Bitcoin Tuesday

There are at least three Bitcoin events that I know of in NYC today. I do not think any of them are public events but the fact that there are three in a single day is interesting to me.

This morning, NYC’s Economic Development Corporation is hosting a Bitcoin breakfast with some of the leading banks and financial services companies in NYC to discuss Bitcoin. My partner Albert will be attending that.

Also in lower manhattan, Ben Lawsky, New York State’s Superintendant of Financial Services, will be holding hearings about Bitcoin.  I have been asked to testify and will do so, at 11:30 along with Barry SilbertJeremy Liew, and maybe a couple others, in a panel of investors.

Then at 6pm this evening, in the USV event space, Wells Fargo is hosting a discussion about Bitcoin. My partner Albert will be part of the expert panel. I plan to attend the first part and then duck out to see the Knicks play the Celtics in the battle for the cellar in the east. This is a public event, but it has been sold out for weeks and if you are not already attending, unfortunately you can’t.

It certainly feels like there is a whirlwind of attention and discussion and debate about Bitcoin in the air in New York City. Last week Marc Andreessen penned a piece in the New York Times titled “Why Bitcoin Matters.” Later in the week, JP Morgan’s CEOdismissed Bitcoin on CNBC. And over the weekend, well known NYC Bitcoin entrepreneur Charlie Shrem, shown in this AVC post from this summer, was arrested for knowingly transacting in Bitcoin with drug dealers (or something close to that, the complaint is here).

So there is a lot going on at the intersection of the Bitcoin world and the world of finance and money and regulators right now. I am happy that USV is engaged and involved in these discussions. They are important and necessary.

#hacking finance

Comments (Archived):

  1. LIAD

    meanwhile across the pond, tonight’s bitcoin meetup is being held in an old cinema currently used as a squat and comes with a disclaimer:”This meetup is a social gathering for the “underground” activist as opposed to any official presentations or business networking, so we appreciate if this is not to everyone’s liking and may take people out of their comfort zone. However, this is not always such a bad thing and we want to keep the group open for all to share their views & projects in the Bitcoin space”…The wolf shall live with the lamb..the leopard shall lie down with the kid…

    1. jason wright

      London?i’ve staked out a little bit of real estate; (nothing to see yet)

    2. fredwilson

      all great internet technologies have an “underground activist” component to them.

  2. jason wright

    the bitball dilemma.i wonder if his bitcoins will be confiscated?

  3. awaldstein

    I’ve always thought that Bitcoin was the most interesting thing going on with larger disruption capability than anything I’ve put in the time to understand.Maybe it will become the most important as well.Hope so.

  4. JamesHRH

    Bitcoin is such a classic VC bet: its either a total joke that has no chance of ever gaining mainstream acceptance………or its the future of money handling.Gotta love it.I am betting it never gets out of the tech sector – the mining / coin volatility will be an un-jumpable hurdle for the secure peer-to-peer ledger.If I had ANY ability to do so, I would set up the latter and skip the former, so as to be ready to pick up the pieces when the Bitcoin bubble bursts.

    1. JimHirshfield

      Your “latter” and “former” aren’t clear. Whatchyasayin’?

      1. JamesHRH

        peer-to-peer multiple ledger is something I could see being adopted (the latter).The whole coin / mining gimmick (which I am not 100% sure is a requirement – at least @jasonpwright:disqus doesn’t think so) will not pass the consumer smell test, IMLTHO.I also think that it perfectly fits the ‘molehill preceding the mountain’ precedent, but in a bad way…….where Bitcoin = Napster but ‘Some Other New Co’ = iTunes.

        1. Andrew Kennedy

          are you familiar with byzantine generals problem?

          1. JamesHRH

            I read pmarca’a NYT piece, so, familiar would be too strong a term.

          2. Andrew Kennedy

            here is C Dixon tumblr post: http://nonchalantrepreneur….is short and gets to the heart of it. the mining is relatively misunderstood or so I believe.

          3. JamesHRH

            My point would be that I am a relatively cutting edge normal – not a techie.I mean, I post on this blog, as opposed to read it once a month or give you a funny look when you say you spend time typing comments on a website that is run by a Venture Capitalist in NYC (and that I have several people I consider friends, who I have never met, who live all over the world) because we do the same thing.Daily.Many people I know – say, senior executives @ my wife’s conservative Fortune 5 (not a typo) company – do not think about (let alone use) FB, Twitter or Tumblr.When someone comes to them with a BTC based backend, the whole mining thing had better be done and dusted.Similarly, if you are going to tell me that my iPhone is going to use my fingerprint to settle transactions for me, using BTC for IRL purchases (say, at the mall), the whole ‘mining for bit coin’ angle is a major league anvil around the throat of your idea.The mining had better be done and dusted at that point, too.Not too many successful pitches get derailed in the first :30 with an endless array of questions about something that turns out to be tangential to your proposition.At least, that’s been my experience.

          4. Andrew Kennedy

            Really enjoyed your above comment. I agree. The odds of getting the details across to a consumer re: mining are just bleak as its so easy for people to grab onto a “mine for fake gold? this is stupid” thought. I think his point about it being a technological innovation like SMTP (think he mentions that in the tumblr post) is what the message needs to be IMO. Computer Science breakthrough makes it cheaper to receive payments (and done). Or some such. Will be interesting to see how this all plays out, but I agree there is an uphill battle.The below excerpt from your comment is simply awesome.”or give you a funny look when you say you spend time typing comments on a website that is run by a Venture Capitalist in NYC (and that I have several people I consider friends, who I have never met, who live all over the world) because we do the same thing.Daily.”

        2. DanielHorowitz

          (Edited)Can you share your (and @jasonpwright) thoughts on mining?I think mining is likely to become cheaper and more accessible to everyone. Whether this is something that regular people keep doing, I don’t know, but professional mining may be a big thing. (Not sure this has much to do with consumer adoption?)

        3. JimHirshfield

          Yeah, now I getchya.Agreed, consumers not likely to broadly adopt mining. But I don’t think that’s a factor either way in adoption of BTC by consumers.

          1. pointsnfigures

            Consumers don’t farm and run grain silos but they eat corn

          2. JimHirshfield

            And lettuce say, “Amen”

          3. JamesHRH

            I am more saying that VISA is not going away, to be replaced by BTC.Maybe VISA’s backend goes away……..

