Welcome to the CoinDesk Weekly Review 31st January 2014 – 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.
The dangers of thinking too small
Having your CEO arrested is rarely an on-message event. Even if you’re the Mafia, such an event does call into question the core competencies of the central executive; for proper enterprises who live by the rule of law, it’s much worse.
A decent spin doctor can put a positive light on almost any mishap that becomes public with the company name attached, but when the head honcho can’t make a conference call because there’s no internet access in San Quentin – awkward.
The Winklevii, investors in Bitinstant, and other high-profile connections have been busy issuing “Nothing to do with us, guv” press releases: a friend in need is rarely someone with much skin in the game.
The charges are: knowingly selling bitcoin to Silk Road people for nefarious use, operating an unlicensed currency transmission agency, and not telling the plods that bad things were afoot. Precisely the sort of thing that high-profile bitcoin names aren’t supposed to do.
Still – innocent until found guilty, and all that.
John Law would also like the jury of public opinion to remember that one of the accused’s potential sins was just not doing it enough.
If he’d followed the lead of HSBC’s CEO and presided over an operation which moved somewhere in the region of a billion dollars of Mexican drug money through its systems, then he’d have got away by saying “I’m profoundly sorry” and having his bank pay a fine.
A mere million from a bunch of punks on the Internet? Don’t make us laugh, say the Feds as they slap the cuffs on, while laughing.
(The HSBC story is a real hoot, by the way. The drug dealers actually built special containers designed to exactly fit the counter windows at the retail banks they used to deposit the cash, so they could unload as much dosh as possible daily. Who needs bitcoin?)
There are a couple of positive aspects, for those who wish bitcoin well. It disproves any remaining notion – still expressed by naysayers – that the authorities are helpless in the face of cybercurrencies and it’s a field day for the bad guys.
The Silk Road shakedown shows that good old-fashioned policing is more than up to the task of working through the consequences. It’s also very noticeable that those involved in the enforcement are at pains to say that bitcoin itself is not ‘OMG Evil’ and they can see its good side. Any moral panic has died aborning.
Scant comfort for Shrem, of course, who may be contemplating up to 25 years in the slammer should things not go his way.
If so, he’d be wise to dispose of the ring he wears which has his bitcoin password engraved on it – otherwise his nickname ‘Four Finger Charlie’ may yet come to pass.
More mysteries from the Middle Kingdom – just what’s driving some of the more unusual aspects of Chinese bitcoin trading volumes?
CoinDesk took a look and uncovered a familiar mix of accusations and counter-accusations – whether automated trading is being set up to mislead the market, or whether it’s all kosher and just happens to drive the market in certain ways and whether people are hiding what they’re doing or being open about it.
In part, this is typical of financial markets, where traders behave in ways that go right up to the edge of the permissible and on into the grey areas, at least until a regulator shuts them down or things go wrong anyway.
There is no doubt that interest in and demand for bitcoin is as feverish in China as anywhere. The Chinese government’s noted equivocation on the subject – at one moment promoting the idea by running educational TV programmes, the next telling the banks they may not trade with bitcoin exchanges – is sometimes explained by the country’s other currency problems.
That the renminbi must become a fully tradable currency at some point is not in doubt: that it is in no state to do that yet is also a commonplace. How much does the government fancy having an uncontrollable currency in widespread use when it’s having trouble riding herd on the official stuff?
But there could be another reason. Widespread reports are circulating (although not in China, where they’re repressed, foreign websites reporting them get cut off) of truly heroic personal fortunes being made by close relatives of the Chinese leadership.
Not only are the numbers staggering – one figure puts the total at around $4 trillion. Trillion! – but the cash is stashed in various foreign off-shore boltholes. As a result of the reports – which won’t go away – new requirements have come in for officials to declare their financial holdings.
Of course, one of the main problems with having huge amounts of ill-gotten hanging around is that it’s hard to move it when the dosh inspectors come looking.
