Digital Gold
Nathaniel Popper‘s Digital Gold, a history of the people who built Bitcoin into a global distributed transaction network that is not controlled by any person or any company, is available for purchase today. I’ve been reading it and enjoying it very much. Even though I have been involved in and closely following the sector since 2011, I did not know all the details of the early days and Nathaniel captured them well.
In celebration of the book being out, The New York Public Library is hosting a conversation between Nathaniel, Gavin Andresen, and me tonight. It will be moderated by Andrew Ross Sorkin. The event is sold out and has been for a long time, but the details are here. The livestream for the event tonight is here.
A lot of people ask me “are you still bullish on Bitcoin” and that question irritates me. Because it suggests that Bitcoin is simple. Bitcoin is not simple, it is not going away, and it continues to fascinate me more than almost anything out there in the tech sector. I’m excited to have a chance to talk about it in public with people who understand it better than I do.
Comments (Archived):
Please post the stream of this either live or otherwise as this is something I’d like to learn from. For one of the most interesting topics around there is a dearth of interesting things to read on it from a business persons point of view.Book on the list of a long list to read.Probably time to do a summer reading list post.
Are you going to attend the event Arnold?
nope as it is sold out and I didn’t plan ahead.this is one i would have enjoyed attending live.
the livestream will be herenew.livestream.com/theNYPL/…
not sure why the ‘are you bullish’ question irritates. granted bitcoin is not simple. but the question is.
it suggests its like a stock. “should i buy or sell?”
ah. sorry. if they were asking you about being bullish on the price, that is ridiculous/irrelevant.i thought they were asking about the protocol/ecosystem/disruptive potential
I can see how that is annoying. “So, Fred, will I make money if I but Bitcoins now?” Totally misses the point of the whole thing. If you answer, you’re basically saying that Bitcoin is primarily an asset for trading and not for transactions, which is the opposite effect of what you’re going for.
Not trading, long-term investing. That’s the nature of an early-stage technology: it’s not useful for most people even if they appreciate that it will become useful. Most such technologies don’t have a way for people to invest in their future prospects, but Bitcoin does. For the everyday person Bitcoin is mainly an investment proposition now, but only if you can understand it and its implications, and believe it will be adopted.
Annoyance and irritation comes from wanting someone to say something with more substance and less predictable. [1] The reason my aunts would always annoy me. All they could say was “how is school going” or something like that. Or people that ask me “are you still running” or when I flew the rc helicopter “how high does that thing go”. Or “going down the shore this weekend”.You know my mom used to ask me when I would stop “playing with the computer”. I had to explain to her that that was the way you learned to use a computer, by playing with it.[1] My personal favorite is clerks who ask me how I am doing when I am at the register.
Digital Gold. About a Digital Currency. Not available in Digital Form.
in the states it is.
In light of yesterday’s post, I hope Popper gives credit and attention to the women as well as the men who have helped build Bitcoin.
there weren’t many if you read his book
And there are more coming out. I keep meeting new ones.
Some of those women in Bitcoin are mentioned here:* http://fortune.com/2015/04/…
What did you think of the NASDAQ trial announded last week for their pre IPO market? I wonder if Bitcoins could help control the HFT guys?
i think it is very interesting. the NASDAQ private market offering is a direct competitor to our portfolio company eShares so we are very focused on this
ha, good luck with controlling hft!
Everyone is in on the looting
Ha, no kidding. Industry is getting smaller and smaller. Only real way to compete is options. I also hate all the gatekeepers. Since I was a floor trader, my costs were relatively cheap after upfront costs-now I have to get a fast computer, front end, rent multiple seats…..electronic trading totally advantaged institutions.
Exactly. Not even the rocket scientists in the Quant Risk groups of the banks know how to control HFT.The unsupervised algorithms just run their Hidden Markovs and Black-Scholes on each edge of the trade and the human brains of the PhDs can’t trace or track those edges at the same speeds and straight-throughs as the HFTs.
I am one of the guys that was an early advocate for electronic trading. I was a part of the group that totally transformed CME-we fought bloody political battles on the floor-and in the boardroom. The problem isn’t with HFT-it’s with the way the market is structured. Instead of coming up with something unique, America followed the European model. The European model never had independents in it-they were bank traders. Totally possible to re-regulate and restructure the market so it’s level. Then HFT will be in check, and not a danger to the market-and everyone will have an equal shot. Won’t be about speed, but about assuming risk
There are 3 factors, imo:(1.) Market structure.(2.) Velocity — not just speed. The directional impact of the trades on other areas of the business. Someone trading CDOs impacts Wealth Mgmt and retail instruments; the assumption of isolation and containment isn’t valid as the crisis showed.(3.) Risk — it’s possible to quantify accounting risk (to an extent). The systems aren’t yet intelligent enough, though, to model for the qualitative factors of risk: political, legal, communication, strategic (e.g., change of leadership that affects stock price).I agree with the efficiency gains and economies of scale afforded by the migration to electronic.The bigger question, though, is “What will bring efficiency AND effectiveness to risk management?”The quant tools can bring the efficiency. The qualitative tools are yet to be invented, imo.
Yes and the 4th pillar is obviously…(4.) Independent cross-verification — not necessarily govt.
.This is a very interesting development. It is a logical outgrowth of the crowdfunding evolution.What is missing in all of this is the old school function of “underwriting” in which a reputable IBank with expertise, a balance sheet, and insurance stood up for the proposal.This may become the ultimate crowdfunding site by the time it’s done.JLMwww.themusingsofthebigredca…
Banks shot themselves in the foot in 08. I hope it’s not permanent
There seems to be a window of opportunity with Bitcoin. It behooves entrepreneurs and would-be entrepreneurs to pay close attention.Those who keep asking you that irritating question will hopefully read the recent Reid Hoffman article: http://www.wired.co.uk/maga…
Indeed, why is it so difficult to understand Bitcoin? For the same reason that the Internet was difficult to grasp by the general public in the first 2-3 years of its commercialization. That reason is they both have multiple functional identities, and therefore they mean different things to different people.Bitcoin (and its blockchain) is a commodity, a currency, a software development platform, a p2p protocol, a transaction processing engine, a storage place, a wallet, a ledger, open source software, a financial marketplace, a computing infrastructure, etc.What is Bitcoin to you? Whatever you’d like it to be. Just like the Internet.