    2. Andrew Kennedy

      Classic VC bet (full stop). To my knowledge it could be adopted behind the scenes as a cheaper b2b merchant payment system ie it doesn’t need to go mainstream with consumers necessarily. That said, nobody is talking about the network effects of Amex, Visa and Mastercard….

      1. awaldstein

        I agree.People don’t understand money. They simply use it and that is not going to change.Bitcoin could in my opinion go mainstream without any more understanding of it than there is of our currency today. Which is minimal.

        1. Andrew Kennedy

          “people don’t understand money”Simply true.I am not sure our leaders understand it either.I am not sure I understand money. I took an econ class on it back in the day and remember thinking, hmmmmm. That said, if the government is behind it, well, that’s all we really need to know. With bitcoin we need to understand the risks a bit more.

          1. awaldstein

            Nor I actually.I’m pretty good at getting large number of people comfortable with spending it. Has nothing to do with understanding it of course.

      2. PeterisP

        I’m really not sure if bitcoin would be competitive in B2B payments. If you need to pay a bill of 100k USD or EUR to another business, then the volatility, ‘friction’ and lack of liquidity would make it far more expensive than any current fees.As far as I understand, currently any other currency – yen, russian rubles, norwegian krona, whatever – could be liquidated to dollars in my hand much faster, simpler and cheaper than if I received 100 BTC.

    3. leapy

      I love your opening para.That’s the key to the protocol. It’s not just about money.I suspect “money exchange” is the magician’s distraction while the real potential is in the fields of contract, identity, risk and so on. Those are where the VC magic wins lie.

  5. JimHirshfield

    “This is a public event, but it has been sold out for weeks and if you are not already attending, unfortunately you can’t.”I thought you were talking about the Knicks – Celtics game. 🙂

    1. John Revay

      Ha – Jim – you have a great sense of humor

      1. JimHirshfield


    2. fredwilson

      i bet you can get tickets to the battle for the cellar on stubhub!

      1. JimHirshfield

        But can I buy on Stubhub with BTC?Then there’s this from last week:Sacramento Kings First Sports Team to Enter Bitcoin Arena”As of Thursday evening, the (Sacramento) Kings’ cheapest tickets on the ticket exchange website StubHub for a Friday night game against the Indiana Pacers were listed at 0.04 bitcoins, or $33.90.”http://www.americanbanker.c…

        1. fredwilson

          i suspect the answer will be yes sometimes this yearand i sure hope they go with coinbase!

          1. LE

            i sure hopeI’m not seeing any heavy hitting sales types at coinbase: no sales types at all.Now of course perhaps coinbase has some connection to stubhub and that heavy hitting is not necessary?But in my mind even if it’s not needed there they still need it to penetrate other places.One thing I Iearned way back was that buying decisions aren’t necessarily made by the big cheese people. They are made by people further down the chain who need to be wooed and persuaded to take action. Knowing the top guy might get you in the door but to tell you the truth ignoring the normal sales process won’t get you always where you need to go.I could point to many examples both with purchases that I have made and in cases of observing and selling to others over the years. [1][1] Have you ever gone to boat shows? Ever see the attention and how nice the kitchen area is? That’s not for the guys that’s so the guys wife can nest and fantasize about making lunch while they are out fishing or cruising. Ignore that kitchen and there is no boat sale (to a married man at least).

    3. Salt Shaker

      Investing time or money in the Knicks these days is a “bit-con”….As speculative as it gets.

  6. DanielHorowitz

    Damn. Was about to leave for NYC to try and go to this. Exciting times. Have fun at the game.

  7. vruz

    There are very encouraging signs of crypto currencies at large generating a flurry of activity and innovation we have never seen in this space. (At least for for a long while, if we consider technologically unrelated, failed attempts 10+ years ago)However there have been a number of disappointing statements (and in my view, mostly faulty reasoning) by many respected and prominent voices.If we filter out the noise, I’m ultimately left with the notion that the very concept of crypto currencies, and the invention of the blockchain may be one of the most influential, disruptive and innovative creations in a long while.The statements by JP Morgan’s CEO do nothing but confirm exactly this.

    1. markslater

      exactly. his view is through the lens of regulatory capture. He controls the institutions of government that control our currency system.That gets exploded by the block chain.

      1. pointsnfigures

        They will use the govt to aggressively move against BTC along with coordinated attacks by central banks

        1. markslater

          i dont see it.

    2. vruz

      I had made another comment but it got eaten by DISQUS, it seems.It was something along the lines of:If we are to have positive economic freedom, Net Neutrality is super important. Without it, ISPs can unilaterally decide to throttle certain connections, including those related to the Bitcoin network.That would effectively mean that without Net Neutrality they can throttle transactions, driving the cost of transactions up.Watch out for incumbents figuring this out.Related video:

  8. John Revay

    Jamie Dimon representing the incumbents

    1. Salt Shaker

      Jamie Dimon is a modern day biz Houdini….how he’s kept his job is a reflection of both poor corp governance and accountability.

      1. pointsnfigures

        He is sharp. Only JP survived 2008 with small ripples

  9. Andrew Kennedy

    I have a question about bitcoin volatility risk. On twitter a couple weeks ago Chris Dixon was tweeting about how Coinbase allows merchants to transact in bitcoin and sell into USD or other immediately. Free for first $1mm and then 1% after. Cool. My question is about what happens when there are more sellers than buyers of bitcoin at the exchange? Does Coinbase take the hit or does the merchant?

    1. DanielHorowitz

      This is from Coinbase “Let’s look at an example. Suppose you create a payment button with a USD price of $10, and sell ten orders during the day. Your payout at the end of the day will be for $100 USD, regardless of how the price of bitcoin changed during the day. After deducting our 1% fee (plus $0.15 for the bank transfer) you will receive $98.85 to your bank account.”…

      1. Andrew Kennedy

        Thanks for this link.

        1. DanielHorowitz

          I think in general where there is exchange risk, Coinbase absorbs it and intends for the transaction fees to cover any small losses they may take.Taking a small loss is OK sometimes to ensure they can provide a great customer experience.

