Monday, June 3rd, 2013
30

The Great VC Coin Rush: At The Bitcoin Convention

The world-altering monetary miracle and/or freakshow that is Bitcoin was on full display at the Bitcoin 2013 conference in San Jose this May. There were more than a thousand attendees, among them bankers, libertarians, conspiracy theorists, sea-preneurs, developers, scantily clad vodka models, the Winklevoss twins, Internet Archive founder Brewster Kahle, Soft Skull Press founder Sander Hicks, and a large fraction of the world's Bitcoin experts. Also, in the lobby, roaming gangs of Imperial stormtroopers and superheroes, since there was a comics convention going at the same time.

So is Bitcoin a great invention, or a trainwreck in the making? Maybe!

Because it's decentralized and no third parties such as banks or governments are required to guarantee transactions, Bitcoin has the potential to be a far safer, more transparent and more reliable medium of exchange than anything that has yet been tried. There is no Ben Bernanke, Mario Draghi or Shinzo Abe for Bitcoin, no way of devaluing it, no way to print more to bail out insolvent banks or buy up mortgages. Plus, Bitcoin could conceivably help to free the world of the skimming machinery of existing banks and payment processing systems. In this way, Bitcoin could be really beneficial for people to use as money. However, the politics of Bitcoin is, not to put too fine a point on it, diverse. Or incalculable, since Bitcoin is an entirely new kind of money.

"Bitcoin is politically neutral," Gavin Andresen, the Chief Scientist of the Bitcoin Foundation, told me. "People love to put their own political values into it, and see them reflected in the Bitcoin system, and see how Bitcoin will help them achieve their political goals. Well, maybe? But as a technology person, I am actually a little skeptical of the extremes. So I don't think Bitcoin is going to topple governments; I think governments are going to figure out how to tax it; even if the whole world were using Bitcoin, I think governments would still figure out how to make you pay your taxes."

This seems certain to me, too. But there are many dueling agendas swarming all around this project, even now. I left the conference uncertain whether the potential benefits of Bitcoin can ever be tapped, because like everything else people invent, its potentialities, however great, are very liable to be swamped by the same lunacy, greed and incompetence that mess up all our other systems.

* * *

Bitcoin enthusiasts can be divided into three rough (and sometimes overlapping) categories:

• Geeks, who are irresistibly drawn to Bitcoin's elegant and (apparently!) foolproof melding of software and network techniques to create trustworthy, spendable, savable money;

• Politically motivated participants, the motliest crew imaginable, cypherpunks, anarchists, libertarians, leftists and various disenchanted others, united solely in their opposition to the baroquely fucked-up monetary policies of modern nation-states;

• Speculators, who would just as soon be investing in coconut macaroons, if they thought there was a nickel to be got out of it.

This year's dramatic runup in bitcoin prices—a bit under $120 today, on a fairly stable month-long plateau after a dramatic spike, and up from around $5 at this time last year—has vastly increased participation in the third category. Witness just a sampling of the Bitcoin venture and angel funds and investments announced in recent months: BitAngels, a new angel fund, raised over $12 million; Liberty City Ventures, $15 million; Union Square Ventures invested $5 million in Coinbase, a bitcoin wallet system; a $2 million-plus round for OpenCoin, developers of the new exchange, Ripple, with the participation of Andreesen Horowitz and Google Ventures; Founders Fund led a $2 million round for BitPay, a payment processor (Peter Thiel, who, as you may recall, made quite a lot of his zillions as a co-founder of the payment processor PayPal, is the creator of Founders Fund). None of these is a particularly large raise by Silicon Valley standards, but the total adds up to a significant and broad-based endorsement.

So in the last year, Bitcoin has gone from being a geeky, esoteric little project to become the subject of world news, of interest not only to the "investment community" but also to government regulators, whose involvement will likely alter the Bitcoin landscape in ways not yet foreseen. But all these developments are generally acknowledged among experts in the community to be inevitable preconditions to the wide adoption of Bitcoin.

* * *

Cameron and Tyler Winklevoss of Facebook fame gave the conference's keynote address. They recently told the Times that they have acquired about one percent of the existing bitcoins—somewhere in the neighborhood of 100,000, or around $12 million at today's rate of exchange. Separately, it appears, they are also investors in bitinstant, a platform for expediting the transfer of regular money into bitcoin.

