Making my way back from Inside Bitcoins London, my fourth international Bitcoin conference in five months, I definitely empathise with Nic Cary‘s comments that these events tend to feel more like a reunion than a conference. Whilst the scene continues to grow and new people pop up all the time, you can’t help but bump into many of the same faces no matter the location around the globe – which makes the events such as these so useful for networking.
I’m not going to write a huge post on the event because no doubt videos and commentary far more erudite than mine will be posted in due course. But here’s a few of my takeaways for those who couldn’t make it along.
It’s been an interesting year so far in Bitcoin (nothing new there). Despite the raft of huge announcements that would usually be expected to catapult the price upwards (adoption by Overstock, Dell, Expedia, Dish amongst others – and the list just keeps getting longer), there’s actually been very little price movement upwards this year.
For those of us who see block chain developments as the beginnings of a fundamental restructuring of the world of finance (and more importantly reaching far beyond this area alone), this is of zero consequence. But it’s no doubt shaken out a few speculators whilst introducing a level of maturity that acts as a vital counterweight against the sometimes all-encompassing bubble of enthusiasm from users.
Experienced bitcoiners are well aware of the challenges that lie ahead. For example, lack of privacy remains an issue, as does enabling scalability of the consensus mechanisms, simplifying the on-ramps and off-ramps (i.e. making it easy to buy and sell), ensuring that remittances fulfil their world-changing potential (should we help African charities accept bitcoins or instead work towards providing more immediate access to clean water for people, for example?) and the dearth of user-friendly platforms that are necessary for mass adoption (despite significant recent improvements). However, for any first-timers reading this blog, the reason that people remain so interested in block chain technologies is because these are all issues that have potential solutions – we’re just not there yet.
This is the maturation of an industry. And this is A Good Thing.
The Emergence of Crypto-Law
As Gavin Wood of Ethereum put it, “We can expect to pay less on our legal fees and more on our programmer fees”. As someone who has a background in the legal industry, I’ve always maintained that the industry is bloated and ripe for disruption. Whilst the mass adoption of smart contracts will never command the size of premiums per transaction that the legal profession has enjoyed for the past 40 years or so in particular, less profitable transactions will be more than offset by the sheer quantity of automated contractual experiences in the future.
Lessons from the past
Dr Bob Swarup gave the talk of the conference on Money Mania pointing out that financial crises tend to come about once every decade or so. Think about that for a moment. We’re now six years on from the last meltdown in 2008 – and none of the root causes have been addressed. The debt has simply been aggregated and the stakes raised in this global game of pass-the-parcel – a sobering thought.
Bonus general knowledge: back at the end of the 1800’s, there was a surge in the popularity of bicycles which paved the way for the eventual success of cars a couple of decades later. Popular opinion held that this new bicycle ’technology’ would revolutionise business by breaking down the existing transportation barriers for ordinary people. Whilst it didn’t quite pan out as envisaged with the consequent world disruption not in fact arriving on two wheels as suggested, the roads that were subsequently built to support the predicted explosive growth in cycling certainly made it easier for cars to then be adopted. Could we now be seeing something similar with Bitcoin acting as the pre-cursor to the eventual integration of block chain technologies?
Scalability requires state acceptance
It’s a hugely controversial issue for so many Bitcoin believers but (as you might expect at such a conference) one that was mentioned by a number of speakers. Yes, governments are powerless to stop the practical usage of Bitcoin. But to really scale adoption to a world-changing level in which usage crosses over to the majority, engagement with (and no doubt some form of regulation by) existing authorities is likely to be necessary.
It’s important to note however that whilst perceived reality amongst ‘outsiders’ might be that mass adoption will not happen in developed countries without this dialogue, this shouldn’t been seen as simply a sign that we are in some way over-dependant on the state. It’s because money is, at its core, based on one thing in particular – trust. And the more people that use the form of money, the level of trust increases. Engagement in numbers builds that trust and is the key to harnessing that essential network effect that is (many argue) a precursor to mass adoption.
Everyone hates the BitLicense
Obviously. If you’re in the Bitcoin community in any meaningful sense, you’d have to have spent the last few months with a lost wifi password to have missed this one (in which case you’re probably a pretty strong outlier within a whole community of outliers in any event).
There are many criticisms of the proposals (take a look here, here and here for some background). The extra-territorial reach of the draft BitLicense looks insane for a start: as drafted, the rest of the world will be forced to exclude all New York ‘persons’ from its Bitcoin products and services as a result. It all boils down to that old chestnut – education. There are many businesses within the Bitcoin ecosystem that are actually software companies despite appearing to be financial services businesses to the regulators. Like it or not, education remains the most critical work to be carried out for those involved in Bitcoin during the next twelve months and beyond.
