Thoughts on the Bitcoin 2014 Conference

So, I’m sitting here early on a sunny Sunday morning in a great little coffee shop in Amsterdam (no, not one of those ones…) and reflecting on the last three days of Bitcoin 2014.

It’s been an exhilarating few days. I’ve never been to an event like it, where the sense of an impending global revolution sits side-by-side with philanthropy and open entrepreneurial passion for building new businesses. It’s a strange world where all three can sit together within one format and there’s no doubt that this is one of few places.  OK, so the crypto-anarchists were never going to be hugely satisfied with a conference that was ‘industry’ rather than ‘grass roots’ but to me it’s pretty simple.

The fact is that Bitcoin – and other decentralised systems – are coming. There is inevitably going to be a period of significant disruption ahead and it’s important for everyone who has realised this fact to help others to understand more about this train that’s a-coming. For some people, that does involve engaging actively with individuals, local and national businesses and politicians to ensure that they aren’t blinded by the poor level of information that’s currently available. The level of general public awareness is still woefully low and that needs to change fast.

There’s no way that I do the entire conference justice in a single blog post but there were a few things that stand out.

Bitcoin in the Developing World

  • Check out this new film that was premiered at the Conference. I banged on about the global remittance market in my TEDx talk on Bitcoin and this video does a great job in explaining precisely why Bitcoin is so important for the developing world.

Patrick Byrne Keynote

Patrick Byrne, Overstock CEO, keynotes Bitcoin 2014 in Amsteredam
Patrick Byrne, Overstock CEO, keynotes Bitcoin 2014 in Amsteredam

I’m not sure what can be said about Patrick Byrne’s keynote at Bitcoin 2014 that can do it justice. That guy must have a brain the size of a small planet. The Scourge of Wall Street gave a whistle-stop tour through Western philosophy and explained why a society based on cryptographic principles is not only the answer but a necessity. Denounced at one stage as a lunatic, proved right by the subsequent financial collapse in 2008, I challenge anyone to criticise the obvious passion of someone who has gone so doggedly out of his way and against the grain in his mission to expose the corruption within our current financial systems (particularly within the US). And all whilst running a billion dollar company (that of course now accepts Bitcoin and is on course to hit $10-15 billion in Bitcoin revenue in 2014).

Importantly, Byrne divulged that the business is now trying to hold 10% of revenue in Bitcoin (as opposed to cashing out immediately into dollars). And it’s precisely because of this sort of commitment, where businesses such as Overstock are now encouraging their suppliers in turn to accept Bitcoin in payment, that will help usage to spread through the business ecosystem. And that’s before we even get into his plans to dual-list the business on a “blockchain kind of stock exchange” itself….

User-friendly Wallets

  • We’ve been talking about the desperate need for a user-friendly Bitcoin wallet service for a long time now. And on Day 1 of the Conference, with the launch of Circle.com, we’re arguably as close as we’ve ever been. The business has been in stealth for a while despite raising $26 million. It’s invite-only but watching Jeremy Allaire demo Circle in the flesh, I have to say I’m impressed. This isn’t Bitcoin for people who know about it already. This is a mass market play for everyone’s attention. Your wallet connects directly  to your bank account, money transfers instantly between dollars (initially) and Bitcoin at will, with a zero exchange fee  and – crucially – it’s all fully insured. This could very well be the first Bitcoin interface that your mum just *understands*.

Bitcoin ATM’s

  • Amongst the range of ATM’s on display, I finally got the chance to give the Lamassu Bitcoin ATM for the first time. I converted a 10 Euro note into my Bitcoin wallet in under 60 seconds. Faultless experience, no ID required and a highly impressive piece of kit.

Annual State of Bitcoin Address

  • For Chief Scientist Gavin Andresen, 2014 is the year of multi-sig wallets. As for 2015, the prediction is that Bitcoin will be bigger (and better-looking), more secure, more diverse, more mainstream, more regulated and less volatile. Plenty more info in the talk which will be online soon.

Mike Hearn Builds a Lighthouse

Blockchain.info Awards

  • Great to see the Lets Talk Bitcoin podcast win the best podcast category at the first Blockchain Awards. Definitely my go-to listening podcast on anything to do with the subject. And as you’ve probably heard, Andreas refused to accept his award. Although clearly the most popular winner at the event was Satoshi Nakamoto himself who turned up in person before disappearing mysteriously into the Amsterdam night….(it wasn’t Gavin dressed up, honest…)