You know I don’t buy this William.When something is everything to everyone it is basically nothing to me.I understand early tech and have productized a bunch of it.If you want to say that it is still in the development and platform stage I’m all in and I think it is and important to conceptualize around it. Critical actuallyIf you say that it is everything to everyone, like the “Unum” (geek moment) was to my company Electric Communities back in early communities days, its lazy thinking.I think it is the former.
No, it’s like the Internet is to each person. For some, it’s a reading place, others it’s a writing place, or a development platform (if you’re an engineer), or it’s a website, or a blog, etc. That’s what I meant. Again, recall 94-98, the Internet wasn’t well understood by the masses, and ridiculed by many. It took a while to understand it. Now we take it for granted.I can tell you everyone I know in this space is trying hard to make it simpler for everybody else to understand or adopt Bitcoin / Crypto and to let it insert itself into people lives one way or the other.Maybe they aren’t trying hard or smart enough to touch people like you, but time will tell.
Bitcoin does have a communications and perceptions problem.As I’ve said before, I like the term “global transaction network”. It’s accessible to Joe+Jane Public.The term Bitcoin itself, though, is nerdish.If you’re a maths/CS person, ok, you get it’s about 0’s and 1’s that get encrypted pre+post transfer for security reasons and that are readable by the machines as money.To the person on the street if you say Bitcoin, the first point of reference in their minds are the coins in their pocket and they will ask themselves, “A bit of a coin? A fragment? That means I don’t have a whole coin and have made a loss of it somewhere?”
The internet is also a global transaction network that’s accessible …
Exactly, Matt.Marketing it as synonymous with the Internet, which is now second nature to the masses, is better than “online payment system, cryptocurrency, ledger, etcetcetc”.
I’d be really curious to hear your thoughts about my other comment here – http://avc.com/2015/05/digi…
The internet is the ONLY place to do all the things you mention William. With bitcoin, its a different story altogether.
please, learn about bitcoin and the blockchain 🙂
Fair enough and I’m super positive about this.But if memory serves me well between 94-98 the internet had changed the world for every business on the planet.Weren’t you able to send emails and files within that framework?I remember my team lining up to share laptops when we were on the road to do just that.
William Mougayar and you should watch this 7-min video about how each one of us sees the same world differently:* https://www.youtube.com/wat…
It reminds me of touching the elephant joke 😉
But the business apps weren’t so clearly defined. I made my living 95-99 educating smart people & fortune corporates about the internet.
Forget apps.Email and file transfer was enough.I made my living building a global company in that time frame that without that communications would have been painful. We started it with fax machines ended with email.
If bitcoin is the Internet, maybe the better time period comparison is circa 1985?
It is certainly not the mid 90s.
Large scale adoption by business didn’t really start until perhaps 98 through 01. Was a chicken and egg type of situation.Here are some numbers that I pulled up, unverified and raw that relate to .com’s registered:1/1/94 – 30,000 (all domains ie .com and country tld’s etc. like .uk)7/1/98 – 1,879,501 (just .com)7/1/00 – 14,680,275 (just .com)Once again, unverified but seem to jive with my memory …
Internet is and has multiple killer apps [1] for the everyday person. Even when it was slow and dial up and only even when everyone thought AOL was the Internet even. Bitcoin is fighting a battle against existing sufficient killer apps.My first encounter with the Internet was probably the arpanet back in college. I was able to telnet to various university hosts and just play around. Guest logins at that time were common and full access was available. [2] So “fun” was the killer app. Later I tried Delphi dial up about 1994 which was text based and just had access to info services. There was no info that I needed from that so I didn’t stick around. No killer app. A few years later in ’96 the killer app was a way to make money and to also be able to play with computers (again).Likewise anyone who tried and used the internet at any point stayed on it because there was a killer app that they used that provided near immediate value. [3][1] http://en.wikipedia.org/wik…[2] And got called into the computing center director’s office because of complaints that they go as to what I was up to. (As if….)[3] Another example, killer app with facebook is really pictures and the ability to brag and say things without any significant negative consequences. Everything revolves around that.
You have a point that the barrier is higher regarding Bitcoin adoption, but hopefully it will get better. The next wave of Apps are Blockchain Apps, not Bitcoin Apps, and there you won’t even know there’s blockchain magic behind the scenes. It will look like a content app, or a commerce app, or a something else that has a specific purpose.
That’s the problem, it’s people with vested interest who promote about it – who don’t talk about the downfalls of it – and promote it as magical.
The reason the internet was difficult to grasp was that we did not have the technology to make internet applications affordable and universal. Bandwidth and compute prices more than 5 orders of magnitude higher than today. With bitcoin, it’s not that we don’t know what the killer applications are, or that we dont have the technology to implement them – it just so happens that the alternatives, in most cases, all work as well as bitcoin does.
Again, that’s a narrow view based on today. The internet wasn’t so perfect either early on. We didn’t see all its potential so clearly from Day1.2 things are happening:1/ Bitcoin & its underlying technology are getting better, and we will see more innovative apps come out that use bitcoin’s blockchain, but you won’t know it or feel it.2/ Other exciting things are happening in the Crypto space that are blockchain related, but not Bitcoin proper.
The problem is anyone promoting Bitcoin doesn’t promote the downfalls or unfairness to it – so most everything said is biased and that it’s magical. Most people talking about it have a vested interest in it, too.
Good point re: people having a vested interest (and me included). But gradually, Bitcoin is gaining neutral advocates who are just users.
Primarily through accepting current value and accepting it as currency – and then likely hoping it goes up in value OR by the illusion of services “accepting” Bitcoin and increased adoption and trust by companies – when in reality if they’re using say Coinbase and converting it immediately to U.S dollars. If you shared with most users, before they own Bitcoin if they’d be happy that someone bought it say at $90 and then it became worth $90,000 – and then that person who just paid $90 for it could hire $89,010 worth of their services for having done nothing – do you think they’d be neutral about it? Why should you gain that value?
