From China to Cyberspace: Bitcoin's Year in Review

It's a legal requirement for journalists to write an end-of-year roundup, and John Law is nothing if not law-abiding.

AccessTimeIconDec 31, 2013 at 6:00 a.m. UTC
Updated Feb 21, 2023 at 3:36 p.m. UTC
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Welcome to CoinDesk's Yearly Review 2013 – a look at the five hottest, most controversial and thought-provoking events in the world of digital currency through the eyes of skepticism and wonder. Your host … John Law.

It is a legal requirement for journalists to write an end-of-year roundup, and John Law is nothing if not law-abiding. One valid set of stories would read along the lines of:

January – collapse of bitcoin predicted!

March – price goes up.

May – collapse of bitcoin predicted!

July – price shoots up!

October – collapse of bitcoin predicted!

December – bitcoin collapses … oh no, wait a moment, it’s still here!

Yet it's true. The biggest single story in 2013, bitcoin’s most tumultuous year to date, is just that: it’s still here. And more than just 'still here'. For those who think that the most important aspect of the cryptocurrency is its dollar price, it’s here with nearly sixty times its $13 valuation at the end of 2012.

Not that it’s all been good news: it’s at around half its peak price of around $1,100 at the end of November. So, how did that happen – and what fun did we have along the way? Here are bitcoin's five biggest moments.

1. China

China door
China door

Bitcoin started 2013 as a four-year-old curiosity, albeit one that was starting to be taken seriously by the sane. It ended the year as a top-level item on the agenda of the world’s greatest economies: nowhere more dramatically than in China.

While it is too soon to write the definitive story of bitcoin’s annus mirabilis, the evidence is strong that a lot of its increasing heft was through widescale adoption by individuals and businesses in China.

There are plenty of possible drivers behind this, including the difficulty of trading yuan and that currency’s over-valuation, which makes it an unattractive vehicle for speculators and savers – especially those within the republic.

Other options are limited: China remains, lest we forget, the world’s largest authoritarian non-democratic state. It is not a free country. The introduction of the libertarian-scented, government-goosing bitcoin is thus a history-grade experiment in immovable objects and irresistible forces.

It’s an experiment that has been gratefully adopted by the Chinese, who became the majority traders in bitcoin mid-year – fuelled, interestingly, by state TV running short programmes explaining what it was and how it worked. Someone somewhere wanted that to happen.

While it’s hard to say just how much this movement pushed bitcoin up, it’s easy to find the cause of the end-of-year crash: the Chinese government told its banking systems not to support yuan-bitcoin trades. Someone somewhere wanted that to stop.

One cannot plumb the 'who' or 'why' of Chinese state fiscal policy, only – fitfully – the 'what'. This remains one of the core paradoxes in the rise of the Chinese economy as a global force: dealing with someone who not only hides their cards but the rules by which they’re playing is not, in the long term, a good bet.

But the power of the bitcoin mosquito to sting the hide of the Communist elephant (and to survive the slap of the trunk) is not only the cryptocurrency’s best story of 2013, it’s one of the most intriguing developments this year by any measure.

2. Newport

rubbish tip
rubbish tip

Newport resident and hapless tech fiddler James Howells idly mined over 7000 btc in 2009, then forgot all about them until 2013 – sadly, a few weeks after he’d thrown away the most expensive hard drive in history.

At best, the storage device with millions of dollars hidden in its megabytes was probably still intact, just under six feet of Welsh household waste in his local tip. However, the council wouldn’t let him in to look.

This story caught the imagination of the general public more than any other, at least by the lopsided metric of how many people wanted to talk to John Law about it.

It had everything – incomprehensible tech matched to human fallibility, with the tantalising prospect of redemption still up for grabs. Had the hard drive gone into an incinerator, the tale wouldn’t have had nearly so much traction.

It’s a bit more than just an amusing tale of someone else’s misfortune, though. It raised the profile of bitcoin still further, slipping in the idea that it was something that ordinary people could be a part of and that it had a certain durability – the expectation that it would have survived the garbage of Gwent won’t have been lost on readers.

From the sublime reaches of geopolitical fiscal intrigue, to the corporation rubbish dumps of South Wales: bitcoin bestrides the globe.

3. Vancouver


Another small story – man installs ATM machine in Canadian coffee shop – is much, much bigger than it seems. The man is Robocoin CEO Jordan Kelley, and the machine is the world’s first bidirectional bitcoin ATM (meaning it can sell you bitcoins for cash, or give you cash for bitcoins).