The Bitcoin Foundation

  • I went along to the Bitcoin Foundation Annual Members’ Meeting straight after the conference. It’s fair to say that the Foundation comes in for a huge amount of criticism from the Bitcoin community and the days leading up to the event were filled with various critical stories in the press. But  I have to say that having been there and looked the guys in the eyes, the picture’s nowhere as simple as is commonly made out.
  • There’s obviously a perception within Bitcoin-land about what the Foundation is and should do. They have fallen short in a number of areas of course but I honestly believe that the majority of that comes down to two things. Firstly, there is a mistaken assumption by the Bitcoin community that the Foundation should be representing the disparate goals and interests of each group that is interested in Bitcoin. Secondly, and no less importantly, the Foundation is an organisation that is under two years old and has been woefully under-resourced in a year in which Bitcoin awareness has both exploded and simultaneously been attacked from all sides.
  • Going from only 3 full-time staff to 10 in the past year, the reality (which hasn’t been communicated effectively) is that they are there to represent their members – not primarily the community itself. 70% of their funding comes from their corporate membership. Let’s be realistic about what they can achieve – but let’s also not be naive about where an organisation like that can be most effective with the limited funding that they have, focusing their time and efforts on the bigger picture by helping businesses, individuals and politicians to properly grasp the concepts of Bitcoin. Let’s hope the international affiliate chapters go some way to dealing with the issue and communication improves.

Anyway, so much more to say but this post is already way too long and bluntly, it’s not supposed to be about the politics of the Foundation themselves. So – if there’s one takeaway from the conference, it’s this:-

Bitcoin is growing. Adoption will come. The people who are working to bring this new technology to the world and are amongst the most clever and intelligent that I’ve ever had the privilege to speak with and there are increasing numbers flocking to get involved in the area. And where else do you have the chance to get involved with a technology that is going to change the world for the better whilst creating opportunities for so many? If you want to learn more, get in touch. Come along to one of our Bitcoin Meetups in Edinburgh.

Let’s keep the conversation going. See you in Asia for Bitcoin 2015?

Gavin Andresen gives the 'Annual State of Bitcoin Address' at Bitcoin 2014 Amsterdam
Gavin Andresen gives the ‘Annual State of Bitcoin Address’ at Bitcoin 2014 Amsterdam
The fantastic Lamassu Bitcoin ATM
Lamassu Bitcoin ATM at Bitcoin 2014
Bitcoin Investment Panel at Bitcoin 2014, including 'Bitcoin Jesus' Roger Ver
Bitcoin Investment Panel at Bitcoin 2014, including ‘Bitcoin Jesus’ Roger Ver

 

 

 

 

 

 

 

 

 

 

 

 

 

Bitcoin Foundation Board at Bitcoin 2014
Bitcoin Foundation Board at Bitcoin 2014
Bitcoin 2014 Conference Lanyard
Bitcoin 2014 Conference
Exhibitors at Bitcoin 2014 in Amsterdam
Exhibitors at Bitcoin 2014 in Amsterdam

 

 

 

 

 

 

 

 

 

 

 

 

Jeremy Allaire finally launches Circle.com at Bitcoin 2014
Jeremy Allaire finally launches Circle.com at Bitcoin 2014

 

 

 

 

My TEDx Talk: “Bitcoin: More Than Just Money”

I’m flying out to Amsterdam tomorrow for the Bitcoin 2014 Conference but before I do, I just wanted to put up a quick post.

A couple of months ago, I was honoured to be asked to speak at the University of Edinburgh TEDx 2014 Conference. The theme was ‘Thinking In Abundance’ and it was an amazing opportunity to give a talk to a room full of intelligent and engaged individuals about what I’m certain will turn out to be one of the most significant developments in recent times. Bitcoin.

It was a challenge to strip out so many of the details in order to present a very broad overview of the opportunities aimed at those who hadn’t heard of Bitcoin previously. It’s far from perfect but I was pretty happy with how it turned out overall. I’d be interested to hear what you think.

You probably know by now that I believe strongly that the technology that underpins Bitcoin will act as a foundation for a fundamental restructuring of the society that we know today. We’re moving into a world that will be dominated by decentralised networks and the coming disruption will be felt in many areas – including finance. That’s why I’m working with others to bring the Bitcoin/crypto-currency community together across Scotland at the moment and I’ll be following up on this soon. If you want to hear more though and get involved, please do get in touch.

Thanks again to Sarah Anderson and the rest of the organising committee for inviting me along to take part. I had a blast!

The Mobile Web: Are We Shutting Ourselves In?

I recently made the switch from iPhone to Android. It had been on the cards for a while but Apple’s decision to ban the last Bitcoin wallet from the App Store gave me the final push that I needed. It was a simple decision at the end of the day: my mobile simply couldn’t now do what I needed it to – and I’m delighted to say that the experience has been awesome so far.

