[dropcap size=big]S[/dropcap]ince inception, the disruptive nature of Bitcoin has ensured a flare-up of strong rhetoric and opinion. Most if not all of the popular media personalities have had something to say – a one-liner dropped casually to signify that their place in show business is still valid. Equally, financial and economic commentators feel compelled to “be seen” to have something to say and – often accompanied by the sound of a great rushing of air – end up exposing their complete ignorance of how Bitcoin has subverted the fraudulent economy of our time.
Meanwhile, kids who disregard school, and who spit at the idea of finding a puppeteered job in the center-right establishment, instead mine and trade altcoins. They can be found in exchange troll boxes – commandeering their cryptocurrency fortunes and exuberantly warning one another: “sell wall coming up!” and “That was pump. Now hold on sheeple, here comes the dump!”
It would seem that while some haughty types feel the need to talk about Bitcoin and try to pin down what exactly it is, others are bringing the cryptocurrency economy into being by doing. Participants include developers, miners, traders (yes, including those trollbox kids), exchanges, vendors, and anyone who obtains and spends bitcoins. Bitcoin’s design invites (and requires) participation for it to exist.
Reflecting on the past two weeks’ Transaction Malleability journey shows that the Bitcoin community was forced to mature by learning some uncomfortable truths:
A. the Bitcoin protocol is not as simple as most of us would have believed
B. the implementation of cryptographic layering and sequencing used in the Bitcoin software is understood only by a small select group of individuals.
C. just because a business is a Bitcoin business does not mean they won’t willingly do you in – in fact, they will do so with the assistance of bankers and lawyers.
Many of us might have preferred the naive optimism that prevailed only a few weeks ago, although, clearly, a period of stagnation had gripped the Bitcoin market since mid-December. How long can the current price doldrums persist? The wisdom of Market Cycles reminds us: During the gloomiest moments of every bear market, is born the defiant spirit of the next bullish advance! Whether or not the bottom of this market is “in”, remains to be seen. Although the Bitcoin community may now be more mature and more foolhardy, there are nonetheless some serious concerns voiced in the points above. We’ll deal with those in a separate article at another time. For now, to the present.
A spirit of expansion seems to be in the air as some prior “blockages” have apparently cleared by themselves. The Peoples Bank of China gave a tacit go-ahead for Bitcoin exchanges in China to resume operations as discussed by Bobby Lee in an interview recently. Incidentally, Thailand’s central bank also gave Bitcoin a tentative thumbs-up after “banning” it last year (outside of their jurisdiction as a bank, of course). Mt.Gox, Bitstamp and BTC-e got their fingers burnt by weak wallet implementations and the (presumed) round table of core developers workshopped their wallet knowledge to some degree of competence via standing-room only IRC. This may be adequate psychological level ground to serve as a foundation for progress.
However, the single most important factor for Bitcoin mainstream adoptions remains:
Given the crippling effect of credit card fraud on the retail sector, as well as, the Mastercard/Visa scheme whereby merchants have to bear the cost of transaction fees; which merchant will not jump at the chance to use a payment method that is a) more secure and b) has a negligible transaction fee cost ?
This is the reason why adoption is inevitable and also how we know that the process of adoption will be exponential once it reaches a watershed – as more businesses accept bitcoins (for the reasons mentioned above) so more consumers will embrace it.
Also of interest is some commentary coming from a Bitcoin stakeholder business in the US. Nevada based biometrics firm, SmartMetric, has for understandable reasons seen a great pollination prospect in Bitcoin. Their business model essentially deals with providing biometric interfaces to common authentication scenarios such as access control and bank cards. According to their press releases, the company is focusing much R&D effort on Bitcoin. And so they should, since many recent stories underpinned by loss and regret have served to remind us, the issue of wallet security is no trivial matter. Recently, when Bitcoin’s value scaled $1000, the sorry tales of wanton spending and mindless discard came from the wretched and the educated middle classes alike.
The $600 we spent would now be worth $6,000, I wish we had gone hungry.
– Angle, homeless man in Pensacola, Florida
Tragically funny because he probably means what he says, but not as funny as the man rummaging through society’s filth, looking for his BTC stash worth $7.2mil on a hard drive buried in a landfill in England somewhere. Advisers to the ever anxious, ever paranoid monied layer emphasize in every newsletter: “It’s Portable in a way that Gold just is not – and Secure – because you’re the only person who can unlock your wallet!” And there we have the one universal truth of cryptocurrency: the truth that applies to every holder of cryptocurrency regardless of race, class or religion: If you forget your wallet password you are fucked.
Back to SmartMetric in Nevada. The company has created a card-sized digital nanocomputer that can both store your bitcoin wallet, as well as biometrically authenticate you, as the wallet owner, before making it accessible. Good idea but what happens if you lose the card? Back to square one and back to the drawing board, SmartMetric. The company CEO must be given credit, however, for a good piece of advocacy he recently issued in an Open Letter on the Future of Bitcoin:
In time, a digital currency that has a perceived and agreed upon value, that is also a recognized medium of exchange, could indeed challenge physical currency. Bitcoin is fast becoming that digital medium of exchange and its commercial and societal impacts will depend upon how Bitcoin is perceived. Is it a currency, a contract, a commodity, a ledger or all of these? – Chaya Hendrick, SmartMetric, Inc.
He goes on to answer the rhetorical question with “Bitcoin is all of the above: a currency, a contract, a commodity, and a ledger”. Further on in the letter he discussed the great potential for banking to redeem itself by adopting the Bitcoin Blockchain as a ledger framework. That is such an oxymoronic idea that it deserves more thought and an article in itself… does he mean Bitcoin will challenge physical currency, but the banks will remain with digital currency and an Open Source blockchain? There are some mental scenarios that the mind tends to avoid, and this may be one of those! Careful consideration of this idea and it’s implications are needed.
In the wake of the November surge of Bitcoin’s value, there was much optimism for the cryptocurrency’s future and the Bitcoin community was justifiably excited when Bitcoin’s daily transaction volume exceeded that of Western Union. However, as for the month of January, matters have regressed somewhat, and Bitcoin’s volume has fallen away from Western Union’s. As can be seen from the following chart (courtesy of Coinometrics), volumes are well off the highs.
And here is a comparative chart showing volumes for the major money transfer players, earlier today:
Bitcoin Daily Transaction Volume and Quantity for 19 Feb 2014
The scale in the above chart is logarithmic, so don’t let your eyes deceive you. Although it appears that Bitcoin is edging close to Western Union in terms of volume the scale far left reveals that WU has almost 300mil vs. Bitcoin’s <100mil transaction volume. Not quite what it used to be. Will Bitcoin surpass Western Union again?
It surely will.
Last modified: January 22, 2016 16:41 UTC