The twins are as big, brawny and self-confident as one had been led to expect. Polished speakers they are not. They opened their PowerPoint with a slogan lifted from a refrigerator magnet they saw somewhere, a slogan often (and almost certainly wrongly) ascribed to former Apple pitchman Mohandas K. Gandhi (or "Ghandi," in Winklevese):

"This is Ghandi, I hope everybody here knows who Ghandi is," one of them said, bewilderingly, at the start of a narcoleptic speech entirely free of politics or cryptography, the single message of which was: "We're a-gonna get rich, boys."

The eye-popping irony of this opening scene—one of history's most famous anti-materialists, hauled in with a spurious quote to lend a "socially conscious" or "revolutionary" gloss to the sentiments of the crassest profiteers going—was so poetically deranged that it cast a sort of psychedelic aura around the proceedings that lasted me all three days.

Anyhoo. Bitcoin! The shindig became less and less boring from the keynote onward, I must say. The whole conference generated a buzzing, crackling excitement throughout—the feeling of money about to be made. The crowd seemed to be wandering through a blizzard of business cards. Pin-drop silence for the panels and presentations—there were dozens of them, on alternative cryptocurrencies, regulatory matters, the long-term stability of the Bitcoin system, and so on, all over the map: crazy, or fantastic, or practical-sounding ideas presented by wonks, lunatics, lawyers, visionaries. (A lot of it is already available on YouTube.)

There was also an astrologer offering to divine the compatibility of your chart with that of Bitcoin (silly, really, since nobody knows where Bitcoin was born); a Bitcoin ATM; a screening of the trailer for an upcoming Bitcoin documentary. Lavish, nonstop conference catering buffets. Coffee and muffins, bagels and cookies for breakfast; pasta, salmon, grilled chicken and sirloin tips for lunch; fancy candy and energy bars, popsicles and ice cream in the afternoon; later, free booze, and the aforesaid vodka babes in hotpants and sky-high platforms dispensing their wares. Guys shaking hands, guys muttering excitedly on the phone, fielding pocketfuls of business cards, texting like mad.

And I do mean "guys." Some 95% of those in attendance were men. The gender disparity made itself felt in a number of ways.

Several times, a familiar, catchy song filled the main hall: Swedish House Mafia's "Don't You Worry Child"—but with lyrics, I was enchanted to realize, about Bitcoin (!). "Just when the Cypriots were losing faith/That's when I learned about the blockchain [...] Satoshi said/Don't you worry don't you worry child/Bitcoin has got a plan for you." This was a "Zhou Tonged" song, and is easily outrunning a fusillade of takedown notices on YouTube and elsewhere. (The story of Zhou Tong is a long one, and wild.)

* * *


The venture crew arrived in San Jose with loafers freshly shined, counseling cooperation with the government agencies who have taken a sudden interest in Bitcoin this year, issuing new guidance for MSBs ("money services businesses"), and throwing a regulatory spanner in the works of Mt. Gox, currently the largest Bitcoin exchange. The good-boy attitude of the investor class sometimes doesn't sit too well with the largely libertarian contingent that started the ball rolling for Bitcoin in its early days.

So far as the Feds are concerned, the recent takedown of private digital currency Liberty Reserve has frequently, and wrongly, been associated with cryptocurrencies such as Bitcoin. Run by "a former U.S. citizen and naturalized Costa Rican of Ukrainian origin" named Arthur Budovsky (he was pinched in Spain), Liberty Reserve currency wasn't decentralized the way Bitcoin is, but was instead issued by the company itself, like a kind of scrip or IOU for dollars, gold or euros; a medium of exchange particularly suited to money laundering. Maybe this is my imagination failing me, but I can't think of a good reason to pay to exchange regular currency for Liberty Reserve (or more to the point, to assume the substantial risks associated with entrusting money to Liberty Reserve itself, the sole authority over the currency) absent the need for total anonymity. The Liberty Reserve fiasco has, however, added another frisson to the ongoing regulatory nervousness around Bitcoin.

Libertarians, as I was after saying, generally dominated the Bitcoin conference; there was a lot of talk about the Free State Project, Ludwig von Mises (ho hum), and taxes. As you may have heard, these libertarians do not want to pay any taxes ever, because that is the perfect form of government. And if you are wondering how come no civilization in history ever managed to implement the perfect tax-free government before, that is just because you are an ignoramus who hasn't heard of medieval Iceland. (Never you mind about Colorado Springs, several hundred of whose undertaxed residents, lacking an adequate fire department, lost their houses in a blaze of tax-free glory!)