Whilst going through the necessary admin to make the switch, I was struck by just how different the factors were that now influenced my choice of mobile. There were few similarities with those that had pushed me towards my original iPhone all those years before. My needs as a consumer have changed of course, but with the passage of time, my views on the technology ecosystem that surrounds us and upon which we increasingly depend in daily life have also matured.

Closed versus open systems

Like many, in the early days I was perfectly content to rely upon companies that built their foundations using the walled garden approach. These companies succeeded precisely because they had total control over all of the applications, content and media that lived within their software ecosystems. And in those days, the reality was that the capabilities offered by the early iPhone when it came to web-browsing were so far in advance of my Blackberry that there really wasn’t even a decision to make.

Yet with time, it’s become increasingly clear that by placing our sole reliance on a single centralised arbiter of quality, a gatekeeper who takes a cut from everyone that wants to participate in that closed platform, we’re often failing to ask ourselves a more important question – are the same barriers that help to maintain such quality actually restricting innovation from taking place?

The inevitable flow of the internet

The internet has an irresistible capacity to surface the things that are valuable to others, regardless of what that content is and whether it is being searched for by individuals or tribes of people united by a sole interest.

By its very nature, the internet allows people, ideas, content and programmes that deliver true value to gain traction online at scale in a way that an attempt carried out within the physical world could never match. With personal recommendations within social media acting as fuel for the mass curation of quality content, in combination with general advances in technology outside the walled gardens, it’s now time more than ever to think carefully about the system that we want to support over the longer term.

Because by choosing companies that ring-fence content on their platforms (whether that is iOS apps, Kindle books or other forms of Facebook-locked content), we are signalling by default that we accept the existence of these barriers to discovery. We trust others to make such decisions on our behalf and in so doing provide them with the power to determine what we consume in both thought and product. It’s almost a return back to the traditional single channel publishing model. And I’m far from convinced that this is the way forward.

Mobile web or mobile apps?

Interestingly, one of the first discussions I read on my new phone (via Twitter) was a debate on a related issue. In January 2014, the US hit a significant milestone as for the first time ever, more people accessed the web via mobile (55%) than on desktop computers (45%). On first glance, this simply reconfirms the projections that Benedict Evans and others have been making for a while about the fact that “mobile is eating the world”:-

But look more closely at that 55%. The stats show that 47% of that time is spent using apps on mobile devices, compared to just 8% of time being spent in mobile browsers. In his post ‘The decline of the mobile web’, Chris Dixon warns of damaging consequences if this trend continues.

So why is this a bad thing? Those figures suggest that people who go online using their mobiles tend to spend most of that time within a small number of popular apps (as opposed to using a mobile browser). And as people congregate in a relatively small number of apps, information tends to become stuck in silos that prevent it from flowing freely. What’s more, businesses are likely to allocate scarce resources to apps rather than mobile web in the future as they tend to view visitors in their app as more valuable than those on their mobile website. As the difference in experience becomes more pronounced over time, this could lead to poorer mobile web experiences overall which will in turn accelerate the move to apps.

Convenience for the customer comes at a cost. With both Apple and Google acting as gatekeepers to their respective app stores and charging a 30% tax, innovative new apps have to factor in that cost of getting through the doors before they can even be in with a chance of forcing their way onto the packed home screens of mobile users. Why would you even let a potential competitor through the gates?

Do apps prevent innovation?

Dixon has received both support and criticism in equal measure for this analysis. To be fair, the statistics do appear to artificially inflate mobile usage by including time spent by individuals playing mobile games online. John Gruber argues that the distinction between mobile webs and apps isn’t that clear in practice. In many cases, a user who relies on an app like Twitter will actually open web pages rendered in a web browser whilst still technically being within the app itself. And of course, Dixon’s criticism of apps ignores the fact that this format has enabled other types of innovation to thrive – think of the creation of a whole range of companies who are not reliant on the web-browser (WhatsApp, Instagram et al).

The debate reminds me of Tim Berners-Lee’s call for the defence of the Web a couple of years back. When he actually set this whole thing in motion some twenty-five years ago, the whole purpose of the web was to link interesting content together. The web’s core principles revolve around “a profound concept: that any person could share information with anyone else, anywhere”. Putting up barriers and closing platforms were certainly not concepts that he intended at least. Many of the same arguments were made in the Wired article ‘The Web Is Dead. Long Live The Internet’ which is well worth a read if only to see just how accurate those predictions from 2010 have turned out to be so far.

Will the walls of those gardens fall?

I’m convinced that decentralisation is one of the key themes for all our futures – of the internet and of every possible service that can be provided online. The network is gradually becoming stronger on a daily basis. So I find this reality impossible to reconcile with a picture of the world in which powerful companies continue to own such gateways in the same way as they do today. Even if we can become comfortable that the current system doesn’t in fact inhibit innovation, such convenience continues to impose a high cost – and at the very least, that cost is increasingly shaping up to be the personal data that we are leaving behind us in our wake as a society for powerful organisations to collect.

