Regarding DPR #2

Not as much hate mail as I expected yesterday, and in fact, I think I probably heard positive feedback from many in the silent minority. Today, I did have a few practical follow-ups from my “screw DPR” post, though. Tomorrow, expect a reaction piece to the (likely) BitLicense 2.0 that Ben Lawsky will be unveiling down in DC (it appears).

***

The truth is, I said yesterday that I spent a lot of time thinking about DPR/Silk Road over the weekend. Let me elaborate on that: I don’t care about Ulbricht personally, other than I think it’s ludicrous that he’s being turned into a martyr. But I did think about what this all means for the future of bitcoin and our society. Here are my key takeaways…

1) We’ll see legal, VC-backed Silk Road equivalents.

Ross Ulbricht was a pioneer, but he broke the cardinal rule of bitcoin: he created a centralized marketplace, and it cost him. What happens when Silk Road can get effectively decentralized and open-sourced, so that it becomes impossible for authorities to seize the site and arrest the administrators for the actions of some of the marketplace’s vendors? How can you stop people from writing lines of code if they have nothing explicitly to do with illicit activity? And what happens when smart contracts proliferate and you don’t need an escrow agent to play middle man in order disputes? You’ll probably see VC-funded decentralized marketplaces, whose teams work on the open-source code (which can be used by anyone for whatever purpose), but also offer services that only apply to legal activities. You think a software entrepreneur would go to jail after raising $10mm from Sequoia. Puhhh-lease.

2) Criminals will need to find a better payment option than bitcoin.

When are people going to learn that bitcoin isn’t anonymous? Chainalysis and other blockchain analytics companies are soon going to make it even easier for authorities to monitor the blockchain for illicit activity and target criminals. Bitcoin tumblers will need to become ubiquitous, or we’ll need an entirely new currency (ZCoin anyone?) to create truly anonymous transactions. Granted, this has been pretty obvious for a while, but it bears repeating given the critical juncture bitcoin has reached with global regulations. Bitcoin is not anonymous. And that’s both good and bad from a legal perspective.

3) An opt-out society doesn’t sound so crazy to me anymore.

I really don’t consider myself an irrational libertarian. I think we need government for a number of really important tasks (safety net, minority rights, criminal justice, national security, infrastructure spending, etc.), it’s just that the one we have right now is so dysfunctional and maybe even irreparably broken that it’s hard to keep any faith in the system we have. How in the world does DPR get life while the bankers at HSBC who laundered money for the Sinoloa cartel were never even charged with a crime?

Look, I get it. That’s why so many bitcoiners and libertarians are up in arms about this verdict in the first place, and they’ve got a point. Our legal system is an inequitable disgrace. People with political connections, money or white skin just don’t get the same equal treatment under the law. Never have and never will. And that’s why the more I think about it, the more I’m intrigued by Balaji’s “opt-in society” or Peter Thiel’s seasteading. I used to think that these were just batshit crazy ideas which made for funny punchlines in Silicon Valley. But I don’t know. Some of it makes sense, but it’s still a very Ayn Randian, privileged thought experiment.

4) Combine those three takeaways, and you’ve got a vision of the future.

Decentralized marketplaces powered by blockchain technology will ultimately do more to subvert the power of the state and central authorities more than anything else in history. I truly believe that, and don’t think it’s a hyperbolic statement. And I think many of you feel the same way.

I’m not just talking about a new eBay for drugs, I’m talking about everything: transportation, financial services, internet access, cloud computing, healthcare, education, and even governance itself. I don’t even think hardcore bitcoin enthusiasts appreciate how disruptive blockchain-based decentralized consensus can be. If you make it more or less impossible to regulate software (speech), and you make it stupid simple for people to conduct *ethical* commerce safely and completely anonymously, and enough people believe that ethical, but possibly “illegal” commerce should be left alone, you’ll neuter the power of both the state and their powerful corporate friends.

***

Mini-rant time…

I should add that I tend not to let my most radical political beliefs spill over into these blog posts, but the truth is my politics aren’t so different from many of the current DPR apologists. It’s just that I think it’s smarter to play the long game.

