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Categories: General

Bitcoin's Finally Growing Up

Published on October 6th, 2013 by adam
By Adam B. Levine 8082257528_de23ab29a6Things move fast in the world of Cryptocurrency; since I started Let’s Talk Bitcoin in April of 2013 we’ve seen regulatory guidance that completely reversed the compliance landscape, companies come and go, we’ve seen the conference scene completely explode with at least one a month and sometimes as many as three or four events taking place all over the world, with their focus on either Bitcoin or Cryptocurrency. Over the last few days we’ve seen the apparent demise of Silk Road- the ubiquitous Bitcoin illegal stuff market- and the arrest of the man accused of operating it. And the price just was crushed.... but then, it bounced back almost immediately. Why is that? Let’s talk about Mt.Gox, the elephant in the room when it comes to centralized Bitcoin exchanges - In the crash and week-long funds-freeze about two years ago, the price of Bitcoin was literally unknown. Because that single exchange serviced a huge majority of Bitcoin’s transactions, it was an incredibly lucrative operation, but also a huge central point of failure for not just trading Bitcoin for other currencies, but establishing price in the first place. BitcoinTalk- for a long time THE Bitcoin community- was one of the earliest and certainly largest points of meeting and education for tens of thousands of new users learning about the currency. Recently it was hacked and when I checked it this morning, it was still down. There are a few similarities between these three events. First, they’re all controversial sites. They were ubiquitous, but everybody loves to hate the frontrunner... and, amusingly, The Silk Road probably had the best reputation of the three. They also don’t matter. Now a year, or even six months ago I think this would be a very different and much darker talk - But the free market is at work here, and while in the past these events would have crushed their various niche... That’d be contraband for Silk Road, Price and Liquidity for Mt.Gox, and Community and Thought Leadership for BitcoinTalk; their success catalyzed and incentivized the next generations. What we’re actually seeing is that these high profile, ubiquitous and centralized (in their own way) operations are arguably just as dangerous as the new players. They may have more reputation, but that makes them a more tempting target for bad actors just as it does for new users. So even in these fields we viewed as dominated by one or two players.... Increasingly, that won’t be the case. These things don’t matter any more because there are now alternatives that are just as good if not better.  Alternatives who are just waiting for the vacuum left by the failure of what have become our legacy institutions... our too-big-to-fails. Except lacking a monopoly, there’s no such thing as too big to fail, each failure is really opportunity for someone more in-tune with the needs of the customer. These institutions were the first, but they’re not the last. Silk Road has three or four very similar competitors who’ll fight for their customers. Gox is arguably less impactful on the price of Bitcoin for those in the know than it’s ever been.  BitcoinAverage.com, an open source weighted price index, actually has a button that lets you completely remove them from your calculations, and BitcoinTalk in recent months has been overshadowed by the rapidly growing and much more new user friendly Bitcoin SubReddit.  If you tried reaching the subreddit in the last few days, you might have actually noticed it's loading slower... many Bitcointalk users have jumped ship at least temporarily. So the point is, where there used to be one voice howling against its respective wilderness, we don’t live in the wilderness any more. Bitcoin is growing up, Cryptocurrency and the entire ecosystem along with it. I am privileged to devote nearly all my time to Cryptocurrency, and I’ve never been more excited than I am now.  Things that used to be a problems are slowly but surely being made easy. We’re on the tail-end of the bootstrapping phase, where features are shoehorned and the fact that it works is the most important fact. There has been much talk of Applizing the experiance and hipster jargon it is not. Open Source projects have a problem of availability. Too much availability. The availability of the Satoshi client, in a format that serves its purpose, was enough for years of early users. Not that it was easy, explained itself well, or didn’t scare people away, but simply that somebody had already done it, it was available, and it was free. The recently-released Hive wallet for Mac OS, and the upcoming Keyhotee platform have taken aim squarely at this problem and look like they’re going to deliver. For buying products, Bitpay is a major major player in the space, but at the same time they weren’t trying to reinvent the wheel when it comes to how we buy things with Bitcoin. To this point, most merchants accepting bitcoin use that standard shopping cart flow, where you add a product to your cart, and when you’re finished you enter all your billing information, and pay the total with either a credit card or via a bitcoin address. But Really, Bitcoin doesn’t need anything like that at all. It’s a workflow and system created to address a problem, associating identity with payments. With Cryptocurrency, that’s a problem we no longer have. Shameless