As we move into a world where the internet of things is increasingly becoming a reality, the same data that is being leaked today is going to be used to directly influence our everyday lives in the future, for all manner of reasons, from good (personalised healthcare) to bad (intrusive personalised marketing). After all, the data analysts of the future will know exactly what you did today and the restorative clean-up work that we need to carry out is becoming a bigger job with each passing day.

Control v The Rich Tapestry of Chaos?

For the most part, we as humans we have a fundamental desire to seek control and possession within society. But it’s worth remembering that this doesn’t have to be the future that we create for ourselves on the web. There will always be a place for order, quality and reliability. But those standards shouldn’t be pursued to the extent that the very pursuit of such ideals sterilises an otherwise fertile landscape in which innovative creations are possible only at the point when such constraints are relaxed.

You’ll forgive me the ramble, perhaps. Of course, the future of the internet is far more important than the simple removal of my Bitcoin wallet from the App Store. Yet the wonder of the internet is that it’s a technology that that facilitates activity at both an individual level and on a monumental scale – simultaneously.

So if something’s not working for you in your daily life, it’s time to change. Don’t just sit back and accept it. Think about the changes you’d like to see and, if necessary, go out and innovate. That’s both the power and responsibility that you hold in a modern digital society.

You don’t just owe it to yourself. You owe it to all of us.

photo credit: Mauer-betlehem via cc

Unleashing the Potential of Information

One blog I make a point of always reading is by John Battelle. I read his book ‘The Search: How Google and Its Rivals Rewrote the Rules of Business and Transformed Our Culture‘ about the early days of Google a number of years ago and found it a fascinating read given his access to some of the internal workings of Google as the business grew.

Like many of my favourite bloggers, he tends
focus on some of the bigger tech trends that are taking place in society and his post earlier this week is no exception.

In a world in which most of the population tend to forget just how much data records our every move (whether we’re leaking it as we access web services via third party authentication log-ins or learning a coue of weeks later that it was stolen, a result of our own blind trust in services and businesses that are amateurish about securing it), he talks about the concept of potential and kinetic data.

It’s particularly interesting to me because he frames the difference as explaining how some of the fastest growing modern tech companies are experiencing explosive growth precisely because of the fact that they’ve worked out how to release that potential. If you can build a business that focuses in unlocking that potential, you’re onto something that’s really valuable.

So for example Airb’nb, Uber and Nest have each discovered ways to release data that existed in what were previously ‘dumb’ environments and brought them into the structure of the internet. By building businesses in this way, they have unlocked potential information about:

  • merchandise (Amazon, eBay)
  • spare bedrooms (Airbnb)
  • transportation systems (Uber)
  • our home environments (Nest)
  • real-world relationships (Facebook)

And of course another great example is Google itself – a business which discovered how to convert potential information (links on the web) into kinetic information (search).

You could argue that it’s a subtle distinction – but I feel that it’s a key one. We’re all guilty of speaking confidently about how Big Data will change everything but for the most part, organisations are still flailing around trying to record everything possible in the hope that this will become somehow useful in the future (hello NSA…).

But if you’re looking for business ideas and want to make a real difference, think about one area and focus in on how you make that leap on converting potential to kinetic information. You might just stumble across a huge idea for a business.

photo credit: jah~ cc

Security, Identity And The Relentless Pursuit Of Data

Listen up...Every single day, technology and our understanding of what might be possible advances a little further. After a slow start (in retrospect), we’re now picking up pace. Soon we’ll be breaking into a jog along the road towards exponential development (see Ray Kurzweil’s ‘The Law Of Accelerating Returns‘). Exciting times indeed. Yet increasingly I’m finding myself questioning how technology will impact on issues of security and identity.

Both topics are going to be of critical importance over the next couple of decades. I can see personal identity driving the rise of individual and surge pricing for example – a move to a world where everyone is charged a different price according to past behaviours. But before we even get to that stage, a number of fundamental questions still need to be answered.

It’s pretty much accepted that advances in technology have brought massive improvements in the quality of life for many. Although not yet for all. The developing world for example is really just getting started, with booming mobile phone adoption rates connecting millions to money and knowledge in a way that was previously impossible.

But while technology creates collective benefits that are often direct (new products and services), indirect (more efficient processes) or a combination of the two, we rarely spend any real time actually debating how to deal with the digital exhaust that each of us is, knowingly or otherwise, leaving in our wake.

Now the question of who should be able to access this trail of information – and for what purpose – is one that’s causing tension between various groups. The battle lines are being drawn today whilst most people remain blissfully unaware.

Gold rush for a new era?

