Bad PR is when even your friends turn on you.
I’ve spent more than 5 years being a Bitcoin developer. The software I’ve written has been used by millions of users, hundreds of developers, and the talks I’ve given have led directly to the creation of several startups. I’ve talked about Bitcoin on Sky TV and BBC News. I have been repeatedly cited by the Economist as a Bitcoin expert and prominent developer. I have explained Bitcoin to the SEC, to bankers and to ordinary people I met at cafes.
… and then, after a short digression, brings out the knife:
But despite knowing that Bitcoin could fail all along, the now inescapable conclusion that it has failed still saddens me greatly. The fundamentals are broken and whatever happens to the price in the short term, the long term trend should probably be downwards. I will no longer be taking part in Bitcoin development and have sold all my coins.
Why has Bitcoin failed? It has failed because the community has failed. What was meant to be a new, decentralised form of money that lacked “systemically important institutions” and “too big to fail” has become something even worse: a system completely controlled by just a handful of people. Worse still, the network is on the brink of technical collapse. The mechanisms that should have prevented this outcome have broken down, and as a result there’s no longer much reason to think Bitcoin can actually be better than the existing financial system.
Think about it. If you had never heard about Bitcoin before, would you care about a payments network that:
- Couldn’t move your existing money
- Had wildly unpredictable fees that were high and rising fast
- Allowed buyers to take back payments they’d made after walking out of shops, by simply pressing a button (if you aren’t aware of this “feature” that’s because Bitcoin was only just changed to allow it)
- Is suffering large backlogs and flaky payments
- … which is controlled by China
- … and in which the companies and people building it were in open civil war?
I’m going to hazard a guess that the answer is no.
Then comes Bitcoin friend #2: Fred Wilson, with Bitcoin is Dead, Long Live Bitcoin. Fred hedges the headline in the text below, which he should since his firm has investments in the category. He also offers some hope, and a call to action:
I personally believe we will see a fork accepted by the mining community at some point this year. And that will come with a new set of core developers and some governance about how decisions are made among that core developer team. But it could well take a massive collapse in the price of Bitcoin, breakdowns in the Bitcoin network, or worse to get there. And all of that could cause the whole house of cards to come crashing down. Anything is possible. Even the return of Satoshi to fix things as an AVC regular suggested to me in an email this morning.
The Bitcoin experiment is six years old. There has been a significant amount of venture capital investment in the Bitcoin ecosystem. There are a number of well funded companies competing to build valuable businesses on top of this technology. We are invested in at least one of them. And the competition between these various companies and their visions has played a part in the stalemate. These companies have a lot to gain or lose if Bitcoin survives or fails. So I expect that there will be some rationality, brought on by capitalist behavior, that will emerge or maybe is already emerging.
Sometimes it takes a crisis to get everyone in a room. That’s how the federal budget has been settled for many years now. And that may be how the blocksize debate gets settled to. So if we are going to have a crisis, let’s get on with it. No better time than the present.
Much tweetage is going on. The best of it, to me at least, involves Vinay Gupta (@Leashless), who does an amazing job of unpacking Bitcoin politics, which seems to be most at issue here. (As Craig Burton (@craigburton) says, “All technical problems are technical and political. And you can always solve the technical stuff.”)
So take a look at this 12-minute video of Vinay holding forth on Bitcoin last August, when at least some of today’s problems were already surfaced. In it he talks about Bitcoin having “anarchist infrastructure producing a libertarian trading environment,” among other wise one- (and few-) liners. Great make-ya-think stuff there.
Bitcoin and the blockchain matter for VRM, because they can both help liberate individual customers (and groups) from the highly centralized systems that have reduced the free market to “your choice of captor.” And, though flawed, they are already in the world. If we are to prove that free customers are better than captive ones, we need systems that break us out of captivity. Bitcoin and the blockchain can do that.
I also want to pause here to express my love for Chris Ellis‘ Protip (@ProtipHQ), which allows anybody to pay whatever they want for anything on the Web, facilitated by a bit of open source code added to a site or service. One click and the cash moves. No intermediators required. No governments. No settlement systems. No credit card cruft. Consider the implications of that.
To solve Bitcoin’s problems (if they can be solved), I believe we need what Brian Behlendorf calls minimum viable centralization. That’s what Fred proposes in his post, and what — in some way or other — we will have at the end of the day. (Or the week, year or decade.)
The best example I know of mimimum viable centralization is Linux, which has a cluster of kernel maintainers at the top. All are benevolent dictators who earned their roles by proven merit. At the top sits Linus Torvalds, who started the whole thing and remains no less involved than he was in the first place. Linux isn’t in everything, but it’s close enough. Consider the implications for Bitcoin/Blockchain and other things like it.
Makes me think maybe it’s time for Satoshi Nakamoto (whoever he or she really is) to step up.
- Bitcoin’s Bold Experiment: A Goldmine for Economic Researchers, by Michael Casey in Medium (plus the list of related posts below)
- Bitcoin Price Crashes as its Branded a ‘Failed Experiment’, by Anthony Cuthbertson in Newsweek
- Bitcoin has died for the 89th time, by Mario Aguilar in Gizmodo — with HTs to @starkness and 99Bitcoins Obituary Stats