Welcome to the CoinDesk Weekly Review 10th 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.
Everyone has friends they love but secretly fear because of what they might do. John Law has one such friend who is particularly dangerous during the festive season. Probably a CERN particle physicist in a previous life, she delights in finding people at parties who are polar opposites and accelerating them towards each other at great speed to see what bits fly off.
She has a particular talent at finding denialists – climate change, evolution, moon landing – and plumping them in front of the unfortunate Law, who finds them all as unappetising as toad-in-the-hole made with real toad. Of course, 2013 was the year of the bitcoin …
Thus, Dear Lord, thus:
“Bitcoin expert, eh? Criminals and drug-runners love it.”
“It’s a ridiculous speculation. I’d say ban it, but let the suckers hurt. Hahaha!”
“My friend says that millions of computers waste megawatts of electricity on that. It’s killing the planet,” and so on, and so forth.
If it’s not possible to escape by pretending to speak nothing but Esperanto, then a game attempt to engage in battle takes place.
The electricity nonsense is simple: agree that bitcoin mining does indeed soak up power, “but so much less than the real thing, eh?”.
As nobody has the faintest idea how much energy mining metal and running the financial system takes up, this is an easy bluff to carry off. And certainly true, to boot. As for the rest, John Law is glad to report that this week alone has provided two excellent counter-examples against the inherent badness of bitcoin – one very small, one very big. The very big one has made all the headlines: the very small one is far more significant. Let’s start with the very big.
Overstock steps up
Overstock.com is taking bitcoin. If you’re not in the US, you may not know Overstock – it’s an aggressive online Utah retailer that started in 1999 shifting bankruptcy, end-of-line and warranty return stock, but now does more general products.
What sets it apart from the thousands of other outfits that take bitcoin is its size, over a billion dollars a year in sales. While this is no Amazon – it’s actually roughly the same as Greggs the bakers – it’s by far the biggest single organisation to hook its wagon to the cryptocurrency star. It’s also the only one approaching a household name.
John Law suspects this is far more a publicity stunt than a major revenue move, but probably not a cynical one. The CEO, Patrick Byrne, is no supporter of the status quo and clearly relishes rewriting rule books – and won’t mind one bit if the threat of bitcoin manages to drive down the transaction costs from banks for more traditional fund movements.
What this is costing him isn’t known, but he’s bitcoin-enabling courtesy of Coinbase – who will be hoping hugely to benefit from this vote of corporate confidence. Who’d be surprised if a mutually advantageous deal was struck between the two outfits?
Ah yes, banks. The selfsame banks who’ve been quick to close down the accounts of individuals or small businesses discovered meddling in bitcoin. It’d be a bold bank indeed who rid themselves of a billion dollar business. And even for organisations that habitually show less shame than a medieval monarch, it’s going to be hard for them to take Byrnes’ bucks but shun the little guys. That sort of behaviour gets regulators quite irate.
Any way you cut it, Overstock’s practical involvement in bitcoin is of major significance in the progress of the feisty digi-dosh – and it’s only a week into 2014. What could be more exciting?
Strictly for the birds
Well, there’s the small case of TipperCoin. It doesn’t come much smaller. Started by two guys in San Francisco as an open-source project, it has just one purpose – to let people tip each other small amounts via Twitter.
Oh, and to get bitcoin more widely accepted. What it isn’t, is out to make any money or open new avenues of lawlessness or make ego-drenched superstars of its creators. This is important stuff, because it passes the two most significant tests of any innovation: do people want to do this, and could this be done any other way?
Clearly they do want to do this – there are already others working on making it better – and no, there is no other way of moving small amounts of money across Twitter, at least not without ludicrous amounts of complexity and expense that makes the whole business pointless.
This test isn’t met by the Overstock move – yes, people want to buy stuff from Overstock, but they can already do it with much less fuss and no particular extra expense through plastic or PayPal.
And at some point, there’ll be another Biggest Ever retailer, even bigger than Overstock, who’ll adopt the cryptocurrency. It’s a good story, but it doesn’t say much about bitcoin.
Back at TipperCoin, the nascent service is growing in some odd directions. One is the inclusion of Dogecoin, the mutant currency based around a bizarre, dog-themed Internet meme that John Law has already tipped for greatness. OK, mentioned in awe and incomprehension. That counts.
TipperCoin is already an offshoot itself, from work done previously in adding microtransactions to reddit usage, and because it’s open source and based in a lively community of skilled yet twisted developers, such mutations can be produced in days. With nobody in charge and no investors calling the shots, this thing could spread wherever people wish – and, in fact, will be a lot harder to shut down than anything more normally structured.
As principal perpetrator Scott Li said when asked if Twitter approved – don’t know, but we’re too small to matter. Such is the very spirit of bitcoin, and it’s this DNA which is the important core of the whole idea.
Will TipperCoin make a big difference? It might: we just don’t know what will happen when it’s painless to throw a couple of cents at somebody who made you laugh for a second through a clever tweet. It might sink without trace, and probably will, but an experiment that couldn’t have been done before has been attempted.
Which is how things change, after all.
Tea totals
And if you, like John Law, are giving body and soul a month-long refreshing break from the rigours of indulgence, you too may be contemplating a nice cup of tea. Even here, bitcoin is shaking things up.
The Tea Board of India – unfortunately not a cool electronica band – is perplexed by the way some of its growers are bypassing all governmental oversight and revenue monitoring by selling their goods directly online and taking payment in, well, you guessed already. Questions are being asked in Parliament.
India is addicted to bureaucracy. It has a labyrinth of boards, ministries, agencies and regulators, state and national, which seek to authorise, deny, monitor and control virtually every commercial act that might conceivably happen. It makes Labour’s post-war British statism look like Ayn Rand’s fondest fantasy.
No wonder bitcoin seems like a tempting sword with which to slice the Gordian knot. No wonder the masters are deeply concerned. As with China, it’s impossible to know exactly what the result will be.
Probably, just a storm in a … oh, never mind. Is January over yet?
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.