There are many parallels today with the way that society has developed in the past. Whereas the majority simply watched as explorers and innovators rushed to acquire newly-discovered natural resources such as oil or gold in days gone by with little or no thought for the environmental consequences, we now see the same fervour from large businesses, governments and criminals, as access to personal data increasingly becomes their lifeblood.

Yet, unlike oil, this treasure is far less transient and limited. Once data is recorded, it does not tend to simply disappear, somehow self-destructing in a James Bond style. It doesn’t matter how effective we believe current laws are. The reality is that there can be no certainty about how our personal data will be used in the future by businesses and organisations that may not yet even exist in a society whose cultural norms continue to evolve.

And whilst there could be a real benefit from our historic data being used to more accurately diagnose our medical problems in the future, for example, few people would be overjoyed about mobile phone location data being used in the same way to justify an increase in health insurance premiums because the data shows that someone was a regular visitor to a fast food outlet ten years before.

Let Battle Commence…

One of the best articles that I read last year – full stop – was by security guru Bruce Schneier. He frames the battle that’s shaping up in the digital world brilliantly and I thoroughly recommend that you make the time to go and spend ten minutes reading it in full.

Despite becoming increasingly high-tech, Schneier sees modern society reverting to the feudal system that used to be common in the past. Skirmishes are becoming more frequent between two distinct camps:

  • The Nimble: small tech-savvy groups of individuals
  • The Powerful: governments or large businesses

The nimble respond quickly to advances in technology by adopting platforms that spread their messages efficiently. Yet, whilst it might take them longer to get started, the established government or large businesses will usually end up in a far stronger position of power over the masses – simply because networks tend to amplify existing power, of which they had plenty from Day One. As Schneier writes:

“So while the Syrian dissidents used Facebook to organise, the Syrian government used Facebook to identify dissidents to arrest”

The vast majority of the world are vassals who fall into neither camp. We believe that our safest option is to ally ourselves to our feudal lords in order to gain their protection. Yet, the reality is that our so-called free choice of ruler is increasingly an illusion. Most of us are becoming increasingly reliant on platforms and devices already owned by these powerful organisations who successfully attract the average user with the lure for convenient storage of all of our personal information in one single location. Just think of Facebook and its quarter of a trillion photographs.

Decentralisation and Transparency

History shows that a true feudal relationship involves rights and obligations that run both ways. Yet events of recent years (including Wikileaks, Snowden and PRISM) have shown that it is going to be exceptionally difficult for those in power to strike a balance between such rights and responsibilities.

In fact, it’s probably an impossible task for them to gain that necessary perspective by themselves. Technology amplifies the potential damage that could be caused by one individual and therefore centralised organisations in power feel compelled to seek increasingly draconian powers to prevent such risks, however remote.

It’s a concerning trend because as society moves increasingly towards a technology-driven distributed networks of individuals, this clash of interests can only become more frequent. Whether it is covert surveillance by governments or data collection by large organisations matters little.

Will society be content to let personal data be controlled by third parties in this way? One of the reasons that Bitcoin is so powerful is precisely because of the fact that it is decentralised, with no central point that can be attacked or influenced – whereas the accumulation of data (for which read: power) in centralised organisations looks to be hugely problematic over time.

A tipping point for public interest?

But we’re in the early stages of this cycle. Over the coming years, I think that the real backlash may come when the average ‘vassal’ starts to see more everyday items that are plugged into the Internet of Things that know precisely who you are and what you’ve done in the past. Will a line be crossed when a bus shelter reminds you of that TV program you watched on your mobile a couple of weeks before, for example?

Whether it will be too late at that stage to protect personal data is up for debate. Whether the nimble or the powerful end up ruling the world is still to be decided. But wherever we’re heading, the cost of starting to work on a solution now has to be significantly cheaper than simply waiting to fix the issue in the future once the data’s been released into the wild.

photo credit: communitiesuk via cc

Edinburgh’s First Bitcoin Meetup

Three weeks ago, I decided to arrange a meetup for people that were interested in Bitcoin. It’s no secret that I believe that the crypto-currency movement is going to have a huge year in 2014 as Bitcoin (in particular) accelerates from niche tech circles into the popular consciousness.

Unsurprisingly, most of the people that are into the subject tend to exist mainly online, whether in forums, podcasts or Reddit. But for me, that vital step into the mainstream will only come when people transact openly – and for that to happen, discussions need to take place face to face to let questions be asked, knowledge shared and – importantly – pique the interest of people who have only heard the often-sensationalised reporting in the press.

So I’m delighted to say that Edinburgh’s first Bitcoin Meetup at the Queens Arms last night was a huge success. Around thirty people turned up, all delighted to have the chance to speak about bitcoin and other alt-coins face-to-face. For me, it was confirmation of the fact that things are about to get really interesting, coming as it did on the day of the launch of a service to buy bitcoins directly around the UK from such trusted places as local newsagents, on top of the news that the UK’s first Bitcoin ATM has been installed.