I don’t see any scenario in which the state loses its power through force, or even civil disobedience for the most part. Not only are we at perpetual war and (hopefully) peak police militarization, but we are stuck with leaders that do nothing but fight for re-election, funded by special interests that profit from the gridlock, and empowered by an entertainment-driven media that simply makes us angrier and dumber. Working everyday in this industry is in many ways my version of Balaji’s “opting out.”

While no one is really paying attention, I’d prefer to play a part in promoting and improving this insanely powerful technology, keep my head out of the figurative (and maybe literal) guillotine, and watch friends and colleagues ultimately do what our “leaders” are too selfish and incompetent to do themselves: the right thing.

I don’t know if that makes me an anarcho-capitalist, but I’ve been called worse.

Events

BTC2015 | Nov in New York City
Bitcoin’s annual can’t miss conference is happening this November in New York City. We are currently finalizing dates and venue. Sponsored by Digital Currency Group. More details in June.

Keynote2015 | Aug 3 in Los Angeles
Bitcoin is about to revolutionise the financial world, but not in the way you’d expect. Hidden in the cyber currency’s DNA is the ability to transform the financial world from an antiquated behemoth to a modern beacon of efficiency. The secret is in the ledger. Find out exactly how a new generation of ledgers is about turn banking on its head at Keynote2015, the conference that redefines FinTech. A one-day agenda packed with the brightest industry minds will get you quickly up to speed on future applications and the existing goldmine of start-up opportunities. Tickets: keynote2015.com | Sponsorship and exhibit enquiries: hello@keynote2015.com

Jobs, Jobs, Jobs

Grayscale Investments, New York (a DCG Company)

The manager of the Bitcoin Investment trust, the first publicly traded bitcoin investment vehicle, is making two non-engineering hires. (grayscale.co)

-Account Manager — Min 3 years of demonstrated sales-driven success within the financial industry, preferably in an investor development or capital raising role; Series 7 and 63 licenses certifications. More info here.

-Marketing Manager — Min 4 years of demonstrated success in product marketing, preferably in the financial space; looking for candidates with experience marketing either public or private investment products and/or marketing for asset management businesses. More info here.

ConsenSys, New York (consensys.net)
Blockchain production studio building decentralized applications in the blockchain 2.0 space (mostly on Ethereum). These tools will be packaged into separate ventures that are individually funded and skinned for different business niches. We are hiring 5–15 students for a summer internship program where they will have access to our amazing team and have the opportunity to plug into numerous ongoing projects. (Since ConsenSys is itself a somewhat decentralized company, with personnel in various cities, remote working interns may be considered.)
-Please apply by sending an email to info@consensys.net with work samples, resume, and general interests in the space. If you include a proposal for a dApp, smart contract, or other useful tool you want to build, we may consider the development of that project.

Today’s Tid Bits

News of Bitcoin’s Death Greatly Exaggerated
http://www.bloombergview.com/articles/2015-06-02/financial-interest-shows-bitcoin-death-exaggerated
Beginning late least year, bitcoin headlines were signaling an imminent death for the currency. The value of bitcoin had fallen more than 56%, outpacing the drop in the ruble and Ukrainian hryvnia. However, the grim news was over exaggerated as bitcoin has gained much steam in recent weeks with financial firms adopting the blockchain, major banks investing in bitcoin based startups, and key figures are joining the boards of some of the biggest names. Many are eyeing bitcoin’s potential benefits, such as being an effective medium for exchange/mechanisms for recording information.

How the Bitcoin Market Cap Explains a $1 Million Price Prediction
http://moneymorning.com/2015/06/02/how-the-bitcoin-market-cap-explains-a-1-million-price-prediction/?gated_signup=true&gateType=1
At its core, bitcoin’s value is derived from pure supply and demand. With a finite number of bitcoins and a countless number of applications for the currency, the value of each bitcoin can reach up to $1 million as demand begins to grow. The currency has the potential to capture a large share of the $2 trillion electronic payments market, the $1 trillion e-commerce market, and the $514 billion remittance market. The larger the demand for the currency, the higher the market cap and ultimately higher prices for each bitcoin held.

