What’s up, Idiots!
Greetings from the Bolt Bus down to New York City, an excellent place to spend a spectacularly beautiful afternoon when you have a fever. Especially when your visit is for a torturous graduation ceremony for a future in-law. I even accidentally booked my ticket for the wrong day (last week), and despite my insistence that it was ok if there weren’t any spots left on the bus, the fine sir checking tickets was able to accommodate me. Exceptional customer service seems to always come at the wrong time.
Before I get to the Bitcoin 2014 recap, I wanted to point out that the Wall Street Journal reported on a letter that Brock Pierce sent to numerous Foundation executives and industry leaders over the weekend, in which he emphatically denied the recently resurfaced accusations that had been levied against him regarding sexual misconduct in the late ’90s. I was happy to see Pierce aggressively defend himself, and I posted the full letter last night. A simple “no comment” or “I was never charged with a crime” wouldn’t have been enough given the ugliness of the rumors, and I think he has silenced most rational skeptics at this point. Onwards.
As promised, here is a blow by blow recap of the Bitcoin 2014 highlights from Amsterdam, in no particular order…
-What’s the matter with free? A number of people have predictably pushed back on the legitimacy and viability of Circle’s “everything is 100% free and insured and instant” claims. I understand the skepticism, but I am withholding judgment until I have a chance to play with the product myself. However, the crux of the legitimacy argument lies in the fact that Circle (according to its terms of service) does not detail whether it will bake in its own bid-ask “spread” to user prices on buys and sales.
Depending on how these trades are executed, the spreads could represent hidden fees necessary to break-even on the “waived” ACH fees and insurance. I wouldn’t be surprised if Circle makes basis points (0.01% is one basis point or “bip” for finance geeks) on its quoted prices, but it would be utterly foolish if the fees add up to anything close to 100 bps - the current fees levied by Coinbase. It would be brand-killing foolish, and these guys aren’t idiots.
What’s more uncomfortable to me is the implication from the ToS that Circle won’t guarantee buy or sale prices in the event of heavy site traffic. Coinbase does this to a limited extent, which is nice when you have a day of insane price swings. It also gives you peace of mind that you can lock in certain prices during any “bank run.” My read: this is a near-term pain point that no one has truly solved yet. However, many derivative market makers are currently salivating over the opportunity, and expect this won’t be a long-term issue for any wallet service / pseudo-exchange.
The other push back had to do with the viability of Circle’s promotional offering once they move past their “invitation-only” speed limit. This skepticism has everything to do with the realities of fraud. One of the biggest costs for Coinbase today revolves around fraud prevention, something that founder Brian Armstrong knows like the back of his hand given his background at Airbnb. Multiple people close to Coinbase told me that the team is taking an “I’ll believe it when I see it” stance towards Circle’s promises. The “hidden fee” issue may be the only thing that matters to new users in the short-run, but it’s fraud prevention that will likely prove to be the competitive differentiator for these wallet services.
-The other big news from the weekend centered around the launch of BitReserve, a platform which plans to eliminate the volatility of holding bitcoin, and makes it easier for people to instantly transfer fiat currencies over the bitcoin payment rails. The company hopes to make foreign exchange simpler, with a product that appears to be part Venmo, part BitPay. They are essentially operating an exchange (2.7% fees for traditional currency exchanges (e.g. dollars to euros) and 1.3% for bitcoin to fiat exchanges), claim to have banking relationships that make it easy for customers to hold fully reserved fiat and bitcoin deposits, and aim to create a closed loop network of merchants and consumers who can transfer value within the network for free.
Founder and Executive Chairman, Halsey Minor, who previously founded CNET and was an early investor in Salesforce has corralled an impressive core team around the concept. I was initially extremely skeptical of the concept (Minor had trouble giving me a concise early use case for the product when I pressed him) as well as the company’s ability to pass regulatory muster. However, Minor does know a thing or two about cloud services, and he has reeled in one of the industry’s top AML/KYC compliance experts, Juan Llanos, as their EVP of partnerships (read: banks and other major financial services companies). I’ve found Llanos to be one of the more careful and impressive bitcoin executives, so when he says that they’ve got a product that could impress the financial establishment, I’m intrigued.
One other interesting note: this is a rebirth of sorts for Minor, who went from a fortune of almost half a billion dollars to bankruptcy in less than five years during the financial crisis. That’s a Tyson-esque collapse, but everyone loves a good comeback story.
-Props to Tim Schumann and Kyle Drake from Project Skyhook for letting me crash with them on short notice. I’m excited to try out their new ATM around Boston in the coming weeks (perhaps “vending machine” is more appropriate given its initial capabilities are one-way: fiat to bitcoin). I need to consult with legal counsel and Charlie Shrem to learn whether it will make me an illegal money transmitter should I demo the unit for friends, but c’est la vie. I’ve tweeted / mentioned it before, but Skyhook is the first sub-$1,000 bitcoin ATM, and the units come with open-source software. Tim and Kyle also happen to be good dudes, so I’m pulling for them to be successful.