Thanks to everyone who came along. Check out the Meetup page for details of the next one at the start of March. If you’re at all interested in coming along to hear more, I’ve no doubt that the group would make you welcome.

Thoughts on the Regulation of Bitcoin

Red Tape
How much red tape is too much when it comes to the regulation of Bitcoin?

As Bitcoin moves into the mainstream, the question of whether – and how – it should be regulated continues to loom large. It’s an issue that’s naturally divisive within parts of the community.

As a decentralised currency beyond the control of any country or organisation, Bitcoin has always held a certain appeal to those who hold certain ideologies or intend to subvert the system in some way. And it’s fair to say that neither radical libertarians wanting to stick it to the man nor criminal networks drawn (erroneously) to its anonymity tend to campaign for greater regulation.

But at the same time, regulation is for many in society inextricably bound up with legitimacy and, if handled correctly, could in fact provide important benefits that go far beyond simply clamping down on illegal activities like money laundering. The reason is simply that with regulation comes certainty – and with certainty, investors become more willing to part with the cash required to fund the development of Bitcoin businesses that will in turn make the ecosystem more user-friendly for the man on the street.

At least that’s the theory. Of course, the reality is that poorly crafted regulations, despite being imposed in order to prevent evil activities that may damage society, can also severely hamper innovation. Think of the torturous amount paperwork and delays involved in opening a bank account as they tick the boxes to ensure you’re not in fact Tony Soprano. Then add into the mix the fact that Bitcoin is a truly global technology and the likelihood is that entrepreneurs will vote with their feet to base businesses outside regions that place them at a competitive disadvantage and the issue becomes even more complex.

I watched the livestream of the first day of the New York Department of Financial Services Hearing into Virtual Currencies and I got a clear sense of the conflict that regulators face in a very complex debate that is increasingly being played out in public in different countries around the world. It’s too early to say which way popular opinion will go in the majority of countries but there’s a need for regulators (around the world) to really take on board that Bitcoin is far more than simply a gradual evolution of the existing financial system.

With the probable adoption of Bitcoin as a protocol on the internet and the emergence of programmable money, there are real risks if regulators fail to innovate their own processes in tandem. There’s a real tension here. It’s clear that forcing Bitcoin startups, most of whom have no more than a handful of employees, to comply with the same levels of regulation that apply to global multi-billion dollar banking behemoths is just not going to work. We’re talking about with technology startups here – they need to get into the marketplace as quickly as possible in order to see whether someone actually wants to buy what they’re selling and to iterate their business models accordingly. Technology startups cannot hang around for months on end for authorisations to roll in in the way that traditional financial services businesses could.

Fred Wilson gave short shrift to the Winklevoss suggestion that startups could perhaps hire specialist businesses to assist them in meeting any regulatory burden with the process, in much the same way that modern-day banks do. Doing this would simply reintroduce some of the cost that Bitcoin has removed straight back into the system. Fred is urging regulators to find a coding solution to help startups to meet any regulatory burden and to me, this just seems like an area with huge potential. If the regulators around the globe show leadership by building a system for this new world of financial services in which individuals can  log and prove their identity and status (in much the same way as people use the authorisation services of Facebook or Twitter to log into websites today, for example), we introduce even greater efficiencies into financial services and suddenly regulation gets a whole lot easier to achieve for small businesses.

There was plenty more discussed but I just want to wrap up with one final point. The hearings took place in the shadow of the two high profile arrests earlier in the week and so the tired comment about Bitcoin being used to facilitate illegal activities was raised once again. Those testifying at the hearing were in no doubt at all that this is increasingly an old story. As the ecosystem has grown, the composition of the community has changed significantly. Indeed Jeremy Liew testified that his personal research from around nine months ago had shown that Bitcoin was in fact only being used in around 0.5% of all transactions taking place on Silk Road at that time. As I’ve written about many times before, it remains an easy story for the media but entirely misleading.

Both the Bitcoin economy and the make-up of the community has developed hugely over the past couple of years and the reality is, I believe, far closer to Fred Wilson’s view that the Bitcoin ecosystem will have five distinct stages to its development:-

  1. The Academic Stage: the emergence of the community
  2. The Vice Stage: the use of Silk Road and reliance on anonymity
  3. The Speculative Stage: where we currently are, with huge price volatility
  4. The Transactional Stage: where merchants start to accept and the public start to use bitcoins generally
  5. The Programmable Money Stage: where we build upon the protocol and the whole system really starts to fly

So, let’s hope that the regulators get this right. Call me a pessimist but my instinct is they won’t – at least at first. But as everyone involved in the tech world knows, sometimes the best way to learn is to fail fast and come back quicker, this time with improvements. Let’s see whether they can learn from the technology industries that they’re having to engage with and continually refine their processes at pace. It’s not going to be easy. But it is going to be important.