BitBeat: Grand Plans for Bitcoin From Necker Island
http://blogs.wsj.com/moneybeat/2015/06/02/bitbeat-grand-plans-for-bitcoin-from-necker-island/
Some of the bitcoin industry’s most prominent figures gather on Richard Branson’s private island for the Blockchain Summit. The group discussed various projects that would leverage the blockchain to change the lives of billions of people around the world. Something worth noting is that a fair amount of non-tech expertise attended the summit, which shows that bitcoin and the blockchain can find success through those who fully understand political, social, and cultural realities. Some of the most prominent ideas discussed was the use of the blockchain for land titles and BitFurry’s light bulb that was designed to mine bitcoins.

Bitcoin App Issues Critical Update After Rare Bug Leads to Total Crypto Breakdown
http://www.theguardian.com/technology/2015/jun/01/bitcoin-app-critical-update-bug-crypto-breakdown
Bitcoin wallet Blockchain suffered from a bug that left multiple users sharing a bitcoin wallet and bitcoins being sent to the wrong addresses. The bug came after the company released an update for its Android app. Certain versions of the Android operating system failed to provided sufficient entropy which directly caused multiple users to generate duplicate addresses. The company recommends downloading the latest version of its app on the Google Play store and users updating their Android OS.

Why Banks Are testing Bitcoin’s Blockchain (Without Bitcoin)
http://www.americanbanker.com/news/bank-technology/why-banks-are-testing-bitcoins-blockchain-without-bitcoin-1074622-1.html
The financial industry is warming up to the prospects of bitcoin, and more specifically the blockchain. Financial institutions see opportunity in using the blockchain to increase efficiency and security in current payments systems. While major banks will not use the public ledger on the blockchain, they are instead going to develop in house blockchain ledgers that would remain on their own internal servers. Several institutions have already begun experimenting with the blockchain such as Bank of New York Mellon, Nasdaq, and CBW Bank.

Apple Approves New ‘Game of Birds’ App With Bitcoin Tipping
http://cointelegraph.com/news/114444/apple-approves-new-game-of-birds-app-with-bitcoin-tipping
Bitcoin is gaining traction in the App Store as Apple approved the second bitcoin enabled tipping app called Game of Birds. Players who receive in game rewards are given bitcoin, which comes from the games own bitcoin wallet. The game derives bitcoin from advertisers who give the currency in exchange for advertising space on the app. While the game does not focus on bitcoin, developers said that they wish to contribute to the growing popularity of bitcoin and help the currency become more mainstream.

Bitcoin’s Tech is Entering the Major Leagues
http://www.cnbc.com/id/102707183
Major companies, investors, and technologists are betting that the blockchain, rather than bitcoin, will have a lasting impact on the global financial system and on our everyday lives. Numerous major players have begun experimenting with the blockchain such as Seagate, Overstock, Nasdaq, IBM, and Samsung. During the Blockchain Summit hosted by Richard Branson, Jeff Garzik compared the current state of the blockchain to the Internet pre 1990. He continued to describe how the blockchain is the lowest layer of a network, similar to that of TCP/IP, and that in the coming years the industry will shift from discussing the blockchain to focusing on the myriad of applications that are built off the underlying technology.

Andresen Considering Shift to Bitcoin Xt
http://www.coinbuzz.com/2015/05/30/andresen-considering-shift-to-bitcoin-xt/
In an email chain with other bitcoin developers, Gavin Andresen expressed a strong interest in moving forward with a patch on the Bitcoin Core, called Bitcoin Xt, in response to a growing debate about the potential increase of the 1 MB block size limit. Andresen laid out a plan for the adoption of Bitcoin-Xt that would involve lobbying merchant services, exchanges, and wallet companies to utilize the new patch, and gaining a larger support for bigger block size in the bitcoin community. However, there has been backlash against the proposed initiative as some fear the overall bitcoin system can be comprised if Bitcoin Xt is integrated. The topic continues to be a hot topic for debate amongst individuals in the industry.

Will Bitcoin Kill Don Drapper? Mad Men and the Real End of an Era
http://www.forbes.com/sites/jerrybowyer/2015/05/31/will-bitcoin-kill-don-draper-mad-men-and-the-real-end-of-an-era/2/
The business model for the advertising industry has changed little since the Mad Men time period. Media companies generate a majority of their revenue from advertising space because it is seemingly impossible to charge consumers for a single article or video they watch online. However, with the introduction of bitcoin and the blockchain, micro-payments become feasible and economically efficient. Micro payments changes the business model for media companies as they can begin to generate revenue from actual users rather than relying solely on advertising space that has remained virtually unchanged for years.

