When Mt. Gox, the Japan-based bitcoin exchange run by Mark Karpeles, stopped honouring redemptions on February 7, 2014, the company initially blamed the affair on an obscure tech fail known as a malleability issue. Many, however, were unconvinced by the explanation, suspecting foul play, a hack or an inside job.
When Mt. Gox filed for bankruptcy on February 28 it emerged 750,000 of customers’ bitcoins had been lost, plus 100,000 of Mt. Gox’s own stash — a sum collectively worth $473m at prevailing exchange rates. Karpeles himself, however, insisted the exchange had been the victim of external sabotage or fraud.
Time went by. Customers put their complaints to the authorities. Alas, not much in the way of information came their way. At some point, rumours began to emerge that much of the run-up in bitcoin’s price to a record $1216.73 in November, 2013, had been driven by a bespoke algorithmic programme known as the Willy Bot, developed by Mt. Gox for its own profit, and that this punting bot may have been the cause of many of the losses. Without concrete evidence, however, this too remained a theory. The mystery prevailed. Customers began to accept the reality: the money was gone and they’d never get it back because that’s what happens when you punt on an unregulated exchange. Read more
Bitcoin business pioneer Jeff Garzik told Cryptocoinsnews over the weekend his latest venture Bloq will behave as a sort of consulting platform to bridge the world of private blockchains with bitcoin, because it is “very important to make Bitcoin a part of the blockchain discussion again”.
But he also said this (our emphasis):
“It’s the overall mission to make blockchain more acceptable, more stable and more widespread than ever before,” Garzik said. “And I think that’s really going to be the success point within twenty years. Bloq is gonna be building a decentralized system. I like to call Bitcoin the first decentralized autonomous organism. There will be many more decentralized systems built on top of this technology and long-term Bloq is going to play a role in launching side chains and blockchains, and launching digital identity that’s affordable and tying all that together.”
As the clairvoyant FT Alphaville said on March 31, Australian Craig Wright has come out to claim he is Satoshi Nakamoto, the pseudonymous creator of Bitcoin both in a personal blog post and in media interviews with The Economist, a former newspaper, blokes’ mag GQ, and the gullible old BBC.
And he chose Monday, May 2 (a Bank holiday in the UK), to do the ‘Big Reveal’, which just happens to coincide with the first day of Consensus, a hullabaloo blockchain event in New York featuring famous self-styled bitcoin/blockchain radicals like Balaji Srinivasan of 21 Inc, Jack Markell, governor of Delaware State, and Larry Summers. (Yes, that Larry Summers.)
As the world’s media now embraces a manufactured ‘Craig Wright media storm’, we should probably add some detail on how this story has developed and we need to look at the evidence thus far presented. Read more
Whilst by no means an entirely undisputed theory, ancient historians generally believe that the emergence of civilised states such as Sumer was closely connected to the centralised role temples played in standardising, clearing and redistributing value in their societies.
Temple authorities, the theory states, kept account of the assets and liabilities of each individual, meaning citizens could only claim as many goods from the temple storage as the records permitted — something based on the amount of provable work they had done. Tangible money was consequently unnecessary. The accounting system was ubiquitous in society and dependable.
As Benjamin Foster, a Yale Assyriologist, has noted before, historians have speculated that the religious complex was essential for spurring the sort of non-rivalrous collaboration that allowed for the cultivation and settlement of land in the first place. Read more
Everyone has an opinion or a theory about what really caused the global financial crisis of 2008. The usual suspects include subprime securities, a housing bubble, financial engineering gone mad, Black Scholes risk models, global imbalances, dollar liquidity shortages and in some cases even Gordon Brown having sold off all the UK’s gold leaving the country with nothing solid when we needed it most.
But what if there was another, more subtle, cause? One we all failed to notice because by its very nature it was designed not to be noticed? A cause connected, instead, to some misleading nomenclature and the tricks language plays on our brain when the etymology behind a word or a phrase is forgotten about due to its overly common dispersal. Read more
Sergey Mavrodi, architect of the MMM Global pyramid scheme, has a habit of closing off his web-based addresses and messages with the assertion that he believes the “financial apocalypse is inevitable” and that “together we change the world!”
On Monday, that prediction was seemingly coming true, albeit not for the financial system as much as for Mavrodi’s own investors. Read more
It may have been a slip of the keyboard, but Marc Andreessen’s pro-colonialism Tweet on Wednesday (later retracted) arguably told us more about the mindset of Silicon Valley insiders than anything ever uttered at a TechCrunch disruptor conference.
Nor should it strike any of us as surprising. The parallels between unicorn imperialist ambition and the British Empire run deep. (And no, we won’t dwell on the shared fondness for unicorn insignia.)
This is the first in an occasional series lamenting the hypothetical eventuality of a world without a free internet* and the extraordinary implications this could have for markets and companies. A tragedy of the web commons if you will.
It is inspired both by India’s ruling to bar Facebook from subsidising internet availability with Free Basics packages (see Kadhim’s series of posts for more on that) but also Balaji Srinivasan (he of 21 Inc toaster fame), and his attempts — including a Stanford Bitcoin course — to convince the world the web should in fact be a paid-for luxury product of scarcity. Read more
Now that Satoshi is a “Davos man”, does that make him “The Man”?
