Is Bitcoin ready for you, or are you ready for Bitcoin?

The company I work for, Bitreserve, recently launched. In traditional fashion I celebrated this with my friends on Facebook, and one asked for "the pros and cons of all this." My answer prompted my friend Wes to encourage me to post my response publicly, and since I am always somewhat tormented by the feeling that I don't publish enough, I thought I would just take his advice.

So here is my quick, off the cuff take on whether the average person is ready for Bitcoin.


First, let me give it to you straight. Consumers are not yet ready for bitcoin, or bitcoin is not yet ready for consumers depending upon your point of view I guess. This technology is still in its infancy. Not unlike the earliest days of the Internet when AOL and Compuserve were still easier to use, and for that reason there was no real benefit for most people to switch. But it didn't take long for that to change. Everyone ditched those services when they realized there was superior content available at a lower cost on "The Internet." Eventually AOL and Compuserve had to completely re-invent themselves or die.

That being said, bitcoin and the larger "crypto-currency" industry is something to watch. It is my hope that it will be companies like mine that will have an increasingly more impactful role in shaping the industry because as long as the architects of this technology are the only ones trying to drive its adoption, they will continue to choose names like "crypto-currency" which is about as accessible as a durian to an American. But I digress.

Digital money like bitcoin is going to have major impacts around the world because it allows people to exchange money without the need for costly intermediaries.

In Silicon Valley it is going to enable new technologies and products to emerge and compete directly with big banks in a way that heretofore has been unprecedented. And let me tell you it is about time nerds did to banks what they did to AOL and Compuserve back in the day!

In developing countries whose currencies are weak and/or suspect, and whose people suffer as a result, because their currency loses half it's value in a day, or because their currency regime is completely corrupt, will benefit tremendously. These countries stand to inherit or could choose to adopt a more stable currency, one that could increase their buying power around the world, and one that allowed them to retain more of their hard earned money. Consider this: the money-sending (a.k.a. remittance) market between US and Mexico is $30+B a year. That comes from predatory companies, like Western Union charging upwards of 20% to send money over the border. Consider the difference it could make to a Mexican family's life if they received 100% of the money sent to them from relatives abroad. It's hard to fathom actually.

Bitcoin is about bringing justice back to the financial system. It is something to watch and something to cheer for. A world desperately needs a more egalitarian money system.

A little bit about Bitreserve:

Happy Get Lucky

And now for something completely different.

I was telling a co-worker about Jack Conte's Patreon, as he has an exceptionally talented 13 year old daughter who can siiiiiiiiiiing and who might benefit from the service.

(Seriously folks, get this girl on The Voice or something - I can't believe that voice is coming out of a 13 year old. But I digress.)

I can't mention Jack without also mentioning Pomplamoose; and I was happy to see that the band is back together making some great stuff again. This mashup and performance of Happy and Get Lucky is awesome.

Update:

This one too! This one too:

Bitcoin in the developing world

Bitcoin may very well become the first major technology innovation whose value will be felt first and more significantly in the developing world, than in countries like the United States where technology literacy and access is far more abundant.

Consider for a moment that the World Bank reports that over $410B in remittances were sent over networks like Western Union to the third world in 2013; and these wire transfer companies charge their customers anywhere between 10-20% for the priviledge. Bitcoin eliminates the need for these intermediaries all together, and would put over $40B back in the pockets of those who would benefit most: the People.

Forty. Billion. Dollars. That is more than the entire GDP of 80% of the countries in Africa.

An Internet of Blockchains

The blockchain is a hard concept to wrap one's head around because it describes a system for which no analog exists today, and it runs counter to everything we know about how trust works. In today's world, trust can only be assigned or transmitted by an individual or organization. The idea that one could safely send money from point A to point B, and have that transaction fascilitated by potentially millions of agents without you knowing who those agents are, what motives they might have vis-a-vis your money, whether they are nefarious or not, is an anathoma. But that is exactly what the blockchain helps enable.

With the blockchain, trust stems not from the reputation of an actor or collection of actors, or from a process or set of controls that abstracts power and authority away from individuals. Nor does trust get transmitted through a graph of friends, or from an external auditor who can vouch for a claim. Instead, we place trust in a design pattern.

But what does that mean, to trust in a design pattern? To answer that, let's look at another decentralized system we have all grown to trust so much that it has transcended the need for trust entirely, and just is: the Internet. The Internet has no governing body or centralized authority. There is no mastermind responsible for making sure some secret collection of computers are plugged in and working. There is no facility that if compromised could "take down the Internet." No, the Internet works because of a design pattern that dictates that data should move the same way between networks, as it does within networks. So if a network wants to take advantage of the access and opportunity afforded by the Internet, all it has to do is connect, and in so doing it begins contributing it's own resources to the benefit of the whole, further decentralizing it, making it faster, and making it more resilient.

We take all of this for granted without knowing how this system works. But if you look back to your own history, assuming you were around when the Internet had it's tipping point, I bet you will find a moment where you had to take a leap of faith. A moment when you had to drop AOL for a generic Internet Service Provider who provided no information services of their own. Of course, the later you made this leap of faith the easier the choice was to make because you were entering an increasingly useful and utilitarian landscape of services - companies like CNet, Excite, Yahoo!, Excite, and others. And the more companies that began building their businesses ontop of this infrastructure, the less and less people cared about the fundamentals of how it worked. The proof was in the pudding.