Australia’s Commonwealth Bank Latest to Experiment With Ripple
http://www.coindesk.com/australia-commonwealth-bank-ripple-experiment/
Australia’s Commonwealth Bank (CBA), one of Australia’s largest banks, will begin integrating Ripple technology to facilitate payments between its subsidiaries. The bank will begin testing the Ripple protocol with one of its subsidiaries to fully understand the benefits of using a crypto payment system rather than existing payment providers. This news comes after German bank Fidor becoming the first bank to integrate Ripple’s protocol, followed by US banks CBW Bank and Cross River Bank.

Bitcoin ATMs Reach 400 Units Worldwide, 2-Way Machines on the Rise
http://cointelegraph.com/news/114409/bitcoin-atms-reach-400-units-worldwide-2-way-machines-on-the-rise
Bitcoin ATM adoption has risen sharply in the last few years as 400 machines are currently available around the world. According to Coin ATM Radar, one bitcoin ATM is installed every two days which signals stronger demand for consumers. US and Canada have more than half of the machines available in the world with 133 and 69 respectively, followed by Europe and Asia. Lamassu, the industry leader for bitcoin ATMs with 32.5% market share, released data showing that its machines produce an average profit for $1,000 — $3,000 a month for its operators.

The Future of Bitcoin Is Bright; Jesus Would Know
http://cointelegraph.com/news/114435/the-future-of-bitcoin-is-bright-jesus-would-know
Roger Ver spoke about the rapid growth of digital currencies at the Pioneers Festival in Vienna. Ver highlighted that as the number of startups and investors increase, the overall moral of bitcoin will grow, as consumers will begin to adopt the currency across all sectors including buying goods, remittances, and online gambling. Ver also noted that if Amazon adopted bitcoin the company could significantly reduce the roughly $2.6 billion on credit card fees it pays. Ver believes that an increase in adoption by businesses, consumers, and investors will ultimately increase the value of each bitcoin to hundreds of thousands of dollars.

Ross Ulbricht, Creator of Silk Road Website, Is Sentenced to Life In Prison
http://www.nytimes.com/2015/05/30/nyregion/ross-ulbricht-creator-of-silk-road-website-is-sentenced-to-life-in-prison.html?_r=0
Ross Ulbricht, the founder of the Silk Road, was sentenced to life in prison due operating a drug bazaar and soliciting murders of those who he saw as a threat to his operation. Ulbricht used bitcoin to trade goods through the online marketplace and he collected millions of dollars in commissions in bitcoin from each sale. In three years of operation, over 1.5 million transactions occurred with 100,000 buyer accounts and several thousand seller accounts. The New York Judge wanted to set a precedent for future cases as Ulbricht was the first person to be convicted for operating an online drug marketplace.

Accenture: UK Government Should Regulate Bitcoin Wallets
http://www.coindesk.com/accenture-uk-government-should-regulate-bitcoin-wallets/
Multinational management consulting company Accenture responded to the UK Treasury’s call for information on digital currencies by proposing minimal regulation on bitcoin wallets. While taking an overall positive stance on the digital currency, Accenture believes that government regulation of bitcoin wallets will encourage larger UK bank participation in the industry, and add security features such as individual wallet identification and money laundering oversight. In addition, the company proposes creating an Authorized Digital Currency Wallet Institutions list that would monitor transactions, ensure payments are between identifiable wallets, and be able to freeze wallets in case of suspicious activity. Accenture has begun to experiment with blockchain technology in its Technology Labs to test how its financial services clients can leverage the technology in their own businesses’.

Regulation and Tax Breaks for Bitcoin Proposed by N.J. Lawmakers
http://www.nj.com/politics/index.ssf/2015/05/regulation_and_tax_breaks_for_bitcoin_proposed_by.html
New Jersey lawmakers proposed a bill, dubbed the Digital Currency Jobs Creation Act, that would create regulatory guidelines for bitcoin companies and offer tax breaks to firms that service or exchange bitcoin. The bill aims to be less strict in regulation than the current iteration of New York’s BitLicense. The legislation is incentivizing bitcoin companies to operate in the state by offering very favorable tax credits for jobs created and exempting companies from paying taxes on money spent on electricity. The proposed legislation would add clarity to the regulatory environment for bitcoin and can possibly set a model for other states to follow.