Investing…how does it work? 🙂
>> Bitcoin is not simple, it is not going away, and it continues to fascinate me more than almost anything out there in the tech sector.TL;DR – Fred is bullish on bitcoin ? :)Sorry Fred
I’m interested in the word “almost” in his statement 🙂
I’ve just bought the book, thank you for the mention.
In many ways, I wish Bitcoin had been part of Web 1.0 because that’s when the banks co-invested in trading platforms and built up the plumbing of the ECN (electronic communication networks) that are now the core of everything the sector does.If Bitcoin had been around back then, it would have been factored into all their system blueprints and roadmaps whereas now Bitcoin isn’t exactly a bolt-on, not exactly a systems integration job and not a plumbing swap-out either.It is too simplistic to ask, “Bullish or bear?” because that’s binary and all the atoms that are the central nervous system of Bitcoin are only just forming.
Furthermore, we shouldn’t forget that Bitcoin belongs to the field of cryptography-based computer science. It’s not just Bitcoin, it’s all things Crypto that’s the trend, although Bitcoin is the poster child.
Exactly, but again comms problem…”crypto” to the layperson sounds like it’s risky, to do with spies, something nefarious etc.To developers it’s a norm. We want to access a user’s Twitter account via OAUTH and, maybe, simultaneously log their tweets into AWS, we ask for encryption keys so that their information gets sent securely.We get tokens, certificates, public keys, private keys and a whole bunch of other meta, machine-readable data that the average human can’t read (unless they were autistic geniuses and had the conversion algorithms).When we’re at an ATM we don’t think about the cryptography that goes on in the wires.We see the digits on the input pad and the prompts in natural language that ask us to input a 4-digit password and if we want cash / to check our balance / some other service.
So as a thought exercise, what is the best question to ask someone like Fred around Bitcoin – I would suggest: “how many applications around bitcoin have you invested in”, or “how many transactions a week do you do in bitcoin?”
I’d ask:(1.) What’s been the growth rate of adoption over each of the last three quarters and how has this been higher / lower than expected?(2.) Who benefits the most from more adoption of Bitcoin?(3.) Why did Bitcoin’s rollout not include this earlier and more widespread over campuses:* http://bitcoin.mit.edu/anno…The answer to (2.) would be the most interesting.The “How many” questions are easy to get the answers for — just go to USV’s portfolio and you can see them.
Great point, we rely on cryptographic hashing for security layers, message validation and shasums as digital media fingerprints but don’t think about it much.There’s definitely an underlying push towards heavier cryptographic representation of all things (GUIIDS), whether they be trust, currency, digital content, or digital representations of physical items.
All this perfectly encapsulates the bitcoin problem. No one says, “The Samoan Tala is going to be huge because it’s printed on paper and cotton, and don’t forget, paper and cotton are in right now!” Cryptography is an information theory concept – we’ve been using it for millennia.Bitcoin is not crypto, in the same way that the internet is not Maxwell’s equations.
I don’t know about that William. Public key crypto is the technological underpinning, but that is not what Bitcoin is about.Bitcoin is about money. Its no coincidence that the title of this book referenced today refers to ‘Gold’ and the sub-title refers to ‘Reinvent Money’. Or the Symbol for Bitcoin closely resembles the Dollar Sign, replace the S with a B.Blockchain seems to have legs. But Bitcoin has not resolved the fundamental question of where it sits within, or as alternative to, the current monetary system (&/or financial transactions system). Thanks…
Well, the way I see it is this:1/ Bitcoin, the currency is an alternative currency that is emerging. It’s not going to replace the dollar, euro or other, but it will be there as a viable one. 2/ The Bitcoin Blockchain is a serious underpinning for software development & it engenders a new computing infrastructure of the cloud kind. 3/ There will be other blockchains, both public and private ones, and with significant impact potential.
Thanks…by Blockchain in my comment I was referring to #3 in your list above – viz. other Blockchains that can be built and have impact.Bitcoin and Bitcoin Blockchain seem to be inextricably linked. The incentive for the miner to process/verify the transaction in the block chain is the reward of the bitcoin (transaction fees are zero/negligible).That reward of the bitcoin is directly about the value and volatility of Bitcoin as money / currency (Using money and currency interchangeably here, not to go down that rathole :-)).By ‘Bitcoin is about money’, I was referring to both Bitcoin and Bitcoin Blockchain. I understand you see it a little differently ? Thanks..
Bitcoin is about money, but its blockchain is about more than money.
Thanks..
This will make a great video of the week.
livestream link for tonight’s event is herenew.livestream.com/theNYPL/…
Excellent
Here’s an example of the random coincidences and “Twain degrees of separation” in my life. I just now read Popper’s NYT article on ‘Decoding the myth of Satoshi Nakamoto’.March 2014 I was in NY for a meeting and early so I went to Columbus Center for a coffee. I happened to sit next to a 20-something Asian American guy who was talking about Bitcoin with his friend, and I couldn’t help overhearing them.I was mostly interested in his views on SF vs NY for startups.So I introduced myself and he said that if I was ever in Palo Alto he’d connect me AND he was recruiting. I hadn’t shared my background only that I’d worked in finance before and was aware of Bitcoin.After reading Popper’s article, it transpires he was…The CEO of Vaurum (now Mirror) where Nick Szabo (possibly Satoshi?) worked.LOL.It would be too weird if somewhere in the fractal my work ends up reconfiguring the blockchain.How? Well, all computing is based on Turing machine principles hence the 0’s and 1’s in bits.If we want true Machine Intelligence, though, we need to go beyond binary. And there’s emerging Neuroscience that evidences the non-binary, non-probabilistic functions of our brains. One of the new Holy Grails of AI is to replicate our intelligence rather than Turing-von Neumann type intelligence.What does this mean for Bitcoins? It means more than 21 million bitcoins.AND my dream about photovoltaics (which relates to solar waves) was a key to unlocking how Turing’s framework is incomplete.The completely random things in my life that end up being connected and integrated!