-Amsterdam was an interesting place to have a professional conference. Between the lax drug rules at the “coffee shops” and the rows of hookers lining the streets in the red-light district, I watched multiple execs and investors walk into and then immediately out of after-hours meet-ups with expressions of “Yeah, I can’t be seen here.” The higher the profile, the faster the exit. Good to see that more people are cognizant of headline risks this year. (I gladly demonstrated to all I went out with that my phone’s rear camera had been disconnected.)
[Honestly, this made the weekend more entertaining for me. It’s much more fun to be around the cast of jet-setting early adopter characters who travel the conference circuit as enthusiasts than it is to be an interloper hanging out with the full teams of any one single company. Humorously, the execs at the bigger companies also tend to worry that I’m going to “scoop” them, or treat everything they say in front of me as if it’s fair game for my blog, so many tend to bottle up. I guess it’s understandable, but if I truly made a habit of reposting private conversations, I wouldn’t be on those companies’ media embargo lists, my sources would dry up, and I’d probably leave the industry.]
-If 90% of life is showing up, the other 10% (for me, at least) seems to be apologizing when I show up. The irony of the weekend was that I won an award for “insight” in large part because my audience grew after a bull-in-a-china-shop approach towards the Mt. Gox bankruptcy and Bitcoin Foundation shortcomings. But those same events proved to be ones in which I made a few colossally stupid and damaging professional mistakes. Most of my mea culpas have been of the private variety, but I did publicly acknowledge that I was too hard on BTC Foundation Executive Director, Jon Matonis. When I apologized to him during the Q&A at the Foundation’s members’ meeting (more on the meeting tomorrow), I saw Peter Vessenes perk up as if he were next in line.
Sorry, Peter. You should still resign, and most people want you to.
Now for Today’s Tid Bits:
The Fed’s Surprisingly Warm Take on Bitcoin
http://blogs.wsj.com/moneybeat/2014/05/19/bitbeat-the-feds-surprisingly-warm-take-on-bitcoin/
The Federal Advisory Council recently admitted that bitcoin could be a “boon” to economic activity. The Federal Advisory Council is a Federal Reserve-commissioned committee of bankers that regularly advises the Fed’s board of governors. The council said that illicit uses for bitcoin are “rampant” but suggested other currencies have the same risk. The Fed addressing bitcoin in a positive light is a big step for its early adoption in the US.
Winklevoss twins: Bitcoin will be bigger than Facebook
http://www.theguardian.com/technology/2014/may/19/winklevoss-twins-bitcoin-bigger-than-facebook-investors
The Winklevii are once again talking their bitcoin book, this time to the Guardian. Following their Facebook settlement, the twins decided to invest heavily in bitcoin, amassing about 1% of the $5.7 billion worth of bitcoins available on the open market. Recently they said that bitcoin could potentially be more impactful than Facebook “because being able to donate 50 cents to someone across the world has more impact than sharing a picture.” Still haven’t changed the name of the Winkdex though.
San Jose Earthquakes First Pro Sports Team to Accept Bitcoin In-Stadium
http://newsbtc.com/2014/05/19/san-jose-earthquakes-first-pro-sports-team-accept-bitcoin-stadium/
The MLS team out of California announced that they are the first professional sports team to accept bitcoin payments in their stadium. Each point of sale (the ticket gate, merchandise store, and concession stand) will be equipped with a tablet running the Coinbase Merchant application. The 10,000 seat, bitcoin accepting, venue will host its next game on May 25th.
Bitcoin Exchange Probed Over Shuttered Drug Market
http://online.wsj.com/news/articles/SB10001424052702304422704579570132275301414
U.S. authorities have opened a new front in their investigation into bitcoin exchanges and other businesses that deal in the online currency, examining possible ties between the firms and the online drug bazaar Silk Road. People familiar with the matter claim that other bitcoin businesses, besides Mt. Gox, received subpoenas from Manhattan federal prosecuters this winter. The article goes on to highlight the crash of Mt. Gox.
Chicago Sun-Times to Let Readers Buy Jay-Z, Beyonce Tickets With Bitcoin
http://www.coindesk.com/chicago-sun-times-to-launch-jay-z-beyonce-concert-ads-with-btc-payment-codes/
The Chicago Sun-Times will deploy ads with bitcoin payment support that enables direct consumer purchases. Although the company originally tested bitcoin micro-payment options with BitWall and Coinbase, it appears they will also work with GoCoin to accept alt currencies like litecoin, peer coin and dogecoin, which Sun-Times CTO, Josh Metnick, referred to as a “super like” button for the internet.
LocalBitcoins.com Back Up and running
http://newsbtc.com/2014/05/19/following-two-day-downtime-localbitcoins-com-service-slowly-returns-normal/
After the weekend scare, the exchange is back up. The site allows users from around the world to buy and sell bitcoins from other nearby users. After a problem with the network hardware was solved the site was back up and running yesterday.
Today’s question of the day: if you could murder one inanimate object what would it be? I say spotty wifi wins hands down. We’re all hopelessly spoiled.
Cheers,
TBI
P.S. Don’t forget to patronize Gyft, a generous Daily Bit sponsor and amazing consumer application for bitcoin. You can earn 3% back for all of your bitcoin purchases at retailers like Amazon, Whole Foods, Target, etc.