Distributed ledger technologies have the potential to help governments to collect taxes, deliver benefits, issue passports, record land registries, assure the supply chain of goods and generally ensure the integrity of government records and services. In the NHS, the technology offers the potential to improve health care by improving and authenticating the delivery of services and by sharing records securely according to exact rules. For the consumer of all of these services, the technology offers the potential, according to the circumstances, for individual consumers to control access to personal records and to know who has accessed them.
That’s from a report by the UK Government’s chief scientific adviser, Sir Mark Walport. Read more
Mike Hearn, a key developer in the bitcoin eco-circus, quit bitcoin on Thursday. He did so with much fanfare.
As is the norm these days, he shared his reasoning, angst and rage in a Medium blog post, saying that he quit due to a schism in the community about how to scale bitcoin.
FT Alphaville met Hearn last year in an off-the-record encounter with a bunch of hedgies, who were sounding him out on whether or not bitcoin had legs as an investment. Hearn himself struck us as very reasonable. He was down to earth, pragmatic and totally open about the challenges bitcoin was facing. He was, nevertheless, still optimistic.
Seemingly, that is no longer the case. Read more
Tips. The ultimate example of “unbundled” costs and discretionary performance-based income.
There are service staff who rely extensively on tips (waiting staff, bartenders, hairdressers, shoe-shiners, doormen, taxi drivers, hospitality staff, street entertainers) and then there are service staff which weirdly don’t (handymen, nurses, airline hostesses, Uber drivers, carers and a plethora of others).
So what to make of a fintech start-up, Xendpay, which would like to encourage discretionary tipping for foreign exchange services? Read more
One of the ironies of the information age is how it’s turning out to obscure rather than improve our understanding of what’s really going on. The pressure to report quickly errs towards unverified reporting, or reporting based on facts distributed via unchecked sources or biased lobby groups intent on propagating causes, which in turn leads to an abundance of misinformation which confuses everyone.
A racketeer like Mr Sergey Mavrodi, the man behind the MMM “transparent” pyramid schemes we drew attention to last week, flourishes in such an environment. The more contradictory the information about him on the internet, the better for him. The same goes for other transparent pyramid schemes (such as all cryptocurrencies). Historically-tested logic about why pyramids are economically flawed is reduced to an opinion, much the same way that scientifically-verified proof about how carbon emissions are causing climate change also gets reduced to an opinion by certain special-interest groups.
Below we share a Q&A with Mavrodi. And he’s done us a little video to prove that we are communicating with the man himself…
Touting Ponzi schemes, or as the hip and the cool prefer to call them these days ‘mutual aid’ programmes, is so much easier if you have a handy Marxist-esque ideology to hand.
The MMM scheme, which we wrote about on Wednesday, has an ideology and it certainly doesn’t disappoint.
Some snippets from the imaginarium of Mr. Sergey Mavrodi:
The modern world is bad. It is inhumane, unfair and unjust. This is the world of money. It is not for people. It is for those who who produce this money, for bankers and financiers, government and millionaires. And people are mere “pawns” in this game. They just serve them as attendants.
Techies look upon the financial world and find its messy structures hard to reconcile with the physical reality around them.
Which is why we’re going to propose that the blockchain fad is mostly about putting finance in terms that are understandable to techies — i.e. as something absolute – and having them learn for themselves through trial and error why that’s actually a flawed assumption in finance. Read more
You may have encountered some fanfare this week surrounding Nasdaq’s unveiling of “Linq”, its blockchain-enabled platform for managing and trading shares of private companies.
Here’s the extremely upbeat press release:
NEW YORK and LAS VEGAS, Oct. 27, 2015 (GLOBE NEWSWIRE) — Nasdaq (Nasdaq:NDAQ) today announced the initial roster of private company clients for Nasdaq Linq, its blockchain-enabled platform. The first participants will include: Chain.com, ChangeTip, PeerNova, Synack, Tango and Vera. Nasdaq will unveil a first-ever demonstration of its blockchain technology at the Money20/20 event today in Las Vegas.
The first platform of its kind, Nasdaq Linq is a digital ledger technology that leverages a blockchain to facilitate the issuance, cataloging and recording of transfers of shares of privately-held companies on The NASDAQ Private Market. It will complement ExactEquity, NASDAQ Private Market’s cloud-based capitalization table management and stock plan administration solution. Nasdaq Linq clients will be provided with a comprehensive, historical record of issuance and transfer of their securities, offering increased auditability, issuance governance and transfer of ownership capabilities.
In movie parlance, 21 grammes is said to be the weight of the soul.
Keep this in mind as we explore 21 Inc’s big product reveal this week — a $399.99 Raspberry Pi that’s also a “bitcoin computer” — which, according to endorsements from Larry Summers (he of secular stagnation fame), Marc Andreessen and others, could be as big as the internet if not a solution to world peace. Read more
We started this post before a Greek deal rendered the discussion of a digital parallel currency moot. Nevertheless, it’s still worth looking to the Kenyan M-pesa for a better understanding of why it’s dangerous to treat fintech solutions as panaceas for economies struggling with productivity, poor credit profiles, tax collection issues and overall corruption without understanding what’s really at stake.