Imagine if I’d gotten involved with Mirror (ex-Vaurum) in 2014, worked with Szabo (who may be Satoshi?) and shared my knowledge of the banks’ ECNs……I’m one of probably only a dozen people in the world with a comprehensive blueprint of the ECNs because of my banking experiences. The finance people who’ve gotten involved with Bitcoin to-date are traders so their views of platforms are limited to their particular silo, typically Equities / Fixed Income.My mandate was cross-silo; extremely rare.Plus I believe in the philosophy of bringing more transparency and trust to the financial sector following the global crisis, which caused $100+ trillion value effects; I have slides that aggregate all the bailouts (also extremely rare because the journalists didn’t know where to look and how to look).However, my two little startups (#1 and #2) are a lot more FUN than doing yet another global finance-related platform. That was my 20s; been there, done that, got T-shirt.Moreover, Startup #1 has a deeper, more full-stack impact on the way we measure and calculate VALUE than Bitcoin-Blockchain does. They are, ultimately, innovations in process functionality rather than innovations in primary information utility.I do know things that would add a lot of value to the Bitcoin-Blockchain movement and its adoption.It may be a matter of when rather than if I’ll get hands-on with Bitcoin-Blockchain.It’s currently #3 on my list of RIGHT (Really Innovative Good High-potential Technology).
I wish I had paid attention at school. I just read your two posts through twice and *still* don’t understand what you wrote there 😉
First, read Popper’s NYT article:* http://www.nytimes.com/2015…He points out he met a man named Nick Szabo who may/may not be Satoshi Nakamoto, the inventor of Bitcoin’s core technology.Szabo clearly states he is not Satoshi.Szabo was a consultant to Vaurum, a Bitcoin startup which has since raised $12.5 million.By chance, I met the CEO of Vaurum at a café in NY around the time Szabo joined them.So I’m wondering what would have happened if I’d joined Vaurum — sparked by that chance encounter with the CEO — and ended up working with Szabo, one of the early architects of Bitcoin.My background is in the global institutional trading platforms that Bitcoin-Blockchain is seeking to disrupt / complement.
History is interesting. And this appears to be a history book. Does it tell us anything about the future?
To understand the future, you need to understand the past. They are connected, no?Each one of us holds a piece of Bitcoin’s future in their head.
Yes. But I’m reminded of a quote I read recently, “driving down the road looking in the rearview mirror.” As usual, I can’t remember who said it.
It depends on the car you’re driving 😉
And the road you’re on.
Exactly.
The elephant in the room has always been that every single one of bitcoin’s strengths could equally be presented as a flaw. Trust, or lack thereof. Safety, or lack thereof. Ubiquity, or lack thereof. And so on. And it does not help when the experts have no concensus vision other than the hope that consumers will catch on and push the prices of their hoards up. Take 21 for example – big names, big visions, big hype, but it takes a lot less than 21 seconds to be convinced that their story does not make any sense.
21 reminds me a lot of Solyndra — over-funded boondoggle
wondering if #Bitcoin will also have an European and an Asian flavour or it is just a world wide concept…
Bitcoin is full-stack and one reviewer called it a “fringe oddity”, aka edges of the fractal.I like outlier stuff but there are 2 other outlier spots I’d rather code for, right now.
To help people understand Bitcoin, I think education on the blockchain, and the practical uses of the blockchain would help. Everyone understands payment mechanisms, and that’s where the value part comes in-“What’s it worth?” is really “What/How Much can I buy?” This is helpful: https://medium.com/@adamlud… Blockchain is the cloud computing system for finance.
I think education on the blockchain, and the practical uses of the blockchain would helpWhat exactly then is the “implementation documents and procedures” for delivery of that education? The fact is there is no way to deliver that information in a way that will make any meaningful impact. [1][1] We aren’t talking about “stop infections at hospitals by more education” where there is a defined group of participants that need to be educated.
.The only thing that fascinates me about bitcoin is the proselytizing by folks with big brains like Fred and Wm. I am not one to bet against the smart guys and these guys are plenty smart. Not batting a thousand but still plenty smart.Absent that, bitcoin strikes me like one of the greatest head fakes in the history of the world, Segway like really.I have been a diligent student of Wm’s reading list on Startup Management. I have waded through all of it. I learned a lot but I was not converted.I will read this book.Still, I don’t see any case for bitcoin until there is a real killer application.All the financial apps whispered about have now grown whiskers while the apps they were to replace are better.The notion of replacing the middleman is no more compelling. I like the middleman, particularly when the middleman provides security and trust.I just can’t “take the fake” but I love the convo and am looking forward to being wrong. I admit I did like riding a Segway.JLMwww.themusingsofthebigredca…
Segway like reallySegway is different though. Segway was a big bet taken by one man, Dean Kamen who was taken seriously by the media [1] because of his previous inventions and his success. Fred, Gotham Gal, Mark Andressen, William Mougayar and other folks with “big brains” as you call it, don’t bet the ranch on one thing. They spread the risk and gamble on many things which is their business model and makes them “not batting a thousand but still plenty smart”.This is really a good model for many things business whether it be real estate or domains or I would imagine race horses or car collecting or conglomerates. (Did you read that Honda is now releasing a light jet?)[1] Nobody would pay any attention to Segway if Kamen did not have the PR play that he did based on his past. Remember all of the PR leading up to that devices release?
.You are over analyzing my comment — it is Segway “like” not the exact same. The Segway was a huge head fake for a number of reasons. My simile goes no deeper than that.The HondaJet has been out there for a couple of decades. The “small jet” phenomenon has already run its course and the Uber approach to small jets is the winner.The problem with small jets is they require two pilots with enhanced ratings and you don’t get a huge performance improvement over the King Air. If you can afford two pilots, then you can afford a bigger plane. Or, you charter a King Air.JLMwww.themusingsofthebigredca…
“The HondaJet has been out there for a couple of decades.”Not what I am reading:http://www.wsj.com/articles…After three decades of planning and development, the Japanese company known for its cars is preparing to deliver one of its most unusual innovations: an ultrafast business jet that carries its engines above its wings. Can’t even imagine how it makes sense for anyone to buy a Honda Jet and be the early adopter of such a critical piece of machinery. This isn’t a backhoe, ditch witch, or even a Tesla with 4 wheels. I prefer something with the bugs shaken out of it. Would have made more sense for Honda to buy an existing player and then stick their new jet into that lineup. Not that I am buying a jet obviously.