Anyway, one libertarian group at the conference, whose attempt to found their own tax-free, "business-friendly" "country within a country" in Honduras was peskily foiled by Honduran citizens when they got wind of it, presented the news that they are making a new deal in an as-yet-unnamed country (waiting until the ink is dry, I guess). Then there is a group of seasteading types who are founding a business sea-cubator on a boat twelve miles from Silicon Valley ("outside the jurisdiction of the United States") where they can hire all the cheap, H-1B-visa-less Chinese and Indian engineers they please. (Freedom!) For this purpose, they have already chartered the MS Island Escape. (Later I told my husband that this part of the show sounded like a giant Michael Crichton plot generator.)

Meanwhile, Internet Hall of Famer Brewster Kahle, freedom of information activist, co-founder of Alexa and founder and director of the Internet Archive (and the Wayback Machine), where employees may already elect to receive part of their salaries in bitcoin, is founding an Internet Credit Union: a splendid idea.

The roaring success of the M-Pesa system, a cellphone-based money transfer service founded in Kenya by Safaricom in 2007 and since exported to various African countries, India and Afghanistan, has not gone unnoticed by Bitcoin entrepreneurs. Many billions of the world's "unbanked" people (a) have cellphones and (b) live in countries where fiscal corruption is rampant. Bitcoin is already easy to trade by phone using existing technologies outside the banking system, and despite some very wild blips in the exchange rate against USD and Euros, Bitcoin is actually more stable than a number of existing fiat currencies. It's logical to suppose that countries whose banking systems and native currencies are the least stable are the most natural markets for the adoption of Bitcoin. There appears to be a ton of entrepreneurial activity in this area.

There's so much more, I can barely scratch the surface. Such as, the highly credible analysis indicating that nearly 10% of the world's Bitcoins have been stashed and never spent by Satoshi Nakamoto, Bitcoin's mysterious founder(s) (worth maybe $150 million at today's rates). Or the stream of wild-eyed grad students who interrogated Erik Voorhees of SatoshiDice and bitinstant after his presentation, especially the guy who asked him about "the teleos of Christ." Voorhees is this geekily elegant libertarian who waxed all rhapsodic about Bitcoin and how terrible governments are, etc. (He totally fooled me for a second by claiming to be a democrat, so deadpan is he.)

The libertarian, I have come to find, is naive in his own special way: for example, Voorhees said, "I trust profit seekers more than I do a politician, I think the incentives are better." Oh, LOLs. They get fed up with those guys on the online Bitcoin Forum, too (much the best place, by the way, to learn about Bitcoin): "Oh spare me the libertarian bible thumping."

* * *

After the conference, I was tempted to characterize the Winklevoss speech as the paradigm of Bitcoinmania as it currently stands: a good idea, maybe even a great one, in the process of being misunderstood and misappropriated—perhaps fatally so—by a gang of clueless would-be plutocrats for their own ends. And yet. Experts and leaders in the Bitcoin community appear to be entirely unfazed by these and other dodgy-looking recent developments. They have placed their trust in the original design of Bitcoin, which they believe will be resilient enough to withstand whatever governments, ideologues and rent-seeking entrepreneurs can throw at it.

It is troubling—to me, at any rate—that Bitcoin is so widely seen as a path to personal wealth rather than a path to global economic fairness. A lot of Bitcoin entrepreneurs will tell you that it's possible, and healthy, to seek those goals simultaneously; but it's very easy to see which imperatives will prevail, should a conflict emerge.

I asked a number of people about this, and they all answered roughly the same way. But Mike Caldwell of Casascius—manufacturer of physical embodiments of Bitcoins!—put it best, I thought:

"The price of Bitcoins may go down if people break laws, if bad things happen. I don't plan on breaking any laws, though, and I would certainly hope that regardless of what other people choose to do—break the law or go against the interest of the government that they live in—perhaps they'll be held accountable for their own actions. And those of us who just want to use it to promote liberty and privacy can continue to do that, and not be bothered."





Maria Bustillos is a Los Angeles-based journalist and critic.

30 Comments / Post A Comment

They're properly referred to collectively as "Winklevoxen"

I was kidding, it's actually "Winklevodes"

@Bus Driver Stu Benedict – Winklevookies

Julius Firefly (#13,153)

As someone who teaches the work of Smith, North, and Williamson to students, I wish them all the best on their coming market failure.

Because it's decentralized and no third parties such as banks or governments are required to guarantee transactions, Bitcoin has the potential to be a far safer, more transparent and more reliable medium of exchange than anything that has yet been tried.