plug: Let’s Talk Bitcoin has partnered with the CryptoCurrency Conference to film, sell and distribute the videos and talks from this conference, as Jeffrey said during today's opening, you’re absolutely free to film, record and release whatever you want - The goal being that we have the event professionally filmed for the benefit of those not able to attend, without it being charity. So if you go to BitcoinVideoPass.com you’ll see our first implementation of the Bitcredits system. Actually it might surprise you, because the page at first glance looks like it’s just informational. It occupies just about 1/3rd of the page with the explanation text wrapping around it; you can make a complete purchase with Bitcoin without ever leaving the page, without giving any of your financial information and without even creating any sort of account with us. Technically this talk is called Doing Business with a Deflationary Currency. People think this is a big problem, who wants to spend Bitcoins when they’re hard to acquire and will gain in value over time? There has to be a compelling reason, and I’m going to share a trick with you. Charge more of people who pay in US dollars. You can call it discounting your Bitcoin price, or surcharging your dollar price - If you want people to part with their Bitcoins for whatever you’re selling, you need to take into account the future value of Bitcoin. Because your customer is considering that, and if the mental math doesn’t work for them, they’re gonna pay you in dollars because why shouldn’t they? For our passes we’ve offered between a 20-30% discount and found that our sales were 95% Bitcoin. Now obviously, I do a show called Let’s Talk Bitcoin, and we only promoted these pre-orders on the show, but I think the lesson to be learned here is that people aren’t stupid; offering a 5% discount for Bitcoin over dollars, I think, doesn’t cut it given the potential. As a merchant, I love this. We pay less fees, there are no automatic refunds (although I did process a simple manual refund for someone who overpaid by accident) and I have the funds in accounts I control in hours instead of days or weeks. Bitcredits is one option, and I like it a lot because it lets users essentially play the market against Let’s Talk Bitcoin. When they buy our on-site credits all the price volatility is removed from the equation. We denominate these credits in US dollars, so you can make one transaciton on the bitcoin network to load up your wallet, and any commerce you do on the site is instant and transaction fee free. You don’t have to do this, but if you choose to do so we take on the exchange risk for better or worse. Right now you can only buy these passes (which incidentally are heavily discounted for attendees of the conference, available at our table over there), but within the next week or two we’ll roll this out to our entire site. The Show is supported by a mix of listener donations, about 75% of which are amounts below $5 at the time they’re given, and we have a lot of content with two episodes of the show and between 3-5 original writings per week, each of which we encourage those who enjoy and value the content to donate to. Small though they may be, those who follow my advice to this point have paid more in fees than really makes sense, so these off-blockchain credit systems I think solve that problem. There are of course drawbacks, we centralize the records of value on our servers which means to a certain extent we have the responsibility to protect them but again look at what we have to collect - For digital goods we literally only need an email address, we don’t keep any funds on the server - merely US dollar denominated tokens that are as good as cold hard cash... but only with us. Eventually the system will go both ways, with users able to send tips or gifts to one another, and authors able to automatically “cash out” from our USD credits back into Bitcoin at the current exchange rate, but for now that’s a manual process. There are of course others trying for this same prize, the barrier to entry is low and the payoff for whoever nails the content monetization problem is enormous. Others doing great work in this space include BitWall.io and BitMonet, in partnership with BitPay And even these are a stopgap- Projects like Watershed and Egora are creating frameworks to build new communities and economies on, with Cryptocurrency built in at an infrastructure level. I’m especially excited about NetVend, which is complicated, but you can think of it like a simplified cryptocurrency infrastructure that lets those wanting to build complicated projects start with a platform that already does it all. The pipes are all there, you just need to plug into the right ones. In expertise just as in everything else, Cryptocurrency is a meritocracy. The people who are up here as experts generally speaking are because they want to be. Because they’re passionate about the future we can create and instead of waiting for someone to tell them what to do, they followed in Satoshi’s footsteps and just did it. I’ve got a saying, almost a mantra. It doesn’t matter that I do this now, but in six months it will matter that I did it six months ago. I think that’s Bitcoin in a nutshell- everything is positional. To mix some metaphors, we’re arranging lounge chairs while the Tsunami approaches, bringing with it a very different and hopefully better world. Thank you.

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