.Uhhh? “After three decades…
You are over analyzing my commentMy default setting is over analyze it has worked well for me.
I’ll see your King Air and raise you a PC-12. Plus you can buy nice chalet with the change.
Segway is not dead just waiting for commodity pricing and at scale servicing access !
Thanks for the double-sided compliment. I’ll take the bait ;)There is no single killer App. There will be several of them. It’s creeping-up.
A predictable, deflationary store of value not issued by a government is a killer app. So killer, it allows companies like 21 to create new protocols on top that will allow IoT to actually be a thing.I know… *something something volatility something something*
As scary as this may be (for both of us 🙂 ) I am pretty much in agreement. Seems like complete headfake, but some very, very smart people and successful investors and technologists are in love with it so maybe something comes from it. William makes the point about the underlying blockchain being useful, and I can actually buy that. Not sure what the “killer app” is, but I think it exists. for the bitcoin itself I think I (and you and other skeptics) are right. Most technologist are not financial experts, and knowing a ton about the financial system, international currencies, federal reserve policy, monetary policy etc. is something I think most (of course not all) bitcoin players just don’t really get. In short, the technology hype is “cool”, but there is scant underlying financial distruption. Biggest change is they don’t understand only real reason financial transactions are expensive are interchange fees, which are not expensive due to technology, but rather market dynamics of visa / mastercard monopoly.
Plus, as much as the average citizens hates banks etc., they want the MULTIPLE layers of protection and caution that banks provide. Main stream will not be comfortable with crypto currencies, even if there were a true financial advantage, which again there really is not
What dictates that crypto currencies/mechanisms cannot develop into multi-layered protection systems ?Won’t the main-stream inevitably evolve to accept anything that can be demonstrated to work effectively for them over the long run, just as they have accepted the opacity of the present system despite its many inequities ?
I like your point about financial expertise – there seems to be a big missing link there which puts a lot of people ill at ease. If this protocol had a little more transparency and efficiency “to the untrained eye”, then it might be accepted in all networks right now – not just the techy tribe.
The only issue there I guess is if it left the “cool tech” into just the “financial realm” I think the emperor would have no clothes.. AKA, its not a good underlying technology. I despise most of our financial system and the corruptness that our govt. affords the biggest banks which benefit them and the non-deserving wealthy who leach off the masses of society. However, these people are damn smart and could easily develop any underlying technology that is needed. There is simply nothing compelling that bitcoin solves from a financial side. Big banking being a monopoly is why it sucks for society, but a technology will not be the key in solving it. I welcome the challenge from any bitcoin supporter to explain where / how bitcoin makes a meaningful financial efficiency in the banking system. I have never honestly even seen a remotely strong attempt to do so. Usually things are “privacy”, cheaper transactions (but again they don’t have a response to the interchange fee I mentioned earlier), and “you just have to give it time”.
“There is simply nothing compelling that bitcoin solves from a financial side” Dosen’t it bring a potential mechanism by which to enforce a distributive Mexican standoff against centralized control/corruption.
The area where big banks have most control is over financial actions: lending, M&A transactions, setting deposit rates etc. right? So I guess you could argue new institutions/ companies can be built on bitcoin, but I am not really sure how the bitcoin is what enables them. Just because you have record-keeping distributed like you talk about, those still aren’t actionable financial intermediaries who make decisions. right, or what am I missing?
“There is simply nothing compelling that bitcoin solves from a financial side.” I just paid a developer in Pakistan $100 instantly with Bitcoin. It was on Sunday.
And you couldn’t have paid with paypal or something similar? I am not accustomed to Pakistani law / economics so please explain. And also, $100 micro payments to third world countries is not exactly a big financial issue
.The financial arena is, perhaps, the biggest arena in which the “middleman” can add something to the quality of the transaction because of their balance sheet and willingness to guaranty the sanctity of the transaction.While I think that Bitcoin has outgrown its adolescent drug trafficking stigma, it is important to note that the secrecy of the transaction had a front seat in its original concept. This is not a small consideration because secrecy comes at some cost — they were criminal transactions, after all, right?The elimination of the middleman in a financial transaction is not attractive to me.JLMwww.themusingsofthebigredca…
Completely agree. I mean, I would like a little less corrupt / crony middleman that we have now, but again that is a political / regulatory issue, not a technology or new business issue.
No so sure you can meaningfully cleave political/regulatory issues from technology/new-business issues here ?Under accelerating network-conditions they will inevitably become evermore entangled in an organic interdependency.
EDIT *Snip* (replied to wrong comment)
Is that to say that carbon-base middlemen keep no nefarious secrets ?
.I was speaking solely of the financial arena.What exactly are you talking about?That is not intended to be offensive. I really cant’t figure it out.JLMwww.themusingsofthebigredca…
People are accustomed to a carbon-based institution in the middle to blame — and importantly from whom they can extract corrective payments — when there is a transactional problem.This is a cultural issue in the path of wide-scale adoption of the no-institutional-middleman system.
As eloquent and accurate a summary of the Bitcoin head fake as I have seen.
Blockchain was a fundamental breakthrough (often described as solution to the Byzantine generals problem) in the creation of distributed trust/ledger and exciting applications can be built off that. It will take time, but will happen.Maybe the adoption of original public key crypto itself is an analogy to consider in dissemmination of Blockchain applications. Secret key crypto had been around for centuries going back to the Caesar cipher. In the mid-1970s, Diffie-Helman and RSA public key cryptos were invented…then you had a period of nearly two decades with specialised usages…until the world wide web happened. Now public key crypto was underlying a lot of the internet usage but consumers didn’t need to know how digital signatures or encryption work using public key crypto, they didn’t even need to know what digital signatures are. So, it went from Little understood/Specialized use to Little Understood/but now widely used. Blockchain applications might follow a similar mode of dissemmination – Slowly, then quickly and widely. Understanding the protocol will be initially unnecessary, and then later, unnecessary :-).Bitcoin adoption as money/currency is a very different question altogether…agree that some of the discourse implies a lack of understanding, or an underestimation, of the financial and monetary system. Thanks.
