Bitcoin in the Headlines is a weekly analysis of bitcoin media coverage and its impact.
It’s been a busy week in bitcoinland, with the launch of Gemini – the Winklevoss brothers’ long-awaited bitcoin exchange – leading the digital currency’s narrative in the mainstream press.
More positive news came from Santander InnoVentures – the Spanish megabank’s VC firm – in the form of its contribution to Ripple’s Series A funding round. The estimated $4m investment is the latest sign that major banks are still optimistic about the blockchain and media outlets are just as in love with the story.
Elsewhere, bitcoin saw its share of naysayers receive air time, with one reporter questioning whether the environmental impact of running the bitcoin network was worth the cost.
Gemini arrives
As put by the Financial Times’ Philip Stafford, the “twins best known for their dispute with Mark Zuckerberg over the creation of Facebook” launched a bitcoin exchange this week.
Cameron and Tyler Winklevoss secured approval on Monday from the New York State Department of Financial Services (NYDFS), the state’s banking regulator, for an application for a limited liability trust company, launching Gemini to the public on Thursday.
“The exchange will act as a gateway for users who want to trade bitcoins but also have it linked with a normal bank account. However the launch comes as some startups struggle to turn their ideas into long-term sustainability.”
Having noted how US financial service regulators had recently cracked down on unlawful virtual currency trades, Stafford then went on to comment on many banks’ willingness to explore the use of the blockchain, “the security, trade affirmation and settlement technology behind bitcoin”, noting the VC interest in the technology.
Nathaniel Popper, a reporter at the The New York Times, also covered the news, noting the long build-up to the exchange’s launch as a result of various regulatory hurdles.
He wrote:
“Wall Street banks have recently been expressing growing interest in harnessing the technology underlying bitcoin. But it is still unclear whether they and other large financial players will want to trade bitcoin itself, as the Winklevoss twins are betting. Much of the interest from Wall Street is in the technology that allows direct digital transactions.”
‘Bitcoin island’
Moving on to highlighting bitcoin’s largely stagnant price over the last year, Popper touched on the Winklevoss’ involvement in bitcoin.
“The first company they backed, BitInstant, did not survive. They quickly began working on a bitcoin-backed exchange traded fund, which is expected to trade on the Nasdaq exchange. That fund is still waiting regulatory approval,” he said.
However, the twins, Popper added, have publicly stated their willingness to work with regulators rather than challenge them.
Cited in the piece, Tyler Winklevoss, Gemini’s chief executive, described the potential impact of his company in the space in a rather poetic way:
“Bitcoin is an island right now, and Gemini is building a bridge to the financial mainland … Gemini is simple and easy-to-use for a first-time bitcoin buyer while at the same time powerful enough and feature-complete for a professional trader.”
Bitcoin respect
Fortune‘s Daniel Roberts, titled his piece “With Gemini, Winklevoss brothers seek respect in bitcoin“, a nod to their lingering affiliation in the public mind with Facebook.
Roberts began by saying that the brothers had taken the approach of asking for permission as opposed to asking for forgiveness.
“That’s why they waited for months to obtain licensing from the New York [State] Department of Financial Services before launching Gemini,” he added.
Regulation, Roberts said, has been the “hot-button issue in digital currency recently” whilst highlighting that a series of startups had decided to stop serving New York-based customers instead of applying for the state’s BitLicense.
“But a BitLicense isn’t what the Winklevosses wanted. Rather, they sought authorisation to operate Gemini as a chartered LLC trust company. To service institutional banking clients, the BitLicense, they say, isn’t sufficient – hence their play for a trust charter,” explained Roberts.
Houman B Shabab, a professor at New York Law School, has previously written for CoinDesk about the advantages of being granted a banking charter as opposed to a BitLicense.
A funding boost
Just when you thought that you’d heard the last of another bank joining in the blockchain and distributed ledger fun, Santander InnoVentures – the VC arm of Spanish megabank Santander – comes along and contributes an estimated $4m to Ripple’s Series A round.
Business Insider‘s Oscar Williams-Grut covered the megabank’s support, writing:
“Santander has made its first investment foray into the hot field of blockchain, the technology that underpins bitcoin. Santander InnoVentures, the bank’s $100m tech investment fund, has invested an estimated $4m in Ripple, a Silicon Valley company adapting the blockchain for mainstream finance.”
Despite it not being a huge investment, Williams-Grut noted that it did represent a strategic stake for Santander that will allow the bank to keep up with developments in the blockchain space, adding:
“Blockchain, or distributed ledger, technology is one of the most hotly anticipated technology developments in finance in a generation.”
Auction announced
Silk Road and bitcoin were together again in the news this week.
The US Marshal’s announcement that it will seek to auction off $10.6m of Ross Ulbricht’s confiscated bitcoins captured the attention of a slew of journalists, resulting in wide press coverage.
The Daily Mail ran with “US Marshals to action dark web drug dealer’s $11 million bitcoin fortune: Bidders get the chance to buy Silk Road founder Ross Ulbricht’s fortune … at a discount”.
In the piece, Darren Boyle, said:
“The 32-year-old criminal created the Silk Road website on the dark web which facilitated more than $200 million of anonymous online drug dealing all paid with the digital currency bitcoin.”
Boyle continued: “Ulbricht claims that he did not acquire the bitcoins by illegal means and insists that he is the legal owner. Since they were seized, the bitcoins have lost almost three-quarters of their value.”
Just another example of how the digital currency continues to be linked to the criminal underworld.
Bitcoin delusion
In less positive news, John Quigg wrote an opinion piece titled “Bitcoins are a waste of energy – literally” for, The Drum, a commentary website with a sister TV show on Australia’s ABC TV.
Quigg’s piece was one of the more roundly criticized of the week. It began:
“Vast amounts of electricity go into feeding the bitcoin delusion. Fortunately, it’s unlikely that the digital currency will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system.”
Only a handful of insiders, Quigg said, have noticed a threat inherent in bitcoin’s very design: that of ever-increasing environmental damage from electricity used in the ‘mining’ of bitcoins.
“In essence, the creation of a new bitcoin requires the performance of a complex calculation that has no value except to show that it has been done,” he wrote. “The crucial feature, as is common in cryptography, is that the calculation in question is very difficult to perform, but, once done, is easy to verify.”
Fortunately, he added, it is unlikely that bitcoin will survive long enough to generate the environmental disaster that would arise if it became a major part of the financial system. “The same design feature that requires the use of so much electricity is the fatal flaw in bitcoin as a currency,” he noted.
Whether bitcoin survives in the long-term remains to be seen, but the truth is that most other commodities out there, and even networks like the Internet, have an inherent carbon footprint.
The question is whether bitcoin will come to be seen as a public good that’s worth the cost.
Spotlight image via Shutterstock