Why this isn’t another dot.com bubble
There’s a lot of chat about the fact that VC money is piling into the sector. But for those who are lazily looking for parallels with the dot.com bubble, consider these differences. First, the total VC funds are still significantly less than those being invested around 2000. Second, funding doesn’t need to come from the Valley. This Bitcoin thing is definitively not a Valley thing. The distributed nature of the technology means that Bitcoin companies can be developed anywhere, with globally distributed teams. Third: the growth of the industry is not simply reliant on VC funding this time around. Crowdfunding, P2P lending and other forms of funding are now a significant factor when utilised within a community that is highly engaged and enthusiastic.
Successful alternative currencies already exist
Many people already know about the success of the Brixton Pound. But it’s interesting to also consider the Wir in Switzerland which is a standalone currency that has existed in that country for around 80 years with some 60,000 users (mostly small businesses). A currency that survives that long has to be doing something very right. Interestingly, during the global economic downturn, Switzerland suffered far less than many countries. A variety of possible explanations exist but the strength of an alternate monetary system that could function outwith the credit crunch to buffer the demands of business for working capital was undoubtedly a significant factor. Don’t get stuck thinking that there is no life outwith fiat.
Evolution in existing payment technologies
Unsurprisingly, Apple Pay was discussed in various contexts after last week’s announcement. Despite some press articles that suggested it could have a negative impact on Bitcoin, my view (which I’m happy to say appears to be the consensus) is that this is most definitely a Good Thing for Bitcoin. As people get used to the simplicity and ease of digital payments via mobile, it will be far easier to convince them to subsequently make the jump across to using Bitcoin over time. Plus the reality is that the world’s leading consumer technology brand still has a niche market share, within specific countries, and is only used by one specific (wealthy) demographic. On the other hand, Bitcoin is global, free and open to anyone.
The development of the payment sector is fascinating and, whilst he wasn’t speaking at this Conference, I thoroughly recommend Richard Gendal Brown‘s recent post on tokenisation if you’re interested. In fact, anyone with an interest in this sector should be reading his blog regularly in any event.
The China Effect
Surprisingly, there was far less focus on the country than in pretty much every other event that I’ve been along to. But with reports showing that 47% of the richest people in China plan to leave the country within the next five years, how are these people going to get their money out of the country? And what sort of impact will that transfer of wealth have on adoption of Bitcoin?
Where is the real demand for Bitcoin?
How do you identify powerful use-cases that will encourage people to use, rather than hoard, bitcoins? More insightful comments from Steve Beauregard of GoCoin who urged everyone to think about times that people have rushed to spend their bitcoins previously. His conclusions are that the key areas to date where Bitcoin has solved genuine pain points for existing consumers are: (1) where privacy is desired, (2) where other payment methods are commonly rejected, (3) where fees are extremely high, (4) where eco-systems are cyclical (e.g. mining).
As a Bitcoin entrepreneur at this stage in the adoption cycle, providing goods and services that take account of these universal truths will likely enhance your potential for success. It’s an important point – as is the argument that says you should use services that enable you to offer as many options for payment by your customers as possible (e.g. Bitcoin, Litecoin, Dogecoin etc). Why limit your potential market?
The islands make their play
Jersey and the Isle of Man are really going all out to attract virtual currency businesses. There’s some incredible tax breaks in the Isle of Man in particular if you’re looking to set up a Bitcoin business there. Despite the bad news they had immediately following their Crypto Valley Conference this week regarding banking arrangements, I think they’ve got a fantastic chance of delivering on that promise. There’s huge potential where there’s government support and a closed-loop economy.
Verified identity in a decentralised world
For me, this remains one of the absolutely pivotal requirements of future business in a decentralised world. There are obviously projects working on this at the moment (check out onename.io for example) but there remains huge potential for the modernisation of AML/KYC issues following developments in this area.
I headed along to CoinScrum on the first night of the Conference for more chat from Jeremy Allaire of Circle amongst many others (aside: Circle is looking slick, I’ve got to say – it’s improved even since its launch in Amsterdam and I’m looking forward to getting my hands on the app that was demoed and currently in development). T15B, the brand new co-working space for Bitcoin startups in London is brilliant. I can only say that I’m hugely jealous. We don’t yet have the density of Bitcoin/blockchain startups within Scotland to justify that but it’ll come, I’ve got no doubt. Congratulations to Pamir and Gulnar, co-founders of the amazing CoinSummit for all their work in creating T15B.
So, all in all, another great conference. A big thanks to Eitan Jankelewitz who invited me along and to so many others I’ve managed to catch up with over the past week as a result. Well, I think that’s it for Conferences for this year. Now it’s time to work out how we continue to build what we have in Scotland. In the next few weeks, we’ll be looking at taking the next step in developing the scene north of the border – so keep your eyes peeled.