I guess my other thought around that is even if blockchain becomes very useful, will any investors make money? Like with the public key crypto techonology that you talk about, it has been USED a lot, but were any of the founders or early companies in that space well compensated when the web took off? I have no clue, but seems like you might know. Just feels like, “may be helpful, but no real money” and we know VCs leave when their is no money 🙂
Its a good question. The block chain is a database (accounting ledger) of all transactions that incorporates distributed trust/peer-to-peer verification…successful businesses can get built on top of that architecture. Bitcoin block chain is one, but there are others, and there will be others.That said, what you mentioned, about a technology architecture that becomes ubiquitous but cannot be monetized ‘directly’ is always a possibility (hence VCs make the bucks to make these bets:-)).p.s. I say monetized ‘directly’…because if a technology/architecture does become ubiquitous – then, by definition, there will be many successful businesses operating on top of it. It just may be at a different layer, and not at the layer/instantiation where the initial bets and investments were made. Thanks…
Thanks for the reply. are you in the space with a bitcoin / blockchain company? Or an investor? Best of luck with whichever, just curious!
Neither :-)…p.s. I think William is closely involved with this ecosystem. Thanks.
http://www.theguardian.com/… … its like they were listenigng to our conversation here on avc!
I think you have nailed it there!Cleaning up the neocheating of the carbon-based middlemen via digitally-distributive middleman-tools will require a deep understanding/sorting of the non-sequitur vs fundamentally-required middleman workflow-functions.That will require some of those foxy carbon-based middlemen to get onboard and share all their expertise on how they really runs the henhouse.
There’s no replacement for genuine trust when it comes to security, financial or otherwise. However, when we say that we “trust” someone we often mean that instead of genuine trust, for convenience purposes, we have decided to make ourselves vulnerable to a third party. This third party may be someone who is not actually trustworthy at all.Read Nick Szabo on trustworthy computing. For example, all rely to some extent on certificate authorities to vouch for the genuineness of websites that we visit. But most CA’s are totally untrustworthy.Bitcoin as a protocol does not replace genuinely trustworthy financial intermediaries. What it does is reduce the situations in which one is required to *pretend* to trust (ie, make oneself vulernable to) untrustworthy third parties.
“I like the middleman, particularly when the middleman provides security and trust.” Oh. . . and some times provides fraudbut in the case of the banks we can apparently trust in the power of the tax payers as the distributive crowd-sourced trust/security back-stop.The trouble is that history too often exposes “middleman” operations as “faith based” neocheating operations.I wonder if the “Blockchain” can actually solves that problem or just elevate “faith-based middle-man” operations into the realm of exalted digital-mystification for the rest of us ?
This excerpt is from the the book. Popper and others think Satoshi may have walked with $200 million (today’s price) maybe that was the whole deal. http://www.nytimes.com/2015…. I’m warming up to it though because of the Exchanges being involved
I’m a fan of bitcoin but you actually have a point that I agree with 100%: The use case for bitcoin **now** is limited, especially when the old alternatives are much much easier to deal with. However, like many revolutionary technologies before it, it needs a big leap of imagination — beyond current use cases/social and societal contexts — to get truly excited about it.A lot of early technologists (ex: Negroponte – highly recommend his book “Being Digital” circa 1995 – still a great read even today) called trends we’re seeing today very very early. Once you know the “physics”/nature of the game so to speak – you can reason up and project out a trajectory—and leap– at least in a broad stroke. It’s hard to remember now, but things as recent as streaming video, online shopping, tablets/e-readers at one point in time actually seemed ridiculous but these trends were already extrapolated out and being written about extensively by those that understood the implications of the technology (and met with equal doubt). Ridiculous with 1995 eyes, but mundane in 2015 eyes.Why Bitcoin (or more broadly blockchains) is exciting to me comes down to this broad stroke: “ownership” and esp. “value”, in the end is only information. And if it’s information – there’s one guarantee — it can and will be digitized. And we’ve seen how it played out it in music (vinyl/cd makers), in publishing( book/news printers), broadcast (voice/’moving image’ senders) and now we are seeing it unfold right before our eyes in finance (ledger keepers).The arc of “digital” is leaning one way — it moves to digital > then it moves to open and p2p. The power/moat in software used to be in the code itself but in the age of a network it’s about the network of users (uber, fb, etc). Bitcoin or something like it fits perfectly into this trajectory.I think the only head fakes are the ones making claims about some arbitrary, specific price target. But I would argue, either way, there’s plenty to be excited about.
.Not to be argumentative but I would posit that every advance you suggest was clearly foreseeable — ever since Dick Tracy’s wrist radio, in fact.The end was known before the enabling technology emerged and was perfected.End first, enabling tech second.In this instance, we have the tech before the horse. The tech — the blockchain — is here but the advance is still waiting to emerge, to be visualized.Long before tablets were a reality, it was possible to visualize them and their utility. Once the tech caught up — and miniaturization — they became a reality.Again, dreams first and tech second.Limiting our focus to the financial arena, there is no end that is not now clearly envisioned and able to be reached by some current technology.I can make a slightly outlandish case that it would be great to have property records — typically the province of country seats of government — for Africa on the blockchain.Why?Because Africa has wars, wars destroy records, extreme foreign investment and no certainty as to the stability of local record keeping.Still, this can be overcome by current technology — cloud storage.I know there are things we cannot now even envision that will become a reality. I hope so, in fact.But, I also know that it has always been the vision of the final product that has drawn the tech to it.We shall see. Bitcoin and the blockchain are getting a bit long in the tooth to be still looking for a killer app.JLMwww.themusingsofthebigredca…
I believe we disagree on our take on how society truly views ‘out there’ technology. I think the vast majority of people usually does not foresee the potential, especially in radical new technologies. Good clip that captures the reality that most people think in current-time context vs. making “the leap”:https://www.youtube.com/wat…I would argue that the end was, and is, hard for the vast majority to visualize. For good reason — the context isn’t there yet. I think you are also assuming that we are already at the end 😉 – internet has matured but there’s a long way to go. Maybe bitcoin will be a part of that future.In 1995, the idea of “broadcast over internet” seemed crazy (…why not radio/tape-recoder?) and got big laughs. But reasoning up from underlying properties, those crazy forecasts were actually quite reasonable. I believe there are equivalent “crazy but actually reasonable” statements we can make today. The below concepts that bitcoin enables are so out there that they will similarly get eye-rolls:1. Autonomous software/machines (not “self-driving” but specifically “self-owned” or “no owner”) – machine to machine transactions2. Autonomous structures and organizations — bitcoin being one of the first prototypes (Automation from the “top down” instead of from the “bottom up”)3. Smart contractsetc.Not every new thing is guaranteed. There are bad ideas. But there are also good ideas that look like bad ideas at first. I guess there’s only one way to find out which one it is — we shall see indeed :).