          1. Andrew Kennedy

            Yeah. Coinbase is *currently* taking the risk for 1% of the transaction. It’s an insurance product.

          2. DanielHorowitz

            I think as Fred mentions above, second to second volatility is quite low and in the long run likely declining.Like any third party payment provider Coinbase provides valuable services and charges a small fee for this. (But way less than traditional payment providers)

          3. Andrew Kennedy

            Makes sense. Holder of BTC is taking the lions share of the volatility risk. Coinbase converts (let’s assume a liquid market) and everyone is happy.

          4. DanielHorowitz

            Right. I think Coinbase aims to be Neutral on price moves as well.BTC needs to be easier to use for the consumer but as a payment network it seems quite promising.

          5. pointsnfigures

            Lots of exchanges and different rules. No single peg yet. If one of the leading exchanges were innovative they’d list BTC and control the mkt. then Dimon might figure out a way to leech money out of it

          6. DanielHorowitz

            You don’t think the market can support many exchanges?

          7. pointsnfigures

            One exchange will win. Network effects

          8. JamesHRH

            And that has worked for equities……..almost, but not quite?

          9. pointsnfigures

            It’s the regulatory framework that has allowed a proliferation of dark pools in the SEC equity business. Remember, dark pools are operated for the benefit of whom? The owners of the dark pools-not for the benefit of the broader marketplace. Dark pools and the fragmentation on the equity side has caused markets to be more opaque, not transparent. They aren’t as efficient for the entire market-but really efficient for operators that pay for order flow, trade against customers and internalize as much as they can. On the CFTC side, exchanges rule- and are vertically integrated. This also is a result of regulation because operators are banned from trading against their customers (bucketing orders) I see Bitcoin as more of a one exchange-distributed ledger/back office than multiple exchanges. The one with the best transparency, capital efficiency and volume will win.

          10. JamesHRH

            My point is that Bloomberg still reports the Footsie, the Dax, the Nasdaq, the NYSE, etc.I am not sure it is going to happen.Coinbase makes a ton of sense only if there is a exchange taking their tx. Something weird happens and Bitcoin payments freeze up super fast, way faster than the Saving & Loan going broke for ol’ George Bailey.

          11. JamesHRH

            The Oracle of Omaha has his hand pretty close to fire here.His reputation could get singed.

          12. pointsnfigures

            A futures mkt is the way to bring stability and allow risk to be diversified. Futures are the most efficient way

          13. Andrew Kennedy

            Let’s say Mt. Gox halts trading (…Does Coinbase shut down? (I assume yes)Does the ability for a merchant to accept BTC stop at that time? (I hope so ie the buy with bitcoin button stops working)

          14. fredwilson

            no because there are a number of highly liquid exchanges operating around the world nowi dont’ think Mt Gox is the biggest anymore

          15. DanielHorowitz

            They work with a number of exchanges on the backend so things are fine.

          16. ewoodsny

            Or is Coinbase engaging in market making – taking a view on exchange rates and providing liquidity on either side of the transaction base on that view? If so, that adds another layer of risk to Bitcoin.

          17. DanielHorowitz

            I could be wrong but I think they are market making to a small degree (They have people buying and selling at the same time.)Regardless, they aim to be neutral on the price move. If there is a small bit of risk here, they are taking it. If they get more buy orders than they can fulfill and the price goes up really fast before they can buy more bitcoin they eat the loss.

    2. fredwilson

      the volatility risk is significant over a day, week, or month, but in the moment, the moves aren’t that largethey convert BTC to $ at the market and the merchant gets the market price

      1. awaldstein

        This to me is key. And why I think if the risk is mitigated and transparent to the user, it can be as ubiquitous as any payment system on any platform from Shopify to

      2. markslater

        It a great service – i use it.

    3. William Mougayar

      You need to get past the volatility thing to understand the potential. It took me a while, but I have.

      1. Andrew Kennedy

        FTRecord, I am HUGELY positive on BTC. I ask these questions because it helps BTC for people to understand and to me the volatility risk question on the mechant side is critical. It’s not good enough for everyone to say “everything is fine” and then later on Coinbase or other gets taken out and BTC ends up the victim. We should have much more nuclear power in this country, but we don’t. I don’t want same to happen to BTC.

        1. William Mougayar


  10. Richard

    Don’t be surprised if a certain duopoly are sitting in the back two rows.

  11. markslater

    Scott Johnson at New Atlantic Ventures last week at lunch:”There is no successful currency in history that has not had an army to protect it”We then debated on the merits of bitcoin as a currency VS protocol and concluded the latter.My big big struggle is what the position of the banks is going to be?

    1. pointsnfigures

      BTC can potentially dis intermediate them if you think big enough. They will fight it as long as they can. If they can’t win they will try to control it

    2. fredwilson

      the internet is an army as powerful as any that has ever been assembled maybe an order of magnitude or more powerful

      1. markslater

        aghhhh! now thats some fighting talk…..i like it!

      2. andyswan

        So why are we so worried about Net Neutrality? 🙂

      3. JLM

        .The Internet is a weapon or tool to be used by craftsmen to make a future that would otherwise not be possible.The Netizens are an ineffective body with no real organizing theme.Witness the hapless efforts at creating political power.Candidates now use the Internet as a fundraising and communication and GOTV tool and their relative craftsmanship determines their level of success.Middle school presidential candidates use it like the Tijuana whore it has become — a damn good thing.JLM.

      4. Simon Edhouse

        “All the forces in the world are not so powerful as an idea whose time has come.” – Victor Hugo

      5. JamesHRH

        I love the sentiment, but, well, ask the people of Syria how the internet is helping them, army-wise.

    3. andyswan


      1. markslater

        currency? or store of value? Many an army in history has protected gold, many a government.

    4. Simon Edhouse

      The position of the Banks will be increasingly untenable, and irrelevant. (but its not going to happen over night… (we all expect new phenomena to occur at internet warp-speed, but disruptive innovations don’t suffer from short attention spans… they disrupt in their own good time) But getting back to Banks… They will be pressured on the practical obvious level competing with an infinitely more efficient and superior system, but also, as a concept, ‘Banks’ and the Banking system in general has a very very serious Brand image problem. These two factors are deadly, for the Banks.