Top 10 Countries in Which Bitcoin is Banned
https://www.cryptocoinsnews.com/top-10-countries-bitcoin-banned/
The bitcoin industry has experienced a tumultuous regulatory environment globally. Although some countries, such as America and UK, have shown positive attitudes toward the technology, other countries have banned the currency due to fear, desire to protect their local currency, or ignorance surrounding the technology. China has deemed the currency illegal strictly for banks, even though the country has the world’s largest bitcoin trading market. Other countries include India, Russia, Sweden, Thailand, Bangladesh, Vietnam, Bolivia, Ecuador, and Iceland.

Official ‘Life on Bitcoin’ Documentary Trailer Released
http://www.coindesk.com/life-on-bitcoin-documentary-trailer/
The trailer for a new documentary called Life on Bitcoin has been released. The two-minute video starts with the newly wed couple’s goal to live 90 days strictly on bitcoin. However, the couple runs into serious roadblocks as there were few places that even heard of bitcoin and even fewer that accepted the currency for payment. The documentary is expected to launch summer 2015.

Richard Branson’s Block Chain Summit Asked to Address Bitcoin’s Massive Potential Power Drain
http://upstart.bizjournals.com/entrepreneurs/hot-shots/2015/05/27/richard-branson-s-block-chain-summit-asked-to.html
Richard Branson hosted a gathering of leaders in the bitcoin industry on his private island for the Block Chain Summit. One of the key issues surrounding the summit is with the large amount of electricity used to mine bitcoins. According to a model built by Australian think tank Long Future Foundation, someday bitcoin mining can consume 60% of the global electricity or 13,000 terawatt hours. Industry leaders will discuss ways to combat the rising demand for electricity by bitcoin miners.

Announcing Xapos Advisory Board
https://blog.xapo.com/announcing-xapos-advisory-board/
In a blog post on its website, Xapo officially announced its advisory board with three key figures in the financial industry. Dee Hock, founder of Visa and visionary who developed the payment system we still use today, states that bitcoin offers a solution to dated command and control organizational structures. John Reed, former Chairman & CEO of Citibank, cites that bitcoin is the most effective way to keep a universal ledger for today’s payment system. Finally, former Secretary of the Treasury Larry Summers believes that bitcoin is the first real method of transferring value without the need of any intermediary.

The EBA Looks Ahead at Blockchain and e-Identity
http://www.finextra.com/video/video.aspx?videoid=864
Vincent Brennan, Chairman of the European Banking Association (EBA), states that banks need to understand block-chain technology and how the innovative system can be leveraged for long-term benefits. He cites that banks should not focus on the mystique surrounding the technology and cryptocurrency, but instead begin to explore how the underlying technology can reduce costs and be used for various banking services such as foreign exchange remittances, faster payments, and collateral management.

Long Way From Accepting Bitcoin at New Firm: Lawsky
http://video.cnbc.com/gallery/?video=3000383037
In an interview with CNBC, Superintendent of the New York Department of Financial Services Benjamin Lawsky spoke about his goal for regulating the bitcoin industry. Through the BitLicense, he wishes to impose modern regulatory guidelines that would protect consumers, add anti-money laundering controls, and ensure longevity for bitcoin firms handling consumer’s money, while avoiding over-regulation that would stifle innovation. Lawsky also said that his new consulting firm is a long way from bitcoin as a means of payment.

Risks & Rewards of Investing in Bitcoin
http://www.investopedia.com/articles/investing/052615/risks-rewards-investing-bitcoin.asp
The investing site site Investopedia covered several different methods to invest in bitcoin as well as the risks and rewards associated. One of the easiest methods to gain exposure is to simply buy bitcoin through an exchange. More complicated methods include mining bitcoin, trading bitcoin derivatives, or investing in several tradable securities, including the bitcoin investment trust ($GBTC). Several risks include the anonymity of the creators, the volatile price movement, and no government recognizes the currency as any form of legal tender.

Have a tip or feedback? Email me! (2bitidiot@gmail.com)