Welcome to the CoinDesk Weekly Review 21st February 2014 – a regular look at the hottest, most thought-provoking and most controversial events in the world of digital currency through the eyes of scepticism and wonder.
Your host … John Law.
Unfair exchange of views
He is much amused by the knots his fellow Britons tie themselves in when they try to work out whether they should be in the European Union (“NO!” cry many on the right) or whether Scotland should leave the UK (“NO!”, they wail again – apparently because it wouldn’t then be in the EU. You try and work it out).
Such responses are emotionally led. The economics of the UK being in the EU aren’t much in dispute – far better in than out, and few really argue the opposite.
However, politics remains primarily emotional, for all it pretends otherwise, and it’s wise to recognise the fact.
Much the same tension between heart and head characterises these early years of bitcoin. On the one hand, bitcoin is a flaming beacon for freedom and escape from the cold hand of the state. On the other, bitcoin is a flaming nuisance, because big names are rather too free and too good at escaping from the cold hand, etc.
Mt. Gox is the current attractor for this lightning storm. Following a long and bumpy history of not actually performing its primary task of exchanging bitcoin and fiat currency, it has lost almost all of its credibility among customers – and quite possibly their money too.
At the time of writing, the nominal price of Mt. Gox bitcoin holdings is about $135, or around a fifth of what the cryptocurrency is costing on other exchanges.
The reason, of course, is you can’t actually get bitcoin from Mt. Gox. It’s rewriting its software, or moving offices, or requiring new verification, or is in bed after eating a poisoned cheese sandwich, or something. All while holding millions of other people’s money.
This is upsetting those with an exposure to the troubled exchange – or ‘Gox suckers’, as they are probably already known in disrespectful quarters.
Many are angrily complaining that there was no way that such a sorry situation should have been allowed to develop. “The company is trading while insolvent, they cry, and that’s illegal.” “Send the feds in!” Another wail of pain is, “Why has the Bitcoin Foundation stood by instead of doing something?” “Daylight robbery!” fume still others.
John Law has much sympathy for anyone whose finances have been hit with the misery stick. He carries many such scars himself.
Yet he suggests those in high dudgeon should read up on the old notion of caveat emptor – let the buyer beware. An early Roman approach to consumer protection, it basically states that if you should know what you’re getting yourself into, you’ve got no redress.
More recently, of course, the rule of law has swung firmly in the customer’s favour by making sellers provide honest information and stick to the rules.
You can’t really complain about regulation being a brake on freedom, and then complain when it’s not there to save your backside. Well, you can – and plenty of politicians will take advantage of your hurt feelings either way – but it does reduce the number of legs to stand on to approximately zero.
And if you are determined to get legless, John Law can suggest some far less expensive, yet more enjoyable, ways. Expect Mt. Gox to receive some concentrated legal attention at some point, whatever happens, Which, in lieu of getting your actual money back, may be the best time to follow that particular piece of irresponsible advice.
Spies, UFOs and the invisible ATM
The speed at which bitcoin technology is advancing is breathtaking. As John Law pointed out a couple of weeks ago, it is possible through bitcoin to build an ATM for a small fraction of the cost of a traditional cash dispenser, and to run it for virtually nothing.
The whole thing can fit in a shoebox and be run from anywhere. What could be more efficient?
Admittedly, shops, printers and even blokes don’t come for free, but they are common enough and can do lots of other things. It’s the incremental cost of turning the lot into a bitcoin ATM that matters, and this is, effectively, zero. Nothing is needed but a chunk of software – and the bloke wrote that.
It works quite simply. Go into the shop, and give the bloke some money. He trousers the dosh and taps on the laptop. This prints out a voucher. Take that home, go onto the Azteco website, tell it the code on the voucher and your bitcoin wallet address. Ker-ching. (Bitcoin, of course, makes no noise. This is artistic licence.)
John Law is unsure exactly why you can’t just give the bloke your bitcoin wallet address in the shop. His laptop is clearly on the Internet, and you could – one presumes – just ask to borrow it for a second and do the transaction there and then.
But there is a certain atavistic pleasure in getting a physical something for your money and having to complete the rite at a later date.
Azteco is connected to Irdial, a name very familiar to John Law. He owns perhaps the most famous product connected with that name – The Conet Project on Irdial Discs. This is a set of CD recordings of ‘numbers stations’ – shortwave broadcasters run by spooks that transmit coded messages around the world.
Nobody officially knows who runs them or why they’re there. During the pre-Internet Cold War days, however, they were the most efficient untraceable way to send commands and messages to spies. The UK still has one called the Lincolnshire Poacher, named after the short tune that precedes transmissions, which transmits from Cyprus, but heaven knows who it’s aimed at.
Such oddness sits well with Irdial, whose audience is similarly difficult to ascertain. Irdial maintains a blog long on impassioned creeds on libertarianism, home schooling, the madness of governments and UFOs.
The most popular category is called Politricks with over four hundred entries, then Someone Clever Said and Insanity – presumably, though, not their own.
However, the whole thing is infused with a certain lightness of spirit and joie de vivre, which marks it out from the infinite number of knotted-brow thunderous libertarian blogs from the other side of the Atlantic.
If you had to pick someone to create a non-existent ATM that nevertheless works but really looks like a rather sketchy shop in the East End of London, you couldn’t do better than Irdial.
The chief characteristic that distinguishes science from religion is that the science works for you whether you believe in it or not – and the basic idea of bitcoin will work no matter how it’s presented. Message ends.
A tip for the future
It points out that by allowing readers to upvote comments on community sites by tipping the originator a small amount of cybercurrency, only those that genuinely seem valuable will be promoted – and people will concentrate on writing such posts, instead of yammering away with trollish unpleasantries.
This meshes well with a more general observation, that one of bitcoin’s primary uses in the real world isn’t speculation or buying stuff, but tipping. It’s a good match – informal, anonymous and efficient. Perhaps the most important aspect, though, is that there’s no third party.
It really is as intimate as giving a busker 50 pence: no banks or logins, no middleman taking more of a cut than the recipient gets.
This too is a form of voting. If maximising income is the aim, a busker soon gets a feel for what attracts the largest volume of payments and can choose to play the most popular tunes.
Those buskers that wilfully play what they like are doing so at personal cost – and thus demonstrating a certain integrity towards their art, which the passer-by can immediately appreciate even if they don’t like the music. That integrity pays less well than populism will come as no surprise to anyone familiar with humans.
However, what the bitcoin-as-vote has that the plain bitcoin-as-tip does not, is the ability of the passer-by to see how popular something is. A bitcoin tip jar gives no public indication of popularity, unlike an open guitar case well sprinkled with pound coins.
This is easily fixed with a bit of software, recording transactions and displaying a figure on the host website. Things get a lot more interesting if such figures are searchable, raising the possibility of automatically generating charts of who’s output is most popular web-wide.
Such an idea would go a long way towards solving another problem of online content – finding stuff that’s worth your time. A popular site with lots of tips would attract attention without having to market itself.
Although it may seem as if such a thing would be easy to game, much like the pop charts were susceptible to record companies targeting the right shops and buying lots of their own products, it would be harder to disguise organised tipping as the pattern of donation size, frequency and origin could be checked in the same software as displays the tip total in the first place.
Such an idea would go a long way to counterbalance one of the more regrettable aspects of the Web, that those with the biggest budgets can organise the best search engine optimisation and thus the biggest artificial profile.
Profoundly democratic, anti-marketing and intrinsically rewarding to the worthy. It’ll never catch on.
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 300 years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.