      1. markslater

        i agree on all points. bitcoin opp ….. sea-change efficiency in transfer of value + incumbent negative brand equity = death by 1,000 bitcoin innovations.Bring em on i say…..

        1. PeterisP

          What is the change of efficiency in transfer of value? From what I’ve seen on BTC companies financial numbers, they seem to have transaction costs in excess of a cent per transaction, which is much less efficient than banks already have.The high *prices* of transactions are purely profit – a sign of lack of competition, not a sign of inefficiency. Speed of transactions as well – you can make all transactions cheap and fast, but if you offer ‘cheap payments’ and ‘fast payments’ as separate products, then it means many, many millions in extra fees.

    5. PeterisP

      I believe that banks will eventually be very active players in the Bitcoin market – the big banks have all the advantages they’d want over everyone else – cheap capital, powerful lobbies, handling regulation, fraud detection, great tech teams, ability to buy competitors, international reach, integration with other payment networks, economies of scale for cheap transactions. They can offer all the services cheaper and better, but they (currently) don’t because it’s clearly more profitable to keep everything the way it is.The scenario is simple:1. Banks use all their might to delay any changes to status quo while earning ‘rent’ from all the transactions; 2. Some startup finally breaks through and makes platform X (bitcoin or whatever) a viable alternative;3. The big banks start to offer platform X services as well, and dominate it. The startup from step 2 doesn’t earn a dime.Banks could already today make payments instant and free, and still be profitable from the other services they offer to the same customers – and they would do that if competition would force them to do so.

  12. pointsnfigures

    Friend of mine in the know says incumbents will come together to crush Bitcoin. Meaning banks and Fed. They have most to lose and can bring an ecosystem along with them. Latest arrest is first salvo.

    1. fredwilson

      like they incumbents crushed the internet when it threatened themlike the US crushed the viet conglike the Brits crushed the americans in the revolutionary war

      1. markslater

        Like the music business crushed sharingLike the networks are going to stop their own implosion……

        1. Simon Edhouse

          The music business did absolutely not crush ‘sharing’… They tried very hard to stigmatize P2P networks, (Steve Jobs built a massive fortune on the back of P2P file sharing by making the iPod the storage device of choice for the 2 Billion songs a month being shared, when the ITMS was selling a fraction of that) The Music Business will ultimately fail in its quixotic endeavors, because its locked into clunky outmoded legacy technologies, bloated value chains, archaic rights systems, national structures in a global marketplace, and meaningless relationships with dinosaur businesses… NOTE: Most Music is still ‘shared’ not bought…. via flash-drives, external hard-drives, email, on cloud services etc etc.The future of Music distribution will arrive when a) distribution b) rights and c) financial exchanges move to the edges of the network… and its coming. 🙂

          1. markslater

            it was a figure of speech to try and capture what you correctly articluate in one sentence!

      2. pointsnfigures

        No doubt- merely laying out initial battle lines. Investment banks jealously protect prime brokerage. Daily forex volume is trillions and they trade against it along with reaping fees. We fought this fight in Chi in 1972. I am on the BTC side. No fan of banks

      3. LE

        Probably a sports analogy here about underestimating your opponent. You know the way I see it every game is “the big game”.I wouldn’t assume that those events are really similar.Also there is the issue of having to “fight fair” which knocks out two of three of the examples you are giving. God knows we could have bombed the shit out of some recent wars but we had to worry about civilians and killing to many people. (God I would have killed those sheep herders you know.)And in “incumbents vs. the internet” the incumbents were more a sleep at the switch until the problem became to large to nip in the bud. Note the early start that is happening now.That said I don’t know am not commenting on the opinion of the smart money. But simply stating that past history is not way to bet either.

      4. davidhclark

        Hell yes.

      5. William Mougayar

        Like in 1995, when the banks used to say that Internet payments weren’t secure.

    2. fredwilson

      like they crushed the internetlike the US crushed the vietconglike the Brits crushed the

    3. markslater

      don’t believe a word of it.He broke the law by facilitating drug deals. Illegal in any currency.

      1. Simon Edhouse

        Gee… proving ‘clear intent’ is going to be interesting.

        1. PeterisP

          I’m not a lawyer, but I believe that proving ‘clear intent’ isn’t going to be interesting.”Operating an unlicenced money transmitting business” is illegal even if you don’t know what it’s used for; in particular the “not knowing” part itself is illegal, the regulations state that you must make it your business to verify what the money transmitting is used for or stay out of that business. If the transactions actually went through him, and he didn’t bother to check if any of the transactions are ‘suspicious’ according to the regulatory criteria – then he had a clear intent of providing an illegal money transmitting business; it’s hard to say that he didn’t mean to offer any transmitting services and they happened accidentally.

  13. William Mougayar

    Bitcoin will do to Money what Blogs did to Publishing, Cloud did to Computing, Email did for Communications.Good thing there is discussion everywhere, and I’m also getting involved with the Bitcoin Alliance of Canada, but the LAST thing Bitcoin needs is regulation. It is an open peer-to-peer money protocol. The minute you start to control it, filter it, or restrict it, its basic principles start to get eroded.This revolution will not be regulated!

    1. awaldstein

      If it’s peer to peer in every instance with no clearing party, no protections, then it logically can’t be processed through a transactional platform.What am I missing?

      1. William Mougayar

        Transactions are cleared via the distributed ledger scheme. It reconciles itself every 10 mins.

        1. awaldstein

          Not bad. Then the pieces are close to being in place.

      2. markslater

        nothing. its on like donkey kong!

      3. Simon Edhouse

        Skype is peer-to-peer… a Skype call is a transaction of sorts.Or… break it down to the most basic level… two people in a park are equal to two peers (by definition) …They have cash in their pockets. One has an article that the other wants to buy, so a transaction takes place… Did they need a clearing party? Did they need protections? No…Bitcoin is Digital Cash… its as simple as that.

        1. awaldstein

          What happens then to the key pieces of commerce–returns, transaction disputes, breakage guarantees?I never use cash as it brings with it no accountability or traceability.If there is no accountability there is no trusted commerce.