I don't believe that this is an accurate statement. The stability of currency is tied directly to the Government that issues it. Ours is called "fiat currency", and exists because that Government pledges itself to maintaining the security of that currency with all its resources. Manipulation of currency only really happens when government regulation fails – it's why the financial industry pushes against regulation so hard. Fiat currency is the stablest thing we've created so far. A lack of government wouldn't make a currency more stable, but rather far, far less. We believe that a 20 dollar bill is worth 20 bucks because the machinery of government is poised to exercise itself in order to keep things that way through any means. As far as Bitcoins go, they aren't really a currency except in some peoples' minds, and are backed only by faith in the public-cryptographic system that keeps them honest. So far they are merely an extremely liquid, interchangeable barter product; and their value, as we've seen lately, swings wildly on a very thin thread. You could call it a currency if you like, but it's not really.

scrooge (#2,697)

@Jeremy Mesiano-Crookston But my dear fellow, haven't you been watching what governments have been doing with their fiat? The Fed is currently buying Treasuries and mortgages at the rate of $85bn per month! The Fed balance sheet has expanded enormously since the financial crisis, because they had to bail out the banks. The Europeans and, more recently the Japanese, have been doing the same with their own currencies. I don't know why you would think this is in the long term more stable than a currency which, according to reputable experts in cryptography and programming, has a slow and predetermined rate of expansion.

Your faith in the probity of politicians and bankers is, though, very touching.

@scrooge It's not faith in the system, it's the basic fact that the system itself exists as a whole because Governments pledge themselves to preserving the values of currencies. That allows the kind of stability that modern economics are based on. Bitcoins have no security or value as a currency precisely because they don't have the backing of any form of systematized power. They have agreement among a certain sector of people, and are backed by a relatively secure form of blahblahblah. They aren't really a currency. They're more a barter product with the promise that they can't be counterfeited. Basically, they're the exact digital equivalent of gold coins. Which, you will note, we sort of moved past. Anyone advocating that we "move on" to Bitcoins is fundamentally stating something relatively close to libertarians' moving back to the "gold standard" argument.

Governments don't "have" a fiat, or "direct" the markets, or "influence" currencies. Governments establish wholesale the entire existence of a currency, which can be regarded as a tiny fetish that embodies a government's political and law-enforcement power.

Also, you should look up the difference between currency, and the money supply. There are different types of money in the economic system which are weighted differently depending on how they are used, and where they end up. The Fed's quantitiative easing, for example, is "valued" far differently than the media would have you believe. Money that goes towards shoring up the reserves of banks, and increasing what they call the 'monetary base' isn't money that's in circulation. It doesn't inflate prices or devalue existing currency anywhere near the amount that you are assuming it does.

scrooge (#2,697)

@Jeremy Mesiano-Crookston All money is based on faith. As one who lived through the 70s inflation, my faith is a little eroded. I guess only time will tell which of us is right.

barnhouse (#1,326)

@Jeremy Mesiano-Crookston er. Maybe you should read something about the history of currency devaluation. Not a pretty story.

No medium of exchange is a valid currency "except in some people's minds"–faith which has necessarily foundered, over and over again, in the face of government corruption. The broad and transparent adoption of cryptocurrency really could act as a curb against corruption: that's just what it was invented to do. Whether societies can be brought to impose such limitations on their governments is another matter entirely.

TheRtHonPM (#10,481)

@scrooge What the Fed did was to issue guarantees and expand/adjust the pool of US sovereign debt. They didn't really print money in any sense, and it's clear they didn't because inflation has remained at historic lows. Nonetheless it's widely regarded that the Fed acted decisively to avoid a meltdown in the banking sector, because they had the power to do so.

Now, say the sovereign bank has no control over its money supply — what would this look like? You need only look to Cyprus. In the middle of a bank crisis, Cyprus — a Eurozone country — was unable to guarantee banks, because there was no way for them to create more Euros without the permission of the ECB. (Note that they need not have printed any more currency, as a guarantee may have been enough to backstop the banks, as in the USA.) So they had no choice but to confiscate funds from depositors (or, revalue accounts to reflect money that didn't actually exist), and the result was chaos. The irony is, this is the world that the Bitcoiners want to create.

scrooge (#2,697)

@TheRtHonPM The Fed is buying US sovereign debt and mortgage securities every month. When they buy them, the entities they buy them from get dollars, or dollar balances in their bank accounts. This is how dollars are "printed". (See "Open Market Operations" — but in a less traditional way since the QE programs began). Because the economy is so depressed, this money has not found its way into traditional bank lending — rather it seems to have gone into assets, like stocks and houses. Hence, the inflation is in asset prices rather than in consumer goods (although many people think that consumer price inflation is actually significantly higher than the official figures would suggest). I'm not saying the Fed shouldn't have done this — maybe the alternative was worse, I don't know.