Watch this space.

photo credit: communitiesuk via cc

Three Key Megatrends In Technology (And Society)

Binoculars
It’s not always that easy to see what’s ahead…

If you’re interested in technology, it’s very easy to be seduced by the hype that surrounds the new, shiny product or service that everyone’s talking about that month. And whilst that’s mostly harmless for the consumer, it can be fatal for a VC. Not only are the companies that you invest in risky but by paying above the odds, you now need your winners to succeed on an even greater scale to have a chance of repaying the people who trusted you with their cash.

So I always find it interesting to hear VC’s explain how they make the decisions about what to invest in given that they focus only on sectors that they believe have tremendous growth potential. Fred Wilson is both a top VC and daily blogger who’s particularly insightful and his recent talk at Le Web on three key megatrends in technology is no exception. You can check out the full talk in the video below.

 

You See Better From Further Out

Fred’s approach is to move one step back from focusing on so-called hot areas in general (such as machine learning and big data) to try to understand the bigger picture. Don’t attempt to guess which technology will be the most important. Look instead at how society is developing and the gaps that are being created. And it’s on this basis that he sees three ‘mega-trends’ driving business over the next few years.

1. Transition from bureaucratic hierarchies to technology-driven networks

Business traditionally functioned from the top down. Management orders filtered down the levels whilst customer feedback would usually go directly to front-line (and often junior) staff. When the system worked, that feedback would have to travel back up through the various layers until management made the decision about whether or not to make changes. Inefficient yes but justified by the high costs of communication.

But now these costs have plummeted, traditional hierarchies are being replaced by technology-driven networks. Think about the disruption to the newspaper industry: vast newsrooms with armies of reporters directed by a publisher with stories being edited to meet deadlines before the publication of a physical daily newspaper. Cue the entry of technology-driven networks (and the advent of Twitter and blogs in particular) and now everyone can be a reporter.

The crowd on each network determines what is popular (by retweets, follower count and the like) and the news that is relevant is delivered to us instantly via our mobiles. The same disruption can be seen in film/television (YouTube) and the music industry (Soundcloud).

Consumers now have the power to clearly signal what they want and find useful. But Fred believes we’re still in the early stages of this process which is only now starting to ripple through other industries like hotels (Airbnb, OneFineStay), creative industries (Kickstarter) and learning (Codecademy). Most industries will be affected by networks over the medium term.

2. Everything is being unbundled

It used to be expensive to get products and services to market. That cost meant that businesses tended to bundle things together that the customers had to pay for, even if they didn’t necessarily want the full selection (think of the Sunday papers with News, Holidays, Finance, Fashion, Classified Ads & Sports sections). Yet technology makes it cheap for new companies to be built to deliver single parts of these products, with the result often being that the bit you actually want is now both cheaper and of a higher quality.

Banking is a great example of an industry that’s being unbundled. It used to be very expensive to open and run a physical branch so the banks offered all types of products, including mortgages, credit cards, small business loans and working capital finance. Yet new businesses are now able to use networks of individuals to provide more efficient, specialised and more effective products – through peer to peer lending for example (Lending Club).

University education is another area where the high costs of traditional delivery – sourcing a building, lecturers, expensive academic books in libraries, face-to-face lectures – are being disrupted by MOOCs and mobile online learning platforms. The network model is also changing the face of research, both with the growth of Open Access publications and by enabling people to collaborate across different locations to enable researchers to share expensive, scarce research resources (such as expensive medical equipment).

3. We are all now a node on the network

The mobile phone has changed the game forever. Whilst those in the developed world still have the option of choosing to use a laptop or desktop rather than our phone, in the developing world, mobile has already won that race for dominance. With the cost of a desk computer too high in such countries for general adoption, people just moved straight to cheap (predominantly Android) smart phones. But regardless of the location, the result is that we are all now connected to each other all the time. Cue a wave of opportunities for businesses who are able to build upon that knowledge of people, locations and photographs across the network – in transport/logistics (Uber), payments (Dwolla, Square) and dating (Tinder).

Where The Three Collide

Fred goes on to identify four key sectors in which each of these three mega-trends are making their presence felt in particular:-

BITCOIN

It’s obvious that we’re heading for major change in the world of money. I agree with Fred’s view that Bitcoin (or similar) is going to be responsible for so much more than just innovation in payments. It has the potential to become the financial and transactional protocol for the internet that has always been missing. As the standard way in which financial value is exchanged across the web and one that is entirely free from the control of any one party, money will be able to flow as freely and easily as content does today. As a protocol, it will also act as a foundation upon which entrepreneurs can build a whole variety of products and services.