          1. pointsnfigures

            Receipt. You can point to the ledger

          2. awaldstein

            I’m dumb it seems but getting it.So in pure peer to peer, with a receipt, the $$ has just changed hands.Without a third party (government or otherwise), without a time lapsed clearing, where’s the consumer protection?Yes, I want my wine to last for decades and have no sulfur added!How does this happen here?

        2. PeterisP

          You also have to keep in mind that there are many things that those two peers are not allowed to do with Bitcoin even if they physically are able to do, just as with non-digital cash.Do you want to offer me a service to hold my cash in return for convenience or some interest? Welcome to deposit regulations, also for Bitcoin.Do you want to offer me a service to deliver my cash to someone else ? Welcome money laundering regulations, also for Bitcoin.Do you want me to pay you for goods or services in cash? Welcome tax accounting regulations, also for Bitcoin.A new way of payments doesn’t mean regulation free – the regulations apply to the actual transaction or service anyway.

          1. JLM

            .There is a powerful precursor here — the barter economy which was originally launched with the notion that barter transactions were non-taxable.It took a few years but the IRS beat the snot out of everyone.JLM.

          2. LE

            I did plenty with barter in the 80’s. It is easier to cheat on taxes with barter. (Just like operating with cash is which of course is better).For example if you are a supply house and you allow a small percentage of clients to pay you in barter you can then use the barter to go out to restaurants. Or take trips (airfare and hotel are big barter items).Of course in theory you need to report these transactions on your tax return. But in general in an audit nobody comes in and says “show me your barter transactions”. Of course they could.So there is an edge there for those that want to fly under the radar.

          3. Simon Edhouse

            There’s often a perception that exponents of Bitcoin and digital currencies are hoping or expecting an unregulated utopia. This is a straw man argument. There are plenty of reasons why Bitcoin and similar systems will make a significant impact, while still being subject to taxation etc.

        3. William Mougayar

          Bitcoin is a lot more than Digital Cash.

  14. JLM

    .I think that bitcoin will turn out to be one of the greatest head fakes and mass hallucinations in history.From the beginning I have been convinced of that fact but have been hesitant to to decisively conclude such an opinion because of the huge respect I have for folks who are its advocates. Folks like the AVC community. One should be cautious in the face of that much accumulated wisdom.Bitcoin is a solution in search of a problem. The problem does not really exist.There is no piece of business which currently cannot be transacted without bitcoin. There is no piece of business which can only be transacted with bitcoin. There are no material advantages which can overcome the potential instability and volatility.Financial institutions — Wells Fargo, USAA, Schwab — have become incredibly sophisticated in marshaling technology to serve the needs of customers in banking, trading, forex, insurance. Not at the “pro” level but at the consumer level.I use these three companies because they are integrated but come from the banking, insurance and brokerage business. Today, they essentially provide almost the exact same services though their pedigree suggests a particular strength.Technology has broadened their offerings.In many ways there is a great analogy between nuclear power and bitcoin. The numbers indicate that nuclear power is the lowest cost of power generation. The safety record in the US is quite good — sorry about that Russia and Japan.And, yet, the consumer, the legislature, the power industry will not allow it to come to the front regardless of how intellectually sound the arguments might be.The reasons are similar — misunderstanding of basic technology, concern as to the process, industry friction and opposition.I will take the under on bitcoin and will bet anyone a steak that in 5 years, this will be the equivalent of AOL.JLM.

    1. Andrew Kennedy

      “In many ways there is a great analogy between nuclear power and bitcoin.” — #truth — u read my comment below?

      1. JLM

        .I did not before but I have now. Great minds………..I will have to share credit with you, Andrew, if you will share the gaol with me?Well played.JLM.

        1. Andrew Kennedy

          The goal is to cut down on all the “tolls” that are taken for moving $$ around. That’s why I love Dwolla and that’s why I love BTC. I’m not sure about you, but ATM fees really piss me off. It’s a service that banks et all will charge as much for as they can get away with (full stop). It’s clear that a better system can exist in the future and I think BTC (or other) is a key ingredient. I agree with you that BTC is up against CC companies + Banks and they ain’t gonna play fair.

          1. JLM

            .I agree more with you than you do with yourself.I do not ever use ATMs and do not even have a PIN.I carry cash and have routinely since birth. Poor man’s instincts.Once Fred Wilson and I had a delightful lunch at Gramercy Tavern and I paid in cash. Fred laughed and said he hadn’t seen anyone pay in cash in ages. [If you ever need a table at GT tell them you are expecting Fred and you will get the best one in the house.]JLM.

    2. awaldstein

      Some of the greatest change agents are not solving a problem but platforming cultural changes.Airbnb to me solves no problem but capitalizes on an opportunity. Same can be said for Twitter and Facebook.Biggest shifts come not from an articuable problem but from a core cultural need. To me they are different. Life goes on without them, but is much better for them.

      1. JLM

        .In some ways you make my argument. Better than I do.AirBnB, Twitter and Facebook were unique and expressions of innovation.Bitcoin is just another way of paying one’s bill. Not even a better way, just another way.In the end, the consumer ends up with nothing that is unique or innovative. Just a “paid” receipt.AirBnB allowed private individuals who owned a certain quality of real estate to capitalize upon its investment potential and to get a return on frozen and unused capital. It peddles the otherwise worthless vacancy.As an aside, the luxury hotels have now awoken to this threat and are moving to crush AirBnB as a competitor which does not have to bear the same regulatory burden while tapping into their customer base.There is a model evolving there.JLM.

        1. awaldstein

          Articulate and we are agreeing on one level.@wmoug:disqus would you agree that BC is just another way of paying bills or is it seriously a protocol of exchange that will rejigger how goods are exchanged?JLM’s argument is a good one if indeed the only thing that BC does is remove the painful and expense process that moving a customer CC through to a merchant account is like.Although honestly, the process so does suck that it is an innovation just to make it coherent.

          1. JLM

            .As always a thoughtful response.I think the big thing is dissecting the transaction between the consumer and the merchant.As a consumer, the degree of difficulty is MEH! I only have to be able to know the instant to swipe my card.On the Internet, I just have to click on a box.The consumer’s end of this is pretty damn easy.I know of no large and serious retailer who does not provide some kind of volume based loyalty program discount or reward.And, it works. I faithfully patronize a particular movie theater because of their loyalty program. Soon, I think they will give me my own movie theater.JLM.

