and tech-heavy ASIC miners. Said brothers are three kids from Utah, all under 15, with a good claim to be the youngest BTC entrepreneurs on the planet. They keep bees - a home-schooling project that went a bit crazy - and sell a variety of tooth-threatening and beeswax-based delights. As their apiarian activities grew, they started shifting product to their immediate neighbours, then local markets and further afield. It was natural, and very easy, to expand into mail-order online, and since you can accept bitcoin even if you’re ten years old and invisible to banks, that was the logical way to cope with payment.
John Law is most taken with the Bees Brothers demonstrating yet more proof that bitcoin makes everything old new again. In this case, the brotherhood lives in Cache Valley, a part of Utah that was home in the early 19th century to mountain men - fur trappers and traders who lived independently from the trappings of statehood and showed a high degree of adaptability. They led the way where settlers and gold-rush colonists followed: the similarities between bitcoin fever and gold prospecting madness has long been noted, but here the system is working as the trade routes that lets individuals thrive connected to, but not bound into, the system.
Admittedly, very few of the mountain men started off before they were teenagers and there’s no record of them getting interested in cryptography, as some of the Bees Brothers are now doing. As for the honey caramel almonds: clearly, much research needs to be done.
Bitcoin can, alas, be used for trade of a considerably less wholesome nature. You will probably know about Silk Road, the anonymous, Tor-based trading outpost that arranges the sale of disreputable goods by unknown parties to unknown parties through the exchange of BTC. One of the most popular classes of product is the controlled substance; if you’ve heard of it and want to snort, poke, imbibe, smoke or rub it into yourself, someone will claim to be able to help out.
Yet still greater levels of abuse are possible, as American computer security investigator and journalist Brian Krebs knows far too well. He has spent many years writing about cyber-attacks and the people behind them, and is thus not much loved in certain Russian quarters. They express their feelings in a wide variety of ways - faking phone calls to the police so armed response units are despatched to Krebs’ home, creating vast lines of credit in his name, and so on.
The latest wheeze, documented in Kreb’s blog, was to have a BTC whip-round, order a significant amount of heroin on Silk Road, and ask for it to be despatched by post to the man. The idea, apparently, was to then pretend to be his neighbours, call the police again, and sit back and chuckle as he tried to explain the strange white powder in his possession.
That may have worked somewhat better had Krebs not been reading the secret bulletin board where the villains were gleefully planning their jolly jape. He got to the plod first - you get the feeling that the local constabulary have tired of the novelty of being caught in the middle of such international intrigues - and told them what was going to happen.
Smack-By-Mail duly delivered, he handed over the package to the law and now awaits confirmation that it was actually as advertised. Smart Guy 1; Puerile Cybernasties 0.
What most distracts John Law about the business, which seems to have harmed no one and lost the bad guys some dosh, is whether it was actually illegal. Drug laws revolve around possession, which is why it’s so difficult to get the big guys who pull strings but never come close to touching the stuff. Worse, it’s not clear if the Ruskies ever technically owned the heroin, any more than you own the bottle of whisky you order online for delivery to your dad for his birthday. At what point does the gifting occur? Under what jurisdiction?
Which raises the rather fascinating prospect that instead of being used to commit old crimes in a new way, bitcoin is implicit in doing something that should be a crime but isn’t. A canny writer with a sufficiently twisted imagination could probably concoct a set of true un-crime short stories which explores this brave new world: the lawyers, one feels, will find gainful employment for years to come.
John Law would just like to make it clear that if you do wish to send anonymous, bitcoin-funded substances through the post to him, he’d much prefer the honey caramel almonds to even the finest pharmaceuticals. Test cases are for other people.
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.
Image Credit: Flickr
CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk offers all employees above a certain salary threshold, including journalists, stock options in the Bullish group as part of their compensation.