Guarantees are no different, really — they are just softer. If the guarantee is ever called upon, the result is the same.

I don't believe the Bitcoiners want to create a Cyprus situation. They just want to be able to rely on a currency which can't be devalued by governments, or bankers, or anyone. As I understand it, there is no way to create a bitcoin bank, because banks in their nature "create money" whereas bitcoins cannot be double spent the way banks rely effectively on double-spending of currencies. If there were a bitcoin bank, your bitcoins would be transformed into a bank IOU, which is not the same as a bitcoin.

The chaos to which you refer in Cyprus may yet come to countries which are printing money. Only instead of a levy on your bank deposits, you get reduced purchasing power through inflation. Note that Cyprus was, in fact, bailed out by the ECB. The levies on deposits, initially targeted at all deposits, was ultimately restricted only to rich-guy deposits (just as in the FDIC there is a limit on deposit guarantees).

So bitcoins force discipline on governments and banks in the first place. Blame the governments and banks which allowed the overleveraging to occur in the first place, not the bitcoiners.

@barnhouse No medium of exchange is a valid currency "except in some people's minds"–faith which has necessarily foundered, over and over again, in the face of government corruption.

That's correct in a symbolic way, as a currency has no tangible value. But in a practical way every Government is forced to act with an expectation of continuity. It's THAT expectation that allows economic activity to happen. A bank is able to give loans at a steady rate because they believe that currency will remain within a given value range at a certain time. Without the presumption of currency retaining its value overnight the democratic capitalist state would quite literally dissolve. That ability to maintain continuity can really only be maintained by a large, central body. It's certainly interesting to use bitcoins as a sort of "emergency currency" in failed states, and I think there's a certain amount of stability based on its purchase demand here in the West. But right now it's a novelty, and the idea that it has staying power has yet to be shown, regardless of what a conference of overly-pale people say.

The idea that a transparent, public currency will somehow hedge against corruption seems to be more of a permanently hypothetical argument than anything else. And not a very good one, at that. Even if you could replace all currency all at once, people won't broadly accept it until someone backs it up with legal force. The idea that people should blindly trust computer security to preserve the very VALUE of a currency is one that will absolutely never fly.

@scrooge The broad way in which I understand QE is that it was designed to solve the fact that all credit availability in the US, and internationally had become paralyzed. Banks and institutions were wholly unwilling to lend and thus all activity ground to a halt. By taking toxic securities off the market through its own action, it allowed credit to restart and the economy to start flowing again. Compared to the potential risk of a dead calm economy, QE was a success: restart credit mobility, remove the assets that caused the fear in the first place, all while keeping currency devaluation to an absolute minimum by affecting the monetary base, and not the M0 money supply (I think those are correct. I'm reaching years back for these definitions…). It buys assets from banks by putting money into their reserves, thus liquidating the capital in those banks, which they had been keeping to maintain their reserves, for lending again. So it's re-starting the mobility of the money that was already in circulation, by creating a type of money whose mobility is extremely limited. The limited money doesn't affect the market that extensively, so it ends up working.

The biggest problem is the way the banks responded to the influx of life-saving reserve money. Instead of taking actions to benefit the broad economy as a whole, they took profit-making business as usual actions. So QE didn't have the juice that it should have had.

Inflation isn't just ( +"money" ="inflation"). It's very complex. And from what I understand, economies need managing so carefully that the idea of basing them on a quantity of limited materials (i.e. gold standard) simply isn't that tenable. A central bank needs the ability to affect the money supply. Simple as that.

Ellsworth (#244,482)

Inflation is money printing, by definition. Price level changes are an effect.

Ellsworth (#244,482)

@Jeremy Mesiano-Crookston

Witness the affects of Keynesianism on an otherwise functional mind.

scrooge (#2,697)

@Jeremy Mesiano-Crookston You are actually confusing the original bank bail-out with QE. In the original bail-out, the US did not directly buy toxic assets but essentially either loaned money to banks or took actual equity stakes (as in AIG, for example, which had the effect of bailing out Goldman Sachs from their CDS counterparty risk at AIG, and in Fannie Mae and Freddie Mac in the case of bad mortgages). The key was to maintain confidence that the whole banking system wouldn't collapse because of the irresponsible behavior of the financial institutions.