.In the list you provide, you prove my point. None of those “things” are really things — except maybe “smart contracts”. They are all concepts, not usable products.When tablets were envisioned, it was a “thing” that someone could envision holding in their hand and how it might work. Technology caught up and it became a reality.”Smart contracts” is pretty thin gruel to advance either tech or mankind.I would also point out that things like “broadcast over the internet” were incremental improvements of existing tech.I have 1Gig service and can still remember the sound of dial up. I always knew it would get better. Now, I cannot imagine how I lived with dial up. I cannot imagine losing 1Gig.There is nothing I have heard suggested about bitcoin or the blockchain — focusing on the financial sector primarily — that makes me want it.I am content with the digital presence of WFB, USAA, Schwab and am confident that if there is a huge consumer demand, they will add features as they have already done. I like reputable middlemen.JLMwww.themusingsofthebigredca…
Fred, a good part of your frustration (I think) is that people have co-opted Bitcoin as short hand for the underlying block chain technology. Moves like NASDAQ using block chain is a harbinger of really interesting things to come and indicative that we’re in the very early innings of this revolution.
If you bought or had a Bitcoin at $90, let’s say 5 years ago, and then in say 5-10 years it becomes worth $100,000 — for doing absolutely nothing you now have the ability to hire labour of other people or buy products worth $90,910.Ask yourself – is this fair?Remember this isn’t a stock market and shouldn’t act like a stock market because what Bitcoin is attempting to do is be THE transactional layer for financial transactions.
“Ask yourself – is this fair?”It’s a futile discussion to attempt to define ‘fair’. Many people took a risk buying some unknown supposedly worthless currency, and that risk paid off.
Right, fairness is relative to someone’s biases. Should we let people take advantage of us/society like that?
Who’s taking advantage of what? How does it relate to society?
With the rise of pervasive Machine Intelligence combined with the Internet, this is the time when society as a whole will be mandated to ask itself the deepest questions about what our values and biases are, what we want our technologies and systems to mean+reflect+represent about us and be able to do, in order for the systems to serve us better.This isn’t trivial, simple or isolated to any elite / niche sector including Bitcoin-Blockchain.We’ll have to deep-dive into what democracy, ethics, transparency, fairness etc are and INVENT THE TECHNOLOGIES to enable our new definitions and make them fit for purpose for future generations — not just what was “democratic, ethical and fair” in the times of Socrates, Plato and Adam Smith.Or even according to the techno-libertarians like Marc Andreessen, Tim Draper and Fred himself.The coding part of the new technologies is, to an extent, easier than frame working the complex and interconnected philosophical imperatives that span:(1.) Computer Science(2.) Economics(3.) Mathematics(4.) Neuroscience(5.) Quantum Physics(6.) Biochemistry(7.) Linguistics(8.) Human behavior, psychology and anthropologyWhere before we built systems based on utility and probability, the future will be systems of coherency between seemingly disparate disciplines.In other words…systems of Zen.Bitcoin-Blockchain only contributes the CS, Economics and Mathematics bits of that — at the most.Maybe there are people out there (outlier types who are also insiders) already working on the other atoms for the central nervous system that will be the Internet, more coherent than what we have today.
I agree the bullish versus bearish question is an odd one in this context… BTC feels to me like the natural (perhaps last) evolution of money as informational exchange.. from stones to gold to coins to paper to bits/bytes at bank accounts to BTC..I guess BTC’s unregulated nature and the question of bullish versus bearish more boils down to your view of governmental power… especially over finance… revolution or power moving to the edge and away from central authorities would naturally make BTC or other regulated currencies FAR more valuable…
Bitcoin (currency/platform/activity) seems unnecessarily complex, with too much focus on faux-security (no transaction is 100% untraceable) and algorithmic complexity at the expense of ease of use. Most people aren’t interested in illegal/untraceable purchases and they like low cost + simple, not anonymity. Like money, using the currency (vs trading/speculation/platform building) has higher potential for widespread impact.It’s like fractals: the number of people using them daily in casual settings (from art to architecture and hair braiding) greatly exceeds the number of those focused only on the mathematics behind it.Shifting bitcoin supply/operator side attention to simplicity (ease of use, clear and widely available info on all aspects, etc) would increase mainstream acceptance AND probably allow for interesting new use contexts.
From a “Joe User” perspective, the inertia from the existing network (i.e.: the local currency) likely plays a big role – can you buy groceries with Bitcoins? Does anyone you know get paid in Bitcoins? No? Well, why call it money then? To the extent that psychology holds, I’d expect to see Bitcoins used more in places where the existing currency is viewed as unreliable (so, high and/or unpredictable inflation) – but also where people have more flexibility/control in how they get paid. I don’t know that it’ll move much beyond that, though – but then, I’m neither an expert in finance nor in economics.
Fred–watched with intent. (With a bottle of Altesse from Savoie I’ll admit.)Blown away at how complex this is unless you approach it from a usage or a vision of a changed world.Building businesses on top of it seems more germane than thinking about apps that connect it to people.This seems less analogous to the early internet than to my background of early communities. My most exciting (and failed venture) Electric Communities, tackled similar issues of articulation and language to describe it. What we had on our side was Neil Stephenson and Snow Crash as a visionary who could paint a future that many approaches could fall into. And a team of early community geeks to cover walls of whiteboards with words and ideas.Brilliance alone couldn’t save the fact that we were too early.Is there a visionary who is bridging the gap from massive technical possibilities to a view of its social and economic future? Makes me want to grab onto a story.
yeah. all so true. do i make it worse in the way i talk about it?how was the Altesse?