It went on to take more than $1,000,000 in its first month, not bad trade for a coffee shop, even in Vancouver. What makes this an October revolution, though, isn’t that it demonstrates a thirst for bitcoin that exceeds even that of hipsters for caffeine, but that it bypasses the only effective tool native states have for controlling cybercurrencies.

The Canadian government (or the Chinese, or the Global Illuminati Conspiracy) can tell banks to refuse to accept payments that are connected to bitcoin. However, they can’t ask them not to take cash.

So, if you want your bitcoin, you can pop into your local espressery and get some: the ATM owner gets a bunch of cash. Job done.

Can ATMs be controlled? They can, if they’re connected to the global banking system. These aren’t.

Can they be banned? Sure, but since they’re very easy to build and install without telling anyone, and can be made extremely portable, and don’t of themselves break any laws, that’s not a simple process to put in place without banning bitcoin itself – and near-impossible to enforce.

What makes John Law particularly keen on this approach is that it doesn’t scale to speculator level. It’s great for bitcoin as an insanely low-cost, personal way of buying stuff over the Internet or across borders, which is where its future lies once the shouting dies down, but not if you want to manage a multimillion bitcoin fund.

Sorry, Winklevii. Have a nice cup of coffee.

4. New York

new york
new york

Not that there was a lack of big stories that looked just as important as they really were.

There is a technical term for markets, capitulation, which means what it sounds like: after fighting a certain result for a while, the market gives in, lets it happen and takes its lumps.

Capitulation is the best way to describe what happened in New York in November, when a Senate hearing into this whole darn bitcoin thing was preceded by the head of the US Federal Reserve, Ben Bernanke, saying that it (bitcoin, not the Senate) had legitimate uses.

There were warnings aplenty about the dark side of the bitcoin force, and much discussion about what regulation will look like: there’s every chance that bitcoin will be larded about with as much statutory baggage as the regulators think it can carry without encouraging normal people to become scofflaws.

But the message from the world’s most important people when it comes to money: "Yeah, it’s here. It won’t go away, it works, and we’ll have to make the best of it."

Which, for a young invention implicated in blackmail, drug running and people who read Ayn Rand, is as good as it gets.

This was the biggest regulatory news of the year for bitcoin, whose practical future will be all about the regulations – poor thing. But John Law recommends you take a few minutes to read the same sort of news coming in from across the globe. China might be big, and America may be bigger, but the world is bigger – and for a stateless currency, that’s its true home.

5. Cyberspace


Lest you think all is bright and shiny in bitcoinland, now that the Silk Road has been rendered impassable and you can buy a nice wine to go along with your steak instead of some LSD, the last of John Law’s top stories is an ongoing report from the front line of cybercrime.

In October, a new piece of Internet-carried malware named CryptoLocker was discovered. By November it had hit the radars of top crime fighters. By the end of 2013, it had infected an estimated quarter of a million PCs and bilked its victims for millions, possibly hundreds of millions, of dollars.

It works by surreptitiously encrypting your computer files, then popping up and demanding a ransom paid in bitcoin. Three months after it began, it’s still going strong and nobody seems much closer to catching those responsible.

If there is some good news, it’s that the bitcoin transfer system has shown that the evildoers are most likely operating from Russia. Unlike the Dread Pirate Roberts, they’re good at covering their tracks.

Indeed, with the chutzpah of true gangsters, they even offer customer support, and have been interacting with victims through public bitcoin forums, Early rumours that files wouldn’t be decrypted proved false - these chaps care about customer satisfaction.

Bitcoin’s role in this isn’t vital: the villains offer an alternative way to pay, and similar bits of bad software have been produced well before the advent of the cryptocurrency. What it does offer is a rapid, efficient route to payment – and thus multiplied their take. It made the effort much more worthwhile. This won’t have gone unnoticed by their pals.

Still, the loot hasn’t been disposed of yet – and that will expose the gang to more scrutiny. The feds didn’t need to break bitcoin to squelch the Silk Road: they used good old-fashioned gumshoe work, with a bit of help from their spook friends.

That’s the overall picture from 2013: bitcoin can change the rules but doesn’t have to break them – and it’s not going away anytime soon. Here’s to 2014. Just don’t expect another 55x jump in value.

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.

China, Rubbish Dump, Coffee Beans, New York and Hostage Images via Shutterstock


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