Fans of irony will not have missed the way that Arthur Budovsky, head honcho at “private currency exchange” Liberty Reserve had his own liberty severely reserved earlier this week. His collar was felt in Spain at the same time as the Costa Rican site went down — one expects for good — due to US unhappiness over its activities. Those included running its own digital currency, also called the Liberty Reserve, and offering money transfer services to anyone with an email address.
As for who most enjoyed those services, John Law notes that the editor of one online news service of his acquaintance told him that the story caused a spike of many thousands of new readers — half of whom appeared to be connecting from Lagos.
The mainstream media spotted the story too, and the BBC devoted some time to asking the question, “What is a digital currency, anyway?” Everyone’s favorite cryptocurrency, Bitcoin, got dragged in but, to its credit, Aunty pointed out that there are a lot of digital currencies and many of them look quite weird.
Every multiplayer online trading game has something you can win through battle or trade, and trade away for in-game goods or services. Mobile phone minutes can be exchanged for money — of course — but are also used in other trades, much as postage stamps used to be a fairly common way of settling small debts. Air miles and Nectar points both have aspects of digital currency.
All you need to do to make your own digital currency is make it safe from counterfeit and make it tradeable for something that people need or want. Bitcoin is just built to be able to do that without a central control, which makes it unique, but it’s no more a digital currency for that.
The lesson, which can’t bear repeating enough, is don’t worry about the coinage, worry about the banks. And if you use one that’s unlicensed — like a gun, taxi or pub, don’t be surprised if you get burned, robbed or end up with bad liquidity. Looked at in this light, the question of why Mt.Gox is running for legitimacy isn’t whether they’re being forced to do it, but why has it taken them so long?
It’s a matter of who you’re more afraid of, the government or the ungoverned. If you’re not sure about that, I can recommend some very adept consultants in that sort of risk management. Hold on, I’ll just get their numbers — now what were they, +234 1 something …
Secrets and pies
After he writes his column on a Friday morning, John Law likes to pop down to the Black Hat And Banker for a light lunch and some strong crypto with his old mate, Satoshi Nakamoto. Last Friday, Saito was in excellent mode.
“Look at this!” he said, handing over a printout. “It’s a Chartgirl infographic, bringing together various guesses about yours truly.”
It was an excellent chart, even if it focused a bit too much on amiable Net greybeard Ted Nelson.
“Oh, Ted! Well, he needed to get his profile up a bit, so I suggested he do a YouTube video. Plus, I knew it would annoy Mochizuki.”
Saito giggled, and his wig slipped a bit. It had clearly been a good lunch already.
“Now, now, John. It’s not as if I need to do any work this afternoon. This guy says I’m worth a milion BTC.”
He adjusted his dress — summer colours do suit him — and peered at me cheerily though his sunglasses. “So calm down and let me buy you lunch. Pork pie?”
As he staggered off to the bar in a cloud of paradox, this particular piece of the jigsaw niggled. As the inventor of Bitcoin and its first miner, the man has around a hundred million dollars to his name. But he can’t spend it without breaking cover: doesn’t matter how anonymous the technology is, if you start making major moves in it, you’ll leave a trail. Yet what sort of person can invent staggering amounts of wealth and then not touch it?
“You know the answer to that one, John,” said Saito as he plonked down a plateful of coronary in front of me. “Academic? Mathematician? Spy? Government? All fit, of course. But you and Ted and Mick and David and Gaga … you know.”
Yes. It’s obvious, really. Who can hide in plain sight and not care about money?
“Glad you’re free this summer. I’ll see you’re in the VIP enclosure,” said Saito, sipping his pina colada. “Looking forward to playing the new stuff on the main stage. Do you think the weather will get any better?” He looked sadly out of the window at the London sky. “No, me neither. Wellies it is. See you at Glasto …”
Bitcoin’s got talent
Back in his school days, when grown men deliberately gave him access to powerful chemicals and taught him how to make booze, explosives and poison, John Law had a fondness for test tubes and Bunsen burners. One of the little bits of (mercifully, now useless) information he retains from those days is that of litmus paper, those little gaily colored strips that told you whether something was acidic or alkali.
Bitcoin, it turns out, has a similarly useful trick. For while you might think you’re reading the news to learn about Bitcoin, you can just as easily use Bitcoin to learn about the news — in particular, about how biased a news outlet or a writer actually is.
This is because Bitcoin is in a unique position. It’s been around for just long enough that a few facts are well established, but not for so long that it’s become part of the establishment. It has lots of implications to choose from, from the End Of The World to Eternal Paradise, but there’s no consensus about which is true. It’s simple enough that an intelligent reader with an interest — that’s you — can quickly learn the facts and get a sense of the implications. In other words, if you know and care enough about Bitcoin to be reading this, you probably know as much as 99 percent of the journalists writing about the subject.
And so, if a printed, online or broadcast news outlet has a bias, you can spot it (you may share that bias — but that’s up to you). So, here’s a quick guide to the Bitcoin Test for News. If you see more of these than normal, here’s what you can tell.
What They Say:
Bitcoin is under attack/being closed down/the tool of evil, especially when the main story isn’t Bitcoin, such as Liberty Research.
What They Mean:
Our readers aren’t very smart and are easy to scare. Our owners are bankers. Trust us. Fear everyone else. EVERYONE.
What They Say:
Bitcoin is the magic fairy dust that will make you rich and send The Government wild.
What They Mean:
Our readers aren’t very smart but boy are they greedy. We get our money from people who want to sell you stuff that you want to be believe in. Trust us. Sneer at everyone else.
What They Say:
Bitcoin is interesting but don’t blow your stack on it. Nobody knows how this is going to pan out.
What They Mean:
We actually think our readers are cool and careful. Our owners are nervous. Make your own mind up whether you trust us or not — oh, and if you could think about our jolly nice advertisers, we’d be ever so grateful.
What They Say:
Gorgeous pouting Samantha is just CHAMPING at the BIT for cryptocurrency!
What They Mean:
If the tabloids are writing about Bitcoin, then it’s too late. You might as well be buying Premium Bonds. Time to move 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 three hundred years off in a small cottage outside Bude. He has returned to write for CoinDesk on the foibles of digital currency.
Image credit: Flickr