It’s especially hard when locking down the currency and foreign transaction regulation is of public, overriding importance. Thus the reasoning goes, the more you can move into bitcoin before things get too sticky, the more you’ll take away.
Which, if true, explains both the intensive pressure on bitcoin price being driven by China, and the government’s express unease at either closing it down or opening it up. After all, stability and fiscal probity in the face of nepotistic kleptocracy is pretty much the definition of state responsibility. On the other hand, it is family.
The potential scale of the forces at work here is hard to comprehend – $4tn is capable of blowing a hole in any country’s stability, if not defused carefully, and really would push bitcoin prices out of known space if the above thinking has any basis in reality.
Or… well, look at North Korea’s approach to dealing with unhelpful members at the Christmas dinner table.
John Law cautions that rumours coming out of China are a poor basis for planning one’s pension, and that whatever happens will be both unexpected and with unknowable consequences.
However, it is vastly entertaining to watch. Here’s hoping that somewhere in the impenetrable Chinese state infrastructure there’s a native Edward Snowden at work. Is that too much to ask?
Fancy a flutter?
One of the joys of bitcoin is that one can pontificate endlessly on unknowables like Chinese politics, but it’s also very easy to make predictions that have a fighting chance of coming true, and remarkably quickly at that.
It doesn’t take any special skill, as bitcoin and its ilk are spreading like spots on a teenager. All you have to do is pick one area of human activity that hasn’t been bitcoined yet, and say confidently that it will. Because it will.
This week alone has seen Potcoin, which aims to be the currency of choice for captains of cannabis in those markets where weed is legal, and the advent of the Bitcoin Arcade Machine – which shows how easy and cheap it is to add bitcoin functionality to existing stuff.
In this case, the coin slot mechanism on gaming machines just sends electronic pulses to the machine’s logic saying when money’s been added: just program a Raspberry Pi to do the same when it validates a bitcoin transaction, and you’re done.
But even John Law at his most oracular, far-seeing, Nostradamus-nobbling best, failed to predict one particular product, now available for bitcoin. He wouldn’t normally mention it, except that it is unique, spectacularly gruesome, and has provoked the stern disapproval of CoinDesk’s editor and keeper of the godly, the wholesome and the correct. Which has only improved Law’s opinion of the product.
There is no way to dress up or disguise the horror, so here goes: Eyelashes For Cars. Huge, parodic, arching, plastic, headline-topping eyelashes for cars, available in a wide variety of colours and easy to install on any motor.
Readers of a certain age may remember the Compact Pussycat, the hyper-feminized vehicle of choice for Wacky Race’s Penelope Pitstop. It had eyelashes: for many decades, experts have concluded that here the concept had reached its natural end.
But no. It is a thing. The website claims that:
“Eyelashes on Car headlights are a growing trend with girls and you would be surprised at how many guys, all over the world. Whatever your personality, having these amazing car eyelashes on your headlights will make heads turn wherever you go. People will be pointing, other cars will be honking and children smiling everywhere you go.”
Well, yes, John Law would be surprised at how many guys. How many, guys? The site doesn’t actually say. The site also doesn’t mention the pointing, the ridicule, and the frequent need to comb out cyclist lycra from between the prongs.
It’s also unclear how the genesis of the headlamp merkin will affect the field of gender studies, already stretched by the advent of Truck Nutz (not, as far as is known, purchasable with bitcoins) as evidenced by academic Zachary Blair’s seminal “Junk in the Trunk: A Queer Exploration of Truck Nutz as Contemporary Material Culture”.
It is to be hoped that Zach can bring Eyelashes for Cars within his purview. Don’t just concentrate on the low-hanging fruit, man.
The only thing about Eyelashes for Cars that is more unsettling than the very fact of their existence is that someone, somewhere, is sitting in a factory making them.
Whatever you’re doing this weekend, and however deep the January blues have bit, take some comfort from this realisation: it isn’t you.
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.