Welcome to the CoinDesk Weekly Review 22nd November 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.
Bitcoin’s hearing aid
If you want to pick a date when bitcoin came to stay, you could do a lot worse than 18th November, 2013. Coming just ahead of the US Senate congressional hearing into bitcoin regulation, the head of the US Federal Reserve, Ben Bernanke, said in a letter that – with the usual reservations and cautions – it had legitimate uses.
In fact, the whole hearing is a landmark. While there were plenty of negative vibes, they were distributed equally – yes, bitcoin is a wayward puppy that’s proving hard to discipline, but with the rest of the world much more willing to adopt the mutt than is the US banking system, the fear of shutting it out was stronger than caution about what it might do on the carpet. In other words: it’s going to grow up into something worthwhile, so what can America do for the best?
There was also an undertone of urgency. An old joke is that Internet years are like dog years – enough happens in one year on the Internet for seven years in the real world. The bitcoin puppy’s year seems equivalent to seven Internet years: last week, John Law was fretting about excessive upside volatility provoking increased cyber-attacks; this week saw double helpings of both. That sense of something out of control permeated the hearings, with questions being filtered in via reddit and speakers complaining about the general incoherent chaos of the discussion.
But nobody said no. Nobody said "resist this evil with all our might". Perhaps it’s the ever-increasing banging on the door from investors and inventors wanting to get on with the job, perhaps it’s the Chinese scooping the stuff up as fast as they can.
Perhaps it’s the rising tide of realisation that, even if bitcoin itself crashes and burns, the basic technology is being taken seriously by everyone who’s smart enough to understand it and new uses for it are being proposed daily.
Whether this sense of reluctant acceptance was behind the latest growth spurt - followed by a mini-crash, followed by more growth - is impossible to tell. The market is so illiquid that a few big players can drive it where they like, and the sentiment of the broad masses matters not a jot, not at the moment.
What happens next? Bitcoin will be regulated, certainly, but probably in a way that’s flavoured by the realisation that shutting down its special nature, even if possible, would not do anyone any favours. A balance will be struck in the hope that bankers stop being so darn miserable. They say that they dislike the irresponsibility of the stuff, but really sense that it’s got the potential to disrupt their world without providing adequate compensation.
Well, that’s too bad. The rest of the world has had to go through all that with the Internet, and the banks can’t live in a pre-Internet world of fat margins from locked-down, tightly controlled channels forever. Sooner or later, one of their number will break and decide it wants to be the First National Bank of Bitcoin - or, if they’re smart, something even better - and then you won’t be able to breathe for the dust they raise.
Based on this week’s hearings, the US Government won’t provide them with excuses for too long.
One new use for bitcoin technology is hinted at in an intriguing blog in the Financial Times. It’s heavy on economic jargon, but don’t let that put you off.
The gist is that people aren’t investing in China even though the opportunity’s there, because of conflict of interest - the government isn’t playing fair, and that soaks up a lot of confidence people have that they’ll see returns if they put their money into the country.
How can you tell? Well, the Chinese themselves are buying a lot of bitcoin, even though they’re paying more for it than the rest of us. In other words, the bitcoin mechanism is providing a unique channel into the true value of the Chinese currency, which is being kept artificially high by the government: Chinese investors don’t trust it, and so will move their money out. Bitcoin bypasses the regulated markets, and gets the love.
The FT goes on to discuss what this says about general attitudes to controlling agencies and their tendencies to not play fair - but at this point, you really should go and read it yourself.
John Law is even more fascinated by the way bitcoin is infiltrating the mainstream thinking into global money than he is by the technology. Capitalism itself is very prone to people not playing fair once they get into a position of well-funded power, which - if you’re being particularly apocalyptic - can provoke the sort of adjustment that involves people throwing bricks through windows or missiles at cities.
The idea of bitcoin-like systems having the potential to replace the sort of controlling authority that can be captured by special interests is gaining traction, and not necessarily with the extreme kill-the-government libertarian flavour that has left a bad taste in the mouths of those who think somebody’s still got to build the hospitals.
Politics is the art of compromise, after all, and if the unstoppable channel of bitcoin-like systems gets rid of some of the blocks that have scuppered compromise between the rich and powerful and the increasingly disgruntled rest of us, it may be healthier for all.
The five worst uses of bitcoin - in just seven days
Ready? Let’s go.
5. Be an extra-strength violent bigot - by bitcoin!
Yes, you can buy bullets with bitcoin now, from an outfit known as JiHawg. John Law will not grace it with a link, because it is a rancid exercise in xenophobia: these bullets, you see, are impregnated with pork, in order to be especially abhorrent to the sort of people that the principals behind this noxious idea wish great harm.
John Law doubts that this is more than a bad joke perpetrated by wingnuts: after all, shooting people is in general more than enough of an insult. He will just point out that such ideas never end well, and move on swiftly.
4. Buy a chunk of a free-for-all paradise - with bitcoin!
Oh, the siren call of investing in paradise. Shunt your bitcoin stash over to Galt’s Gulch in Chile and be a part of a libertarian community untrammelled by tiresome laws.
What can go wrong? For a start, it’s in Chile - which is a wonderful place and all, but happens to be a sovereign nation replete with laws and regulations and no more likely to let a bunch of incomers do what they like than anywhere else.
Also, it’s named after the hero of Atlas Shrugged, a fantasy novel with about as much connection to reality as Lord of the Rings, but infinitely nastier. John Law will just point out that such ideas never end well, and move on swiftly.
3. Hijack your customers’ computers - for bitcoin!
This was never going to end well either. It seemed like such a good idea at the time - push out a revision of your gaming software to your clients that injects a secret bitcoin mining algorithm, and sit back while the results flood in.
This is based on the assumption that people who are nerdy enough to create expensive gaming computers and use obscure software won’t notice that the machines sit there soaking up power at full tilt when nothing is supposed to be going on.
Come on, lads, these geeks spend their lives tinkering with their hotrods. The inevitable court case came to an end this week, with E-Sports Entertainment copping a $1m headline fine.
2. Kill someone famous - through bitcoin!
Oh, lordy, the fantasists are thick on the ground this week. Assassination Market claims to be offering death-as-a-service (DAAS) over the cloud: chip in enough bitcoin donations, and members of an illustrious list will be offed for the good of us all.
Among the almost-infinite number of reasons why this is a worse use for your digital dosh than funding a mission to Uranus to hunt yetis is the small fact that it would cost a lot more than the price of a Mercedes to off Obama. At least Silk Road actually got people stoned.
1. Have your poo checked by randoms - using bitcoin!
So, so aptly number one, CoinMD is a new service for the health-conscious. What can you do with it? For example, upload a picture of your poo to the Internet, get medical advice on its appearance from anonymous strangers, and if you think it’s worth it, don’t spend a penny - send them some bitcoin.
against taking medical advice from strangers - let alone paying them to discuss your droppings - but John Law thinks its true crime is a lack of imagination. The name alone: why not call it Stool Pigeon? Turd Opinion? Captain’s Log? Research in Motions?
Or, if you will, shitcoin. And that’s quite enough of that.
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.