Kenya is often presented as an example of a country which has flourished thanks to mobile money adoption — the poster child that “digital payments can make the world a better place”.
But often forgotten is Kenya’s unique circumstances. The M-pesa mobile money system, owned and operated by Safaricom which is 40 per cent owned by Vodafone, was allowed an unchallenged monopoly in the country for a very long time. Read more
Earlier this week we gave fintech people a brief guide to the Greek crisis in a bid to explain why payments technology is unlikely to be part of any solution there.
On bitcoin specifically: why on earth would Greece want to replace the euro, a currency it already thinks too restrictive, with another which would be even more constraining and give Greeks even less control over monetary affairs!? Read more
They say crises define movements and people.
If that’s the case, purveyors of fintech payment solutions could soon be defined as those who stood ready to exploit a Greek national bankruptcy crisis for the benefit of “onboarding” users. Read more
Online retailer Overstock last week became the first company to offer a corporate bond, valued at $25m, in the form of a “crypto security”.
Unsurprisingly, the story was pumped up by the crypto trade press, which has a habit of taking statements from vested interests at face value.
But, as Bloomberg’s Mark Gilbert has hinted indirectly there’s something hypocritical about lauding a bond for its transparent blockchain traceability features while at the same time providing sketchier than sketchy details about all its other aspects. Read more
A Silicon Valley start-up that tried to offer trading in derivatives linked to private SV companies like Uber and Jawbone has been shuttered by the US authorities.
For the backstory here, you might want to first read this post from March on the Sand Hill Exchange.
Here’s the company’s version of what happened — published on Monday night, but since then “censored.”
We hope to have more on this a little later… Read more
The FT’s Richard Waters reports that Larry Summers, former US treasury secretary and secular stagnation theorist, is to form part of the advisory board at Xapo, a Silicon Valley Bitcoin start-up specialising in deep cold storage of bitcoins in Swiss vaults and the issuance of bitcoin debit cards.
Worth noting in this context, of course, is that Larry Summers is also the man arguing that bubbles are a bit of an inevitability in a secular stagnated world. Or as he explained in the Financial Times back in December 2014: Read more
Details of the hottest, most secretive bitcoin start-up in Silicon Valley have finally been revealed by chairman and soon-to-be CEO Balaji Srinivasan of 21 Inc in a post on Medium. They are, by and large, exactly what FT Alphaville reported them to be. Cold sharp summary: Bitcoin mining devices in toasters.
Calling this a simple internet of things play, however, would be lazy. To really put the audacity of Srinivasan’s vision into perspective one first has to go back in time to the days of the early internet. Read more
Some people may have had difficulty understanding what the hell Balaji S. Srinivasan, chairman-cum-ceo of secretive Silicon Valley start-up 21 Inc, is up to after reading his Medium “open for business” post.
The following slides, shared by potential investors in 21 Inc, may or may not help. But they certainly highlight the conceit on show here. Click to enlarge.
Why are the great and the good of the banking and financial services world suddenly extolling the virtues of blockchain, the technology that underpins the artificial scarcity of bitcoin?
Possibly because they’ve finally figured out that what the technology really facilitates is cartel management for groups that don’t trust each other but which still need to work together if they’re to protect the value and stability of the markets they serve.
Cartel enforcement, in that sense, appeals to all sorts of financial players from bankers and commodity producers to general asset creators. Read more
The company in question is called 21 Inc. Its business plan has hitherto been a closely guarded Silicon Valley secret. But we can now reveal how it plans to monetise the future of money. Welcome to the world claiming to exist beyond the Internet of Things…
On Wednesday FT Alphaville received a press release from a company called XBT Provider proudly announcing the launch of the “world’s first bitcoin traded note on Nasdaq Stockholm”.
The tracker product being offering, the press release claimed, would make bitcoin accessible to institutional investors by providing them with a liquid exchange-traded note.
Or as the marketing spiel put it, the product was set “to provide investors with convenient access to the returns of the underlying asset, US dollar per bitcoin, less investor fees.” Read more
Here’s a comment to note in the Bank of England’s “fundamental change” section of its One Bank Research Agenda discussion paper:
Technology is potentially transforming the landscape for money and banking. New digital or e-monies and new methods of payment and financial intermediation raise fundamental questions for financial regulation, money demand generally and central bank money in particular. For example, might central banks issue digital currencies and what would be the impact on existing payment and settlement systems? Is the cryptographic technology behind Bitcoin transformational? How will financial regulation need to adapt if new non-bank credit intermediaries emerge in scale?
Talk of official digital money, of course, is not new to FT Alphaville readers. Nor, for that matter is talk of collaborative non-bank credit unions that mint their own currencies for their own network use. Or even talk of digital money solutions that open up the central bank’s balance sheet to more people in a way that eases the safe-asset shortage. Read more