Ripple’s Susan Athey: Too Much Focus on Bitcoin Exchange Rate

Ripple’s Susan Athey and Blockchain’s Peter Smith shared their thoughts on cryptocurrencies at TechCrunch's Disrupt NY 2014 event.

AccessTimeIconMay 5, 2014 at 5:41 p.m. UTC
Updated Sep 11, 2021 at 10:44 a.m. UTC

TechCrunch is currently hosting its Disrupt NY 2014 conference, spiced up with a hackathon and an interesting ‘battle’ between 30 startups. Of course, no disruptive tech event would be complete without digital currencies, so TechCrunch obliged.

Ripple’s Susan Athey and Blockchain’s Peter Smith took to the stage at the event to share their thoughts on cryptocurrencies and the current state of bitcoin.

Media obsession

Athey cautioned against the media’s incessant focus on the bitcoin exchange rate.

“I think the focus on the exchange rate is a little overrated. I mean it’s fun to watch the price move around, but if I wanted to send funds to you, say, in Japan, I only care about the bitcoin exchange rate for about 10 minutes,” she said. “The level of the exchange rate is really irrelevant for its use as a transaction medium.”

We have heard similar statements from bitcoin execs in the past, but the focus is slowly shifting toward matters generally considered more important, such as VC-funding of bitcoin companies and the real-life applications of cryptocurrencies and block-chain technology.

Athey pointed out that even gold has a premium on top of its intrinsic value. As bitcoin has no intrinsic value, it’s value is solely premium, she said, explaining:

“You can think of the number of bitcoins like a pipe of fixed dimension. If I want to put a lot of dollar value through that pipe, the exchange rate of bitcoin has to grow to accommodate that volume through the pipe. If you look at the volumes and exchange rates, they track each other reasonably closely.”

She further said there were some deviations from historical trends, but it is possible to imperfectly predict the value based on the transaction volume.

Exchange warning

TC Peter Smith
TC Peter Smith

Asked to comment on the demise of Mt. Gox and its effect on bitcoin, Peter Smith said the overall impact will be relatively small.

However, he also used Mt. Gox as a cautionary tale, as an example of why bitcoin startups should not centralize their operation – namely their bitcoin storage. Smith said Blockchain never takes possession of the funds, always keeps its software open source and works to decentralize trust rather than centralize it.

Smith explained that centralized exchanges are vulnerable and that almost all services that have ‘centralized trust’ have suffered significant security breaches and incurred losses, adding:

“If you go out and buy bitcoins on an exchange with centralized trust, you should immediately transfer these bitcoins to a service where you can manage public and private keys.”

Smith went on to criticize the basic concept of centralising trust.

“I don’t think that business models that take away the core value proposition of the bitcoin protocol are a good idea,” he said.

The bottom line is, Smith believes startups that centralize trust are doing it wrong.

Images via TechCrunch


Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

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; 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 employees, including journalists, may receive options in the Bullish group as part of their compensation.