But we are past the dire panic that hit the markets after Lehman. The point of QE was to stimulate the economy via bank lending. In practice, it seems to have worked more by exerting a "wealth effect" (people with stocks and houses, for example, feeling richer and so spending more) than through banks increasing their lending (except to large corporations which don't really need the loans anyway but can't resist the low interest rates and often enough have used the money to buy back their own stock — see Apple recently, as one spectacular example).

Who knows whether QE has worked or not? As with most economic claims, there is never a proof, because there is no "control" – you don't know what would have happened had they not done what they did. Hence, it doesn't have the more compelling claim of a scientific experiment.

My own feeling is that after QE1 it should have been phased out. Let those who took the risks suffer the consequences, and purge the leverage out of the system. More fiscal stimulus would have been a better way to go, but it was politically impossible because of the right wing of the Republican party.

@scrooge I thought we were always talking about the Quantitative Easing program? You said "The Fed is buying blah blah every month". The only real ongoing program is the Quantitative Easing program. If anyone is confused here, it's because you're confusing them.

The bailout wasn't really an economic experiment of any sort of new method, but just pumping money into existing industries.

And QE did work to a limited extent because the flow of credit was indeed restarted. Everything around that is debatable, but the basic fact of it operating in some form in the way it was originally planned is true.

And I don't really believe your point about the "wealth effect". Stimulating domestic spending and stimulating large-bank credit are very different things. I don't believe there's any evidence that Quantitative easing affected individuals at all except in a tangential way that rich people generally buy more when the economy is moving.

scrooge (#2,697)

@Jeremy Mesiano-Crookston I was only quoting you: "The broad way in which I understand QE is that it was designed to solve the fact that all credit availability in the US, and internationally had become paralyzed".

That was not QE, that was the bailout. The paralysis occurred after Lehman and was gone within a couple of months.

As for the "wealth effect", just try googling: "Ben Bernanke" wealth effect, and he'll explain it to you.

Really, with as little knowledge as you apparently have about these things you are not qualified to argue about it. Over and out.

Bill Peschel (#170,856)

Which do you trust more, rent-seeking politicians and dictators, or a system in which one hacker with the right code can crash it?

barnhouse (#1,326)

@Bill Peschel No one hacker can bring down Bitcoin. It would take many thousands of them, at this point, colluding simultaneously.

@barnhouse Well, the Titanic was "unsinkable", right?

barnhouse (#1,326)

@Jeremy Mesiano-Crookston if you study the structure of it you'll see why one hacker can't take it down. At the moment there are about 20,000 independent witnesses worldwide, recording and verifying every transaction as it occurs, every ten minutes. Anyone can join the network, run a full node and join this process. Over half the nodes would have to collude in order to take control of the system. Very difficult even now, and the wider the adoption the more difficult the task becomes.

@barnhouse Again, that's excellent for a product used as a limited medium of exchange. But for an entire currency? Can you guarantee forever that nobody will ever find a method of breaking this? No, nobody can ever responsibly say that. Is there a Bitcoin police force that seeks out potential counterfeiters and imprisons them?

Ellsworth (#244,482)

This was a thoroughly enjoyable article. As someone participating in the bitcoin space, the perspective of someone looking at the conference "from the outside in" is valuable to me. The writing was descriptive and coherent, the research level was far higher than the norm, and the points of criticism were mostly valid.

Bitcoin's continued growth and adoption is not guaranteed. It brings inherent advantages over current wealth storage and transmission options (very low fees, extreme portability, lack of 3rd party confiscation risk) and weaknesses (relatively small illiquid exchange market with high volatility…large amounts of cash, gold, and bitcoin require security protocols that are the responsibility of the owner alone)

I agree with the author that the possibilities offered to the currently unbanked are more compelling than those offered to those in western countries with highly developed financial systems. The large global remittance market is another space ripe for innovation.

Unbelievable success, pain-filled failure, both are possible at this juncture. Some will invest in their vision of the future, others will scoff and snicker, this is a hallmark of all revolutionary attempts at change.

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r&rkd (#1,719)

Isn't this the case: The supply of bitcoins eventually stops expanding but the economy keeps growing. If the only currency were bitcoins, this would lead to crippling deflation. But of course there are other currencies, so buyers use bitcoins for purchases that suit the transactional benefits of bitcoins, and use other currencies for all their other purposes. Except that bitcoins can combine anonymity with global reach, the transactional benefits of bitcoins are shared by cash. So, in conclusion, how could they matter so much?

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