The blockchain today is operating in a time not that dissimilar to the Internet in the 1990's. Consumers are baffled and confused by how a decentralized finance system could even function, while a growing number of people led by technologists, futurists and entreprenuers see the potential for ideas and companies that heretofore had been impossible due to the economics of a centralized system. But slowly, as more and more people take their own personal leap of faith, more and more people will stop caring about how it works, and just accept that it does. By then we will no longer be talking about "a blockchain," but rather an Internet of Blockchains. And no longer will our computers simply connect to the Internet, they will contribute their computing cycles to an untold number of micro-economies that will power far more than even they are aware of.

Explaining the value of the blockchain

Here is a near impossible thought exercise: close your eyes, go back in time to 1990, and imagine a time in which centralized networks like Compuserve and America Online ruled the day. Unbeknownst to most, there was another technology emerging on the fringes called the "Internet." It was highly distributed, and built on top of standards no one understood except computer scientists. It lacked the weather widgets, pretty stock tickers, and easy to use news feeds that made AOL and Compuserve so useful to consumers. Now, try to imagine how you would explain the value of the Internet to a Compuserve user.

Fast forward to today when we take for granted that a free to use, highly distributed network, that exists outside the control of any one person, country, or institution is superior to all previous attempts to provide utility through a centralized network.

This quandry is playing out again with bitcoin and the transformational technology that underlies it: the blockchain. Trying to explain the blockchain to a layman is fruitless because there are no financial systems that exist today that can function without a centralized authority. In time however I believe the value of the blockchain will become so self evident through the many service providers who build on top of it that people will just accept it without ever having to successfully explain it to anyone. It will just be another fundamental piece of infrastructure we use everyday without ever really knowing it.

Below is an excerpt from a conversation with Andreas Antonopoulos on the podcast Let's Talk Bitcoin in which he explains the nuance of this dilemma, as well as the nature of authority quite expertly:

When you first look at bitcoin it's money, it's digital money. That really misses the point. Then you've got a network, and an implementation which is essentially a piece of software and behind that you've got a community of people. But underlying all of this is the blockchain technology. As a technology it's more useful to think of the blockchain as a design pattern, a new design pattern for distributed systems. It's a design pattern that takes the traditional model of concentric circles around a root of trust and authority with increasing access control as you go out and moats or walls set around a central authority and it inverts it completely. And it actually makes the authority reside at the edges of the network through the process of collaboration. And it makes this authority cummulative so that the more people participate authority is achieved at ever higher rates with every passing block, with every increase in hashing power, with every increase in the constuency of users. Network effect creates authority in a highly diffuse and distributed manner which also makes it very difficult to exploit because there is no single thing you can take down.

This narrative is very difficult for people to understand primarily because authority has never been diffuse. Authority has always been centralized in most systems. It has been a model that has worked very well, but is a model rooted in physcial power and force. And is the outcome of centralization of physical power. In decentralized systems like bitcoin you invert that trust model and where previously you had to trust everyone who had access and therefore very few people could have access, in a decentralized system you trust no one, you trust the design pattern, you trust the math, you trust the self adapting system to reach equillibrium state in which reward for concensus is greater than reward for fraud. And in that equillibrium the system is not only self-sustaining, it is also completely open. You don't need access control. You don't need secrecy. You don't need vetting when you trust no one, but the design pattern. You can allow everyone to access and so it completely inverts the trust model, and it creates this new environment where through this diffuse authority you can achieve trust through massive scale with massive participation.

But here's the problem: you can't explain that. It's very difficult to explain that narrative because people intuitively associate authority with centralization because that is the only authority model they've ever seen.

...

The only two models we have seen so far are either authority vested in a single individual, or authority vested in a heirarchical organization designed to distribute that authority through checks and balances implemented through process. So we use organizational and process tools to control authority, to diffuse it, whether that's the US Constitution creating a three part government with checks and balances, whether it's a corporate governance board where a board of directors vies for power against the chief executive officer to create balance, essentially to unvest the individual and instead to vest the process with a higher level of trust because the process is not as easily corruptible. And now we have taken this a step further by vesting authority in the design pattern and we're diffusing authority completely until their is no center, not even an organization. And that is a very difficult leap for people to make.

Listen to the whole podcast (over an hour) for a fascinating discussion on "The Why of Bitcoin."

An excellent primer on Bitcoin and financial privacy

One of Bitcoin's greatest potential benefits to society is its inherent transparency. Every transaction that has ever happened is documented and shared around the world in a psuedo-anonymous fashion. In other words, and unlike the much revered dollar, I can't take a bitcoin out of my wallet and hand it to you without the whole world knowing about it.

This is an amazingly powerful idea and paradigm shift, especially in light of the fact that financial institutions conducted themselves with the same degree of transparency, then we might very well have avoided some of the largest financial frauds perpetrated in the 20th Century. When we think about Bitcoin in these contexts, it is hard to dispute its relevance and significance to the People of the world.

On the other hand, the idea that every time one buys something from Amazon there is a public record of that transaction somewhere on the Internet for all to see can be equally alarming.

So how private is Bitcoin really? What are the legitimate reasons one might want to transact as anonymously with bitcoin as they do the US dollar?

The following podcast (about 52 minutes) is not only a fascinating primer on privacy at it relates to crypto-currencies, it also provides great insight into privacy on the other great decentralized technology of our time: the Internet. Oh yeah, that. In an age of constant surveillance by government and private industry, I recommend everyone queue this podcast up. You will be glad you did.