“Bitcoin is the new Cayman Islands.”
From Free Market Income
Day 7.
Monday is the last day of Bitcoin living and it’s off to an exhausting start. My first night in the Bitcoin-paid hostel was not especially restful due to noise filtering in from Mission Street and my body’s usual skepticism about an unfamiliar bed. I have plans to meet with security researcher Dan Kaminsky in the Mission in the afternoon so it would be silly to head to the office. I’d love to go to a cafe to work but none in the area take Bitcoin. I don’t think I can take Bitcoin seriously as a currency until tech-forward San Francisco has at least one BTC-friendly coffee shop.
20 Mission has Wi-Fi. I place a Skype call to Pyry Lehdonvirta who is in Helsinki. He is the 29-year-old CEO of SC5, a Finnish HTML5 software developer that started paying 20 of its full-time employees partially in Bitcoin last October when Bitcoin was valued at $40 USD.
“The increase in [BTC’s] value has been bad for us,” says Lehdonvirta. “It has paralyzed our experiment. You can’t spend them because it’s changing around too rapidly. We haven’t stopped using it, but it’s turned into this currency game.”
Lehdonvirta traded most of his own Bitcoin when the price spiked to over $250 USD.
“We are willing to accept Bitcoin as payment. We want to be part of an ecosystem, but the fluctuating currency rates are a problem,” he says. The security of Bitcoin payments appeal to his company. “Banks and credit cards are not very secure. If someone steals someone’s credit card, it’s easy to use it and commit fraud. Fraud is much harder with Bitcoin.”
Bitcoin was on Lehdonvirta’s radar very early, in part because his economist brother, Vili Lehdonvirta, was fingered by the New Yorker as one of two people who might be the true identity behind Satoshi Nakamoto, the person(s) who invented Bitcoin. (Both brothers call the guess wildly incorrect.)
Lehdonvirta says Bitcoin has gotten outsized media attention given its current state of development.
“Lots of people are accepting Bitcoin just to get publicity,” he says “But that’s not bad. As they want to get the publicity, they start accepting Bitcoin. And that’s a good thing. More people accepting it will make it much more useful.”
Earlier in the week, I spoke with Jude Gomila, the CEO of HeyZap, a mobile gaming company that has started paying freelance developers in Bitcoin. For him, the appeal of paying in BTC is even more pragmatic.
“Gaming is very international. We have developers all around the world. Some don’t accept Paypal because they can’t receive it in their country. And wire transfers can be expensive,” says Gomila who has paid a “handful” of developers in the digital coin. “It makes sense for there to be a global currency in the world that everyone can use that doesn’t have a transaction fee.”
I bike a couple of blocks to go to the Little Chihuahua to meet Dan Kaminsky, the security researcher who famously failed to hack Bitcoin and who recently wrote a Wired op-ed trying to cut through the Bitcoin hype. He’s wearing a grey “Game Over” t-shirt and at least three different body tracking devices, one on his arm and two on one wrist. He buys me a surprisingly delicious tequila root beer float (I pay him back for that and for his own lunch in Bitcoin later in the day — .27 BTC). Big thoughts about Bitcoin bubble up from his brain like the foam on the ice cream as the root beer hits it. A collection:
“Bitcoin is the new Cayman Islands.” (It’s a great place to park money.)
Except, it’s also this: “Bitcoin is a big ledger where people can see every entry. It’s the most traceable currency ever created.”
Except, that traceability breaks down. “There’s a lot of noise as the transactions increase. Imagine seven billion people hearing seven billion people’s thoughts. The network can’t scale.”
“Economically, it’s useful to be able to send money from point A to point B over the Internet without regulators able to hit the freeze button.”
“Bitcoin is a hack. We move the consensus of who moves money from a network with a few nodes which can be regulated into a network with lots of nodes that can’t.”
“Bitcoin is the Internet applied to money.”
“It melds what we think is gold with what is the Internet.”
“I don’t know what will happen with it.”
The meeting leaves me feeling even more like I’ve spent the last week in a William Gibson novel. Bitcoin is fundamentally an idea about how a new form of stateless currency could operate. But it’s an idea that has been set in motion by digital ore being created and now actively mined. Is it just an art project or will the belief that this digital gold actually has value catch hold and go viral?
If the idea does catch hold, “Bitcoins will have become something entirely new: a true, stateless, virtual currency rooted in nothing other than confidence in the set of rules that surround them,” says University of Virginia Peter Rodriguez in a post about what five real economists think about Bitcoin’s future. Usually governments create currency. In the case of Bitcoin, we’re seeing whether currency can create governance.
I bike over to SOMA, where I meet with Tom Lowenthal, a developer with the Tor Project. We talk about ways people can practice better privacy with Bitcoin, by for example practicing “clean address hygiene,” i.e. creating a new address every time they have a transaction with someone rather than using the same one every time which makes it easy to plug that address into a search and see the money that has come and gone from it.
Finally, I bike to the office. I have one last big event: a Bitcoin blow-out to get rid of the BTC tips I’ve been getting all week. I’ve invited any Bitcoiners in San Francisco to join me for dinner at Sake Zone, the sushi restaurant that accepts BTC. I posted the event on Reddit and Meetup and have been getting messages and emails all day. I thought it would be a group of 15 or so people, but it seems like it’s going to be much larger. I call the restaurant to warn them that there might be 50 or so people coming.
“Five oh?” asks the person on the end of the line, sounding worried. “Our restaurant only holds 46. They might have to stand outside.”
“And it’s okay if I pay for all of this in Bitcoin?” I ask. She confers with someone in the restaurant and tells me it is ok.
I check the price of Bitcoin. It is falling. It’s gone from $119 to $110. I have more than 10 Bitcoins in tips to throw at the meal. I hope it is enough, and I hope the price doesn’t fall further.
A Redditor from a large tech company tells me he’s driving there and offers a ride knowing that I can’t pay for any other form of transportation. I was dreading the hilly bike route so I gratefully accept. My two colleagues and I pile into his small car and we are on our way. My colleague hashtags the event #Forbesbitcoinrager. When we arrive, there are already two dozen people standing outside. The number swells to 60 or so within a half hour.
It’s a wild cast of characters: the CEO of Bitpay, a Bitcoin speculator decked out in Google Glass, a dude with a face full of piercings who is paying his rent in Oakland in BTC, a bunch of people who are developing Bitcoin apps and web-based games, economists fascinated by the Bitcoin phenomenon, two founders of Burning Man (who say they’re contemplating accepting Bitcoin for tickets), and Internet Archive founder Brewster Kahle who takes people over to the Internet Archive for tours and to change money at the Archive’s Bitcoin <-> Cash Converter Box.
We eat and drink 8.854 worth of Bitcoin. I add a 1.5 BTC tip.
Not only did I survive the week, I ended it by paying for 60+ people to eat and drink over the course of three hours, all in Bitcoin.
I go home to my BTC-paid room for one last night in my BTC-paid bed. The next day, I return to my USD apartment to put dollars, credit cards, and my Clipper card back into my wallet. I weigh myself. I lost five pounds on the “Bitcoin week diet,” but I survived.
For more on this story go to:
http://freemarketincome.com/bitcoin-is-the-new-cayman-islands/
Please see iNews Story April 14th 2013 – “BITCOIN 101: A Beginner’s Guide To The Unfakeable Digital Anarchist Currency Everyone’s Obsessed With” at :
Bitcoin is a decentralized, anonymous, digital-only currency that was originally developed in 2008.
The Bitcoin system is decentralized and programmed to generate a fixed number of Bitcoins per unit of computing time.
