The latest book by financial crime journalist and fiction author Jeffrey Robinson is making its way around bitcoin missionaries, mercenaries and visionaries following its release last month.
BitCon: The Naked Truth About Bitcoin is a critical evaluation of the fantasy and fallacy of the dreamers and journalists that brought bitcoin to notoriety. Its reporting covers all manner of bitcoin debate – the currency, the commodity, the technology, the crime, the scandal, the business, the politics, the regulation, the economics – offering the bitcoin skeptics’ usual condemnations of the currency, but backed by numbers.
So when asked for whom the book was written, Robinson said: “I always write for me, and it’s the bitcoin book that I would want to read if I were thinking of spending my money on bitcoins or getting involved.”
He added that the bitcoin media and its darlings “don’t justify any of the misinformation, spin or hype, can’t back it up with facts, and are doing it only to pump up the price of their own holdings. I think that needs somebody to scream, yell and kick and say ‘this is wrong, and don’t believe it’.”
Robinson is bullish on the block chain, though – something he repeatedly emphasized, as he does in the book, is a distinct entity from the digital currency:
“It’s a tech buy, not a commodities buy, because the technology is very exciting and the technology is going to happen. The block chain is the future, but not necessarily with bitcoin.”
Though many believe bitcoin as a currency is essential to the viability of the block chain (without the incentive of a bitcoin reward, miners wouldn’t work to maintain the block chain ledger), Robinson thinks the block chain can survive on its own, and claims to know of a number of Silicon Valley startups currently working to give the block chain independence from bitcoin as a currency.
Bragging rights
Robinson said that when bitcoin reached its highest-ever market cap, $1,147 last December, it was the direct result of a pump and dump scheme and a distant second to the Uzbekistani som.
“Nobody cares about this stuff, don’t tell me it’s changing the world,” he said. “The block chain technology may, and I believe will. The currency will not be part of it.”
That’s because bitcoin, “the pretend currency”, is illogical, he said, and despite a year of his research that included attending meetups, hearings and conversing with bitcoin’s supposed champions, he struggles to find a problem in the developed or developing worlds that it can solve.
He said:
“It solves no problem. It exists, but it’s a solution in search of a problem.”
When asked if he allows for the fact that he might be wrong about the digital currency bitcoin, he said: “I do not allow for the fact that the numbers are wrong. The numbers are right.”
For example, he pointed to ambiguous figures estimating 5.8 million wallet users as of this July. With just over 13 million bitcoins in circulation, each of these wallets should hold about 2.25 BTC on average, but this wouldn’t account for the unused, empty wallets holding not more than 1 satoshi.
Citing guesstimates of 3,000–20,000 bitcoin merchants worldwide in mid-2013, Robinson pointed out that if the 2014 figure of 63,000 merchants is true, that means that adoption has more than tripled in one year. Transaction volume, however, did not have the same spike.
“The transactions didn’t triple, they remained the same,” he said. “The actual buying and selling of services with bitcoin has remained stagnant for 15 months. So now you’ve got 63,000 businesses chasing the same amount of money that the 3,000 were chasing.”
Transaction volume on the block chain, October 2013 – October 2014Math and marketing
For merchants, bitcoin has been a valuable marketing tool more than anything else, Robinson said – though not by much.
Overstock sales hit $130,000 in bitcoin on its first day accepting the currency.
He said:
“$2m minus $130,000 divided by the number of days [it took him to get to $2m] – that’s $7,000 a day … hockey stick, boom, sales crash. And it’s the same story with every single business that’s said ‘we will allow you to pay in bitcoin’.”
He talked of the emotional, cultish aspect to the bitcoin “faithful” that so highly regard people like Overstock CEO and chairman Patrick Byrne and other major executives making the bitcoin acceptance announcement.
“What happens is when you announce ‘we’ll accept bitcoin’ … the faithful say ‘he’s supporting us, we’ll support him’,” he said. “And they love Patrick Byrne, they would deify him.”
Robinson spoke highly of Byrne, calling him a very brilliant man, but also a great marketer, maintaining based on research and previous conversaions with him that he was not a “bitcoin fan” until he realized the way it could impact his business.
He added:
“Should every company on the planet have a system to accept payments through Coinbase or someplace in bitcoins, as long as they don’t have to touch the bitcoins? Maybe. Is it good for bitcoin? No, because it’s not an endorsement of bitcoin it’s an endorsement of marketing.”
On money laundering
Robinson’s expertise in investigating financial crime and fraud leads him to believe that bitcoin is a bad way to launder money. He argued that because it doesn’t disguise the money as something else and instead just moves it, and the fact that it can be traced back to its criminal origins, bitcoin isn’t the best laundering tool.
“It’s a great way to move capital flight money, it’s a great way to move tax evasion money, but it’s not a great way to launder money,” he said.
Robinson has authored more than 30 books including The Laundrymen: Inside Money Laundering, The World’s Third Largest Business; The Merger: The Conglomeration of International Organized Crime; and The Sink: Crime, Terror, and Dirty Money in the Offshore World.
Block chain bull
BitCon: The Naked Truth About Bitcoin takes readers through the story of bitcoin, but perhaps the real conversation should be about the block chain. Robinson said that nearly all of the best journalistic pieces on bitcoin acknowledge that “the political, libertarian, wacko, delusional view should be completely disregarded and that the currency is a very secondary story”.
“All of these people that say that the dollar is trembling at the feet of bitcoin are getting in the way of the real story,” he said. “The real story is the technology – the pretend currency traded as a pretend commodity is a side issue that will go away.”
He predicts that in an increasingly and soon to be completely digital world, no one will need bitcoin; that once all businesses come online and implement the block chain to allow easier payments in dollars, pounds, euros, yen and pesos, no one will need bitcoin.
He said:
“The odds of competition coming into the marketplace creating a course of least resistance that has nothing to do with bitcoin but does have to do with digital currencies means that in five years’ time no one’s going to need bitcoin the pretend currency. They’re going to love the block chain but they won’t need this pretend currency.”
He added that every company right now should be looking into the block chain technology and exploring its potential benefits for their customers.
“A lot of people are going to make humongous fortunes with the block chain technology,” he concluded. “It’s been changed 70% in the last five years? It’ll be changed 170% in the next five years, and one of the changes will be the separation of the block chain from the pretend currency.”
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