          2. William Mougayar

            Definitely it’s a lot more than just a payment method, although it’s one of the applications that’s the most visible and obvious. It’s foremost an enabling platform for new money-apps. It’s the first currency that is not under the grips of central banks or governments, and it’s going to be very hard to regulate it. It’s snake oil for the regulators.The thing with Bitcoin is that you need to read-up a lot about it in order to be convinced. About 2 months ago, I must have spent 20-25 hours getting educated on the source of the protocol. One can get lost in the rhetoric, but that’s not educational.

          3. falicon

            It won’t really be that hard for the U.S. to regulate…but the U.S. is only one market and Bitcoin can have a very healthy live outside of the U.S.

          4. William Mougayar

            One thing I know for sure is that regulation that touches the bitcoin protocol will be detrimental to its well being.But if you cite the case of Charlie Shrem who was arrested on allegedly money laundering charges, you don’t need new regulations for that.

    3. Nathan Gantz

      One of the defining characteristics of nuclear power is centralization: small scaled nuclear reactors are not a thing at this time. Whereas one of the defining characteristics of Bitcoin is decentralization. So I would argue that solar energy is a better analog, because like bitcoin it will become more widely used and more cheap in the future. As you know solar is expensive currently but is expected to dominate by 2030.

      1. JLM

        .There are several excellent small scale package nuke plants available. The US is not receptive to them primarily for political and misguided environmental reasons.The US Navy runs approximately 400 such plants on its fleet.If, ten years ago, we had adopted a well distributed model of such power plants for each certain number of people — as part of a coherent energy policy — we would now be approaching real energy independence.Who killed it?Sen Harry Reid in his opposition to Yucca Flats.I worship solar but it continues to be 4-6X too expensive.The numbers don’t lie.JLM.

    4. Ben Longstaff

      Micro transactions and micro donations are not possible with existing financial institutions.

      1. JLM

        .That strikes me as an odd assertion. How can that be?I can direct USAA, Wells Fargo and Schwab to send a check in any currency anywhere digitally.I am a huge fan of micro lending as a foundation activity to grow a local economy.JLM.

        1. Ben Longstaff

          Sending a check isn’t free for everyone, when I first opened a bank account in the US it cost $10 for each check, there is a lot of friction in the process of sending a check and a delay in it clearing.Having micro payments online isn’t feasible with a check, for example a per article pay wall with a micro payment as an alternative to a subscription isn’t feasible with a check

          1. JLM

            .I use eBill for everything from WF, Schwab and USAA. It is easy, free and no amount limitations.JLM.

          2. LE

            when I first opened a bank account in the US it cost $10 for each checkCan you explain the circumstance where it costs $10 per check? Where exactly was that?There may be costs with having a checking account if are living hand to mouth and don’t have enough money to clear balances. But in most competitive markets there are banks that offer free checking of one type or another.Western Union money orders costs money of course. So the idea is to make enough money that you don’t have to go to Western Union or pay bank fees obviously. We are not talking about a high barrier at least in the US.

          3. Ben Longstaff

            I had just moved from Australia to Mountain View to work for a funded startup as a software engineer, I opened an account with Bank of America.I think the height of the barrier varies based on the length and quality of your credit history.

    5. falicon

      Overall I’m with you on Bitcoin (… )…but…It does already solve a lot of problems outside of the U.S. where various government currencies have little to no value for their own citizens (it becomes a real, usable, value store).It also has great potential to power identity, signatures, and other transactional things (see… for a glimpse of how this world might look before too long)The video I reference in this post (… ) is by far the best detailed talk I’ve heard about why BitCoin is/should be exciting.So – great potential…but probably still one or two big crashes and changes away from the *real* thing (IMHO)

      1. JLM

        .Outside the US in developing countries the access to the Internet that is required to make Bitcoin work is the same Internet that could deliver Schwab, USAA, Wells Fargo.Ii fear these markets are simply too small.JLM.

        1. falicon

          I believe Bitcoin provides for more flexibility and freedom in those situations (think more unstable countries and governments than developing per-se)…but I agree, that specific use-case/problem is not a massive market that warrants serious investment (it’s more an opportunity/situational market).The money quote for Bitcoin potential right now is that “Bitcoin isn’t money for the internet…it’s the internet for money.”Meaning that it’s a whole new platform/way of thinking about global transactions (that can be done at scale).A LOT of interesting things can be built on top of…but of course the problem is that nothing really is (yet, that I know of)…and everyone is mostly stuck on the currency value/price part of the story right now…but it’s the transactional platform bit where all the really exciting potential sits…

      2. Conor

        I’ve seen other people mention this “other countries where citizens don’t trust their own currency” point in favour of Bitcoin before and I don’t understand it. What countries in particular are people talking about? The euro in Greece? There was a brief time when that was true, but I don’t know (haven’t checked) if it still is. And that’s just for one or two countries in Europe. Are people looking at Bitcoin that way in Asia, Africa, South America? I doubt it. I can’t think of any national currency in the world right now that is less reliable than bitcoin, would be interested if anyone can name one. I have a feeling this is one of those US-centric “I’ve never been outside the US, but I’m pretty sure every other country is less developed than us” lines of thinking. Jumping off my soapbox now :)(I’m a daily reader of this great forum but always too lazy/forgetful to keep a consistent username, and the time difference between US and Asia means I’m always late to the threads)

        1. Conor

          PS: Not saying you’ve never been outside the US 🙂 Just think it’s probably the weakest point in favour of Bitcoin that I see mentioned from time to time

          1. JLM

            .Argentina has a very well evolved banking system because of both oil and agriculture.JLM.

          2. falicon

            For the record I’m generally wrong more than I’m right.Just pointing out what the counter arguments are as to why people like the potential of bitcoin…but again, officially I am with you on this version eventually not working.

    6. ZekeV

      JLM, if you would like to make that proposition into a bet, you can do so at Define the failure condition in a reasonable way, e.g., total market value of all BTC < $1mm, or transaction volume, or that bitcoin transactions will be made illegal altogether in the top five industrialized countries. Everyone in the bitcoin world would take the other side of your bet, and you would win big if you’re right. Of course, the bet would pay out in bitcoin…

      1. JLM

        .I have more faith in steak — red meat kind of guy I guess — than I do in bitcoin.How will I get paid when bitcoin no longer exists?JLM.