HEALTH & WELLNESS

Think of the growth of wearable technology with individuals wearing devices that can report back with details of their vital signs (Fitbit, Fuelband etc). In the future, some of this data will remain personal and private, some will be shared across networks and some will be exchanged solely between you and your doctor, caregiver or family member. Throw gamification into the mix (Fitocracy) and suddenly you’ve got a profound force for good with individuals making positive decisions about how to keep themselves fit and healthy.

DATA LEAKAGE 

When the industrial revolution arrived, the side-effect of such rapid development was the pollution that poured into our environment. By the time we realised and started the clean-up started, almost a century had passed and we faced a far harder task than it could have been had we dealt with it at the time.

Arguably we’re now facing exactly the same problem in the information age – only this time the pollution is data. Every digital activity we carry out leaves data exhaust which is, like it or not, letting other parties observe our activities. Fred’s view is similar to most people that I speak to: most of the time, he’s happy to let the government, Google, Facebook and others spy on him. However, sometimes the services that we’ve used end up recording our activities when we don’t want them to. Therefore, getting some control over this data leakage, both at an individual and a societal level is important.

TRUST & IDENTITY

Currently, many of us sign into services using our identities from other platforms (e.g. Facebook, Google, Twitter etc). Whilst it is extremely handy to use their authentication services, we are essentially giving these companies knowledge about everything that we do. Fred predicts the emergence of a standard protocol that will provide individuals with control over their own identity, trust and data which will be distributed (like Bitcoin, across many thousands of computers), free from any one party’s control and global.

Tick The Boxes

No matter whether you’re a VC, entrepreneur or just a citizen in the modern digital era, Fred’s talk provides plenty of food for thought. Using this framework provides a useful lens through which to watch just how the world will change in the next few years as a result of developments in the tech world.

We’re only just at the starting line: the pace of technological advancement can only accelerate from here on in as networks strengthen and the remaining friction that slows down the voluntary exchange of information between people anywhere across the world disappears completely. So if you’re looking to start up a new business or simply to future-proof the one you have, you could do far worse than take start to consider how to take account of all three.

photo credit: C.P.Storm via cc

Discussing Bitcoin On TV

It’s been a busy week after STV got in touch to ask me to comment on the news that the Brooklyn Cafe in Glasgow had become the first in Scotland to accept bitcoins in payment over the weekend. I gave a street interview for the 6pm News, and followed that up with a live studio appearance on Tuesday night – you can check it out below:-

http://www.youtube.com/watch?v=w0QrSFMC3-4

Whilst there wasn’t enough time to go into any depth on the subject, I’m delighted to see Bitcoin continuing to push through into the mainstream public consciousness. I’ve been interested in the topic for a while now and I’m convinced that digital crypto-currency is here to stay. Whether Bitcoin or another of the alt-coins will be the ultimate winner here is unclear but moving to a digital currency provides such significant advances for us all in a world that has changed immeasurably over the last few decades that once you get your head around the basics, I find it hard to imagine any scenario in which it won’t become a necessity around the globe.

I have exactly the same feeling about this as I did when I came across the original incarnation of Napster around the turn of the century. Whilst it soon became clear that the obstacles to the development of the peer-to-peer sharing were going to be insurmountable for Napster itself as an organisation, it was abundantly clear to me (and many others, I should say) from the start that it would be impossible to suppress a technology that transferred content with such ease.

As history shows, peer-to-peer technology was forced to evolve under the shadow of various legal threats. End users found the immediate transfer of digital content too compelling to simply forget, despite the various legal issues. And it was precisely this perceived value that drove innovators to continue to evolve the solution until content was ultimately being transferred on a decentralised network using decentralised software, avoiding a central organisation which would always be vulnerable to attack. Existing businesses simply had to find a way to work within this new world or perish – a struggle too far for many layers of the traditional entertainment industry.

To me, Bitcoin – and more specifically digital currency – displays many of the same characteristics. Not simply in the way in which it relies on peer-to-peer technology but in the fact that it will continue to evolve. But in this case, it’s not ‘simply’ entertainment that’s ripe for disruption. The change that it’s driving will be felt far beyond the world of finance alone.

Bitcoin’s single most important innovation is also its greatest strength – the distributed public ledger. This is a record of every single transaction that takes place using bitcoins, confirmed every 10 minutes across all of the network’s computers. If you’re spending money, no longer do you need a trusted 3rd party (e.g. bank) to confirm (for a fee) to the seller that you actually have that money. If the network says you have 10 bitcoins, you’ve got 10 bitcoins. You can now rely on the network to prove