The best part of the conversation was the unbridled geeky joy from ‘the geek’. Loved that guy. And your theme of building businesses on top of blockchain. I would have liked that to be the theme of the entire talk honestly.I’ve fallen hard for Savoie. It’s Jura adjacent (my first love of course) but while not as unique in some ways, the wine are crisp, clear, and easy. Tiny productions. Insanely small amounts of unique grapes. Farmers wines that satisfy the quality need of the nerd in me. They define alpine as a category as nowhere else.The Altesse was easy and light and a good pairing with watching the panel with samthecat at my side.
There’s more complexity to it — please see my comments above to Matt Myers.The Bitcoin-Blockchain only solves the quantification bits of the central nervous system of the Internet for the future.Monday night I was at a Web Standards talk by one of the W3C team and there’s emerging work there which adds to the complexity and Vint Cerf has criticized potential attempts by US government to curtail encryption (or, at least, give them the rights to unlock the encryption) — which has implications for Bitcoin-Blockchain and adds more complexity.Then there’s the missing bits of qualification in the protocols that would make data in the system ATOMIC.When I say qualification I mean more than what happens at the moment in the Blockchain in the form of:* timestamps on the ledger* transaction amounts* identities of the parties involved* locations of the parties involved* numeric factors in the transactionIt’s a technological change as significant as us discovering “Earth is round. There’s gravity and relativity. People transaction not just because of logic, rationality and probability. Democracy and economics isn’t determined by a single, binary, discrete action.”There wouldn’t be a single visionary. It would have to be a multi-disciplinary team.
There’s complexity to everything.There are different ways to apply broad based platforms to a multitude of applications.True positioning and knowledge is neither long lists of details nor single phrases of generalizations.If you are telling me that it is too complex for someone like myself to understand and be able to place in context of my thinking, then this is not a useful exercise honestly.Vision is the key that binds diversity. Complexity as obfuscation is not very useful to anyone.
I’m not at all saying it’s too complex for someone like you.I’m saying that it requires the nodes of intelligence of people from multiple disciplines including the key ones listed (Economics, Mathematics, Neuroscience,…Human Behavior, Psychology and Anthropology).You and others here know a lot about human behavior from your experiences productizing experiences in Internet communities.The vision for transforming Bitcoin from a niche tech philosophy and paradigm into socio-economic deployment necessarily has to be multi-disciplinary.I’m simply highlighting all the disparate disciplines and intelligences that would bring about a Coherent Internet.Bitcoin-Blockchain is only one area of the complexity involved.
Thanks for the clarification.The most complex topics in the world in the hands of leaders with vision, are calls to action that each of us hears differently and to our own needs.That in Bitcoin is missing.
Let me compare Bitcoin-Blockchain to wine.We know all the quantities of chemicals and process mechanics involved in making wine — as we know the quantities involved in mining Bitcoins.We have the timestamps of the production flow — as we do in the Blockchain.However, we had no metrics for why the mass consumer would buy wine until someone invented a Wine Evaluation matrix that matched it with different foods, taste combinations, distribution ease (supermarket, online etc). Things that were immediately identifiable as utility for the layperson.That switch over from the specialist skills of the producer of the good (wine) to mass adoption needed the people who understood human psychology and behavior.The same thing needs to happen to Bitcoin-Blockchain.
The way to reduce the complexity of Bitcoin-Blockchain into something simple starts first with REBRANDING it.Do people who appreciate wine necessarily need to know about Flavonoid Phenolics and ketones? Nope. We didn’t call “wine” Phenobuds…….In the same way, do people who use Bitcoins need to be confronted with Bits and all the geekdom of cryptography as in Bitcoin? Nope.Someone get a dictionary out and REBRAND IT.This is where people like you would be invaluable, by the way.
Speaking of the New York Public Library, you can borrow a copy of Digital Gold from here: https://nypl.bibliocommons….
Here is what I think needs to happen to see mass adoption.The techies who have created and are enhancing Bitcoin are not going to be the people who can also promote adoption. Communication needs to be transferred to promoters who can speak for the masses and away from engineers who have a selfish love relationship with the currency/technology. Every time I hear someone promoting Bitcoin, I have this frustration that the Bitcoin artisans really don’t know their audience (the prospects).The best part about Bitcoin is that it is the only real alternative platform for worldwide transactions. If someone wants to promote a platform and a currency, something that our well being may depend on, there has to be a boring, trustworthy and accessible structure for it. Or at least a comforting feeling of such structure. A currency is much more important than e.g. an iphone, so it will need a structure, at least, if not more solid thanApple (not in size, but in terms of credibility).The current payment system is also complex, although not beautifully so; current money is still contested as a concept or legitimacy, but people everywhere trust the platform and the currencies enough to use them.Communication needs to move away from tech intricacies to emphasis onfunctionality.Until someone assumes to orchestrate promoting bitcoin, as a boring, safe currency and platform, I think it will still be in the future what it is now, regardless how much the underlying technology will evolve. Bitcoin needs to win over the masses, not the techies, in order to survive in the long run.
There is a level of smart (complexity) that becomes tiring, and I sometimes suspect that the Bitcoin miners want to keep their circle small and closed 🙂
Fred, we’re launching Streamium.io, which allows you to broadcast live video and charge for usage on a per-second basis, using a bitcoin protocol called payment channels. Thought you might find it interesting!
Just finished Digital Gold.Bitcoin’s connection to the cyberpunk movement only makes sense in hindsight.What blew my mind is the impact one evangelist entrepreneur can have, namely Wences Casares.Definitely a worthwhile book.
Readers of the book should visit the Satoshi Nakamoto Institute to learn more about the pre-history of Bitcoin. It was a pleasure talking to Nathaniel Popper about the Cypherpunks.http://nakamotoinstitute.or…
Nakamoto Institute is legit!
Here’s some future sauce for you: http://streamium.io . Pay-per-second livestreaming. No accounts needed. Once storj.io or maidsafe gets running, you’ll see stored data variations of this across all content types.Here’s a write-up by them on medium: https://medium.com/@demibre…