        1. ZekeV

          I was being facetious. Presumably if you are a bitcoin doubter, you would prefer to make the bet denominated in good ol’ USD. I am optimistic about the potential for this technology. It is a means for multiple nodes on a network to agree on the state of a shared database. That is all. It doesn’t really matter (other than to speculators) whether BTC holds its unit value.

          1. JLM

            .Uhhh, what a coincidence, Zeke.So was I.JLM.

  15. DanielHorowitz

    (Sorry for commenting all over your blog.)

  16. wiwa

    Sigh. Back when Bitcoin was $11 a tenant wanted to pay rent in bitcoin (~70BTC per month). I said how can bitcoin be worth $11 each? Give them to me at $5 each (~130 BTC a month). And he wouldn’t do it so he paid in cash. I kick myself every day for not taking that deal..

  17. Jeff Pester

    FYI – You can catch a live webcast of the NYSDFS Bitcoin hearings this morning at 11:30 ET here >> http://www.totalwebcasting….

  18. William Mougayar

    I would be interested in a follow-up to today’s post:- the morning event with Albert- your testimony – the panel at USVWhat were the take-aways, issues discussed, red flags, etc.

  19. jason wright

    i watched the other sessions. Did Richard Zabel let slip that his investigators were able to crack tor to identify bitcoin bad people? I thought Bruce Schneier said he was confident that tor could not be compromised, by the nsa or anyone else. cat out of bag moment?

  20. kevinmurphy

    I ran across and signed up for early access to . Thought I would share this finding. Hope it turns out to be an informative site…

  21. pointsnfigures

    Read Atlas Shrugged……Chicago machine is the looters and mooches in action. Don’t be a chumbalone

  22. William Mougayar

    Exactly. That is the real problem.

  23. JimHirshfield

    Fines = cost of doing business to wall street firms.The board was likely elated the fines and prosecution wasn’t higher, ergo bonus paid.yeah, makes me want to vomit. but that’s life in the big city.

  24. andyswan

    This is the price that is paid for a powerful government. …powerful incentive to own it.A powerful government rewards men who trade in the currency of favors and other men.

  25. JLM

    .They only settled the civil or regulatory piece. The criminal issues were left for another day — which will likely never come.It is truly amazing how evil Wall Street and the banks have truly been and yet there is not a single head on the wall anywhere.Money talks and politicians listen with their hands out.JLM.

  26. jason wright

    Compare and contrast Wachovia Bank and Silk Road.Bitecoin would now be more apt .

  27. William Mougayar

    correct. Bitcoin adoption and usage is greatest outside the US, in less developed countries where their monetary systems and currencies are weak.

  28. JLM

    .Merchant problem, not consumer problem, perhaps?Merchants will ultimately do what consumers require them to do to make sales.And, yes, I have.JLM.

  29. andyswan

    Oh I didn’t realize that bitcoin allowed customers to pay merchants with money that they didn’t yet have….

  30. andyswan

    Ask Manning or Snowden how ineffective and lax this government is about enforcing the law. Then ask the IRS agents who purposefully targeted political enemies during an election cycle… or Dimon.The clear distinction is what the criminal does FOR or AGAINST the women in power.The more powerful the government, the more valuable the favors.If you still don’t believe that… then ask yourself…. why is it that when you get your guy, the champion of the little people, Mr. Hope and Change himself into the White House…. with HIS attorney general, HIS congress… why is it STILL that you see Mr Dimon face nothing and Mr Snowden hiding in Russia?

  31. LE

    I think part of the problem you have with this is you simply don’t understand how many people think. So you are constantly being hit with things that don’t make sense because you are such a nice guy (and I’m not saying that in a patronizing way). In the same way that Woz didn’t understand Steve Jobs.So here it goes. You can’t defeat the enemy if you don’t understand the enemy and how they think.Of course people trade in favors and of course people trade in their self interest.I’ll tell you a funny story that may be true. Back in the days when ICANN was formed all registrars used to vote on important issues. I would purposely hold out so that certain members would have to call me to get me to agree with them (even though I already agreed from the start). This was simply to extract a quid pro quo for an issue that I wanted them to agree with.So you see I guess you could say I am one of those “bad” people that works in his self interest. Or you could say that I understand (and always have) how the system works and play the system the best way I can. It’s a game you know. And you have to play the game in every way you can or you will get trampled on.(Some of the above has been made up. Maybe. Or maybe not.)

  32. andyswan

    “We’ve got a man in Washington”….

  33. JLM

    .You make a brilliant point — the credit card enables the merchant to make a sale that is funded by the consumer with “future” dollars.That is part of the utility of using a credit card — making purchases you cannot fund in real time.JLM.

  34. andyswan

    Not to mention INSANE levels of fraud protection.

  35. JLM

    .Fail to take credit cards and your sales will plummet. In this manner credit cards are simply a sales lubricant.The fees are passed along to the consumer — just like every other cost of doing business.Credit card companies have long since risen to the bait of enticing their customers to use their credit cards.Toured Europe on “points”.I now pay everything I can on my credit card. It’s the points, baby.There is a fairly complex process for bitcoin to wiggle its way into. Just another reason why the hill they are climbing is uphill both ways.JLM.

  36. LE

    Do you actually do any merchant sales yourself and accept credit cards? Because I do. And those fees don’t bother me at all and neither does “waiting multiple days”. Don’t assume every business model that accepts credit cards has cash flow issues or that it matters that they have to pay a % to an intermediary.

  37. andyswan

    Charlie we agree on all of that. Where we differ is that when I see all of that, I determine that having the Federal Gov’t in charge of healthcare (or _____, usually) is probably a bad idea….

  38. JLM

    .As an aside, you should see the new documentary on Mitt — called “Mitt”. I thoroughly enjoyed it.I wish he were the President and if the guy in that documentary had been on the ballot maybe he would have been.JLM.

  39. markslater

    as bill gurley said – regulatory capture.

  40. JLM

    .The Founding Fathers knew that and that was why they mandated a small Federal government and powerful State legislatures.Remember the Colonies had ruled themselves as individual States for a long time before they ever revolted against England. It was only the unifying theme of their common bad treatment at English hands that united those otherwise “Ununited States”.We operated with NO income tax longer than we have operated with one. Those were good rates, no?The Feds should only be doing what the States physically cannot do — defense, national borders, interstate commerce, oceans, etc.JLM.

  41. Simon Edhouse

    Some people only think about ‘Now’… Some focus on the future. ~ ‘Now’ is very temporary, the future is massive.Credit Cards are old 20th Century technology shoe-horned onto the web, and they do their job woefully. NOTE: “Merchants in the United States are losing approximately $190 billion a year to credit card fraud” (link:…In contrast, Bitcoin was born on the internet, its an internet native technology, and that alone should tell you something about its destiny. But, it does and will have integration issues. It will change and morph, as it evolves… So did Railways, so did the Automobile, so did Satellite technology.

  42. LE

    “Fail to take credit cards and your sales will plummet. In this manner credit cards are simply a sales lubricant.”From the first business I was in accepting credit cards was a huge leap forward. No longer did you have to worry about checking D&B to see someone’s credit and deciding how much to sell to them (or how much work to do). For new accounts you could just say “we accept credit cards” which went over much better than “COD” (which never happens with business accounts you get a check which can sometimes bounce).I would take 3% fees any day over having to collect accounts receivable. Cost of bookeeper alone and all that hounding is a huge drain. (Of course most likely a small business will still have to extend credit for sure…)A small business with 1,000,000 in sales paying 3% so it’s costing them $30,000 per year to accept credit cards (some other per transaction fees of course). Try extending 1m in a/r and getting away with only paying admin staff $30k per year to keep on top and hound people (also mailing statements, aggravation etc). (Note also depends on size of transactions as they say “to be sure”).Some of my points of course don’t have anything to do with bitcoin just trying to answer to people who whine about having to pay % fees to credit card companies.My personal feeling? Why only a steak dinner? I’m more sure than that I will offer a 7 day trip!

  43. James Ferguson @kWIQly

    JLM Two minutes ago I was reading”I carry cash and have routinely since birth. Poor man’s instincts.”but now I read”I now pay everything I can on my credit card. It’s the points, baby.”So I must assume there are things you cannot pay with credit cards and must pay with cashIt may be that your (apparently but not) self-contradictory comments have nicely made the argument for bitcoinsIE digital transactions that credit cards cant reach

  44. andyswan

    here here!

  45. Salt Shaker

    State legislatures appear to be more productive and somewhat less beholden to special interest groups, although that could be my own naïveté speaking. Fed suffering from gridlock and paralysis. Greater empowerment to the states is one solution, but I’d rather see how/if the fed system can be fixed first. Both are needed, it’s a question of balance and addressing what issues each should tackle. The system is unquestionably broken, irrespective of which party is in control.

  46. JLM

    .AOL was born on the Internet, no? MySpace?Every dog is not Rin Tin Tin.JLM.

  47. markslater

    i agree JLM regulatory capture is a cancer on free society.

  48. Simon Edhouse

    Ok… lesson 101, the internet and the web are not the same thing. The web is just an overlay… Like a fun-park that you gain admission to via a browser… Does the internet have ‘pages’ and ‘ad-system’s calculated by CPM, (which it co-opted from the newspaper industry)… No, but The Web does.The Web is half as old as the internet. Only when you understand the true difference between the two will you understand about ‘pure internet technologies’.

  49. JamesHRH

    10,000 readers < 30 years of age just went:’whaaa?’Google.Huh.That dude is old.

  50. Salt Shaker

    His Congress??? I don’t think so. A bunch of unproductive obstructionists. Too many posers posturing for their own good rather than the will of the people. Term limits rights this ship and (potentially) minimizes the influence peddlers on K Street. It’s like having an NBA shot clock. “If you can’t get it done, then the next guy will.” Incumbency provides too much of an advantage, often w/out justification. Some of these guys need to take up ice fishing.

  51. JLM

    .Sigh, yes Miss Buttons. I’m sorry. Figure of speech, really. Sorry for the inexactitude of my comment. Won’t happen again.Get that broom handle out of your ass, please.JLM.

  52. LE

    Totally acceptable in the context that it was used by JLM to call it “the internet”. Source: me who has been doing this stuff since the start (arpanet) and deals with “normals” everyday who will use the term “internet”. Consequently it’s defacto correct common usage.

  53. JLM

    .In some ways the impotence of the Congress and President is a very good thing particularly when the extremes of governing philosophy are held in the balance.Having done a bit of state lege lobbying myself, I think that the big takeaway is they are simply cheaper.I know lots of very good legislators who are both patriots and statesmen.JLM.

  54. JLM

    .Haha, you’re out of touch, dude.A stoner in SBS told me that the coolest thing in the world is to get high and watch the old serials of Rin Tin Tin with Lt Masters and crew.You think he was lying?JLM.

  55. JamesHRH

    No, but I am not sure the phrase ‘stoner in SBS’ is a broad demographic profile.

  56. JLM

    .I was in SBS skiing on Green Wednesday — the first day of legal marijuana sales in SBS — and it was a circus.JLM.

  57. JLM

    .Make no mistake, Colorado is ALL IN on marijuana and expects to reap $65MM in taxes. Likely to incur $100MM in social safety net and law enforcement expenses.We shall see.Heard Pres Obama is thinking about retiring there. He does worship a bit of choom.JLM.

  58. William Mougayar


  59. JLM

    .I always carry cash and when I am traveling often use it especially when I am trying to avoid leaving any breadcrumbs.On the other hand, I am a fairly recent convert to paying my bills — bills that arrive at my door or internet delivery — with a credit card for the points.I am a bit conflicted sometimes but the line is I love those points.JLM.

  60. James Ferguson @kWIQly

    @JLM – I was simply being smart – it begs the question how conflicted will you be when Bitcoin merchants offers loyalty coins on everything ?

  61. JLM

    .Good one.As to Bitcoin, I am a skeptic, not a naysayer.The tremendous number of brilliant folks advocating for its existence is cautionary to any fair observer.Hope your well and warm.JLM.