Welcome to the CoinDesk Weekly Review 13th 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.
High hopes from a low country
Like a fledgling revolutionary state, bitcoin is desperate for international recognition. And, as with many such states, the rest of the world is carefully chewing over the implications of any such acknowledgement. So the latest lukewarm-to-positive statement from Belgium’s finance minister that BTC looks mostly harmless has brought cheer to many coinistas.
Belgium is a strange place. A quick look at its history may help explain why it’s not uncomfortable with the idea of a new (and basically strange currency) and what to infer from the announcement.
Both bitcoin and Belgium are new, synthetic and have no shortage of conflict and drama in their histories. The state of Belgium came into existence in the 19th century much as a new particle comes about in the Large Hadron Collider: by repeatedly smashing together other states until bits fall off. The territory has the dubious status of hosting the most (and bloodiest) conflicts in European history, mostly by dint of being at the crossroads of just about every family feud going.
It is home to two very different peoples: the Dutch-speaking Flemish and the francophone Walloons. So, following one of the most gruesome exercises in imperialism and a central role in the two bloodiest global conflicts ever, it was very ready to be one of the six founding members of what was to become the EU. Then, it decided to practically pull itself apart and is now competing with Italy for the most enduring and least comprehensible political crisis in living memory.
And yet, it prospers. From being known as ‘the cockpit of Europe’, in reference to the hole in the ground where cockfights took place, it’s now much closer to the aviation definition than the poultry one thanks to its position as the spiritual and bureaucratic helmsman of the Union and other legal entities. It’s perhaps understandable that jaw-jaw is now far more to the taste of its people than war-war. If ever a place has earned the right to be considered boring, Belgium is it.
So: a healthy disdain for politics, a strong liking for reinvention, a pragmatic sense of how to keep the tills ringing and an instinctive feel for how a small border nation can influence the goings-on of much older, bigger and more powerful neighbours.
That sounds like a useful and apt friend for bitcoin to have, even if the place has little detectable bitcoin activity itself. And if that’s not enough, Douglas Adams once declared “Belgium” as the single most powerful swear word in the galaxy, the use of which is completely unacceptable everywhere except on one tiny planet where they just don’t know what it means.
Diss Belgium at your peril.
All of which helps explain why baby cryptocurrency exchange Kraken has opened trading not in dollars, pounds and yen but euros. It wants, says San Franciscan founder Jesse Powell, to be the first fully legal exchange in America, but you know... regulators... What you gonna do?
Well, Powell said that investors are more interested in a company that’s up and running than one that’s fully legal and although there’s no intention to ‘slip under the radar’, ultimately, he thinks that users are more excited by funky features than boring old compliance.
Up to a point, Lord Copper. Whilst John Law very much appreciates brash talking by punk rockers to Power, he also notes that only certain classes of investors and users will remain unperturbed by a lack of demonstrable legality in a business proposition. Regulators do notice such nuances - after all, it’s a high-stakes game - and there’s a fine line between chutzpah and carelessness.
On the other hand, as Carrie Fisher said, everything is negotiable. There are plenty of successful businesses - indeed, successful markets - that have enthusiastically pushed against the boundaries of acceptability until the rules are rewritten in their favour. Sometimes you get rich. Sometimes you get porridge. It’s not unknown to get both.
One thing that unites those who go on the offensive and win is that whether through luck, instinct or sheer smarts, they get their timing right. There were MP3 players before the iPod. Smartphones before the iPhone. Tablets before the iPad. However you wouldn’t have got much bang for your buck by investing in any of them and, like so many digital pleasures, even Apple products are still not clear of the big guns of the content providers. Once upon a time, those guys liked to complain that the vast majority of music and movies copied into such things were done so illegally. In that instance, people didn’t care for the fine details of the law (and not just any old people neither).
Whilst the content providers look set to lose the war in the long term, in the short term their lobby has won many victories thanks to a vigorous, expensive and ongoing campaign. But it takes an awful lot to overhaul an entrenched system full of big, powerful players: mostly, it requires lots and lots of people who agree that funky features are more important than unimpeachable legality. It doesn’t hurt that the content industry has displayed the moral correctness of a barbarian chieftain in its own contractual dealings: few feel they’re destroying a city of light when they download Miley Cyrus.
Powell’s big question, then, is whether there are enough folk who share his features-over-legality view about bitcoin to give his stance some heft against the biggest, meanest and least-scareable lobby in town: government finance.
But are there really that many of those folk out there yet? John Law fears not. There are other, less hopeful explanations for why someone running a start-up wants to push for revenue and investment right now. Plus the view from San Francisco has been out of sync with the world before. However, John Law wishes success to Powell and everyone else shaking their fists at the castle, as long as they follow an old rule: you can live outside of the law as long as you’re honest.
Keeping it honest
Continuing in the theme of honesty, John Law feels strongly that advertising should always be legal, decent and truthful. With that in mind, here’s an unabashed advertisement: the mighty minds behind CoinDesk have made two new things happen on the site this week and you are more than welcome to help yourself to both.
The first is the signing-up of Jon Matonis, Executive Director of the Bitcoin Foundation, as Contributing Editor, which is about as horse’s mouth as you can get without being a veterinarian dentist. As someone with as good a claim as anyone to be a recognisable face of bitcoin and one, moreover, that is comfortable in the halls of power, he’s highly likely to be something of a lightning conductor for whatever electrical storms gather, and it’s good to have a tap on that particular powerhouse.
Yet publications hire high-profile contributors all the time. Rather fewer set up shop as a global economic indicator - Dow Jones and the Financial Times have their indices - but if the people CoinDesk writes about have a certain chutzpah, then why not the site itself? Thus the Bitcoin Price Index, CoinDesk’s own, independent and reassuringly serious-minded tracker of the actual value of the cybercurrency.
You can read the thinking behind it on the launch announcement, or just head on over to the price page itself. The idea for the index was born well before the site launch but getting it right in a market that’s quite so rapidly changing in both size, importance and basic composition wasn’t an overnight task. And it’s not a fire-and-forget site gimmick: it’ll be tended with care, don’t you worry.
Like the currency itself, it is predicated on openness both in how it’s created and how it’s used, and is something that has a clear role to play in the future of digital currency. It’s also driven by the itch that someone needs to do it - and who better?
Chutzpah. It’s contagious. Honest.
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.
The leader in news and information on cryptocurrency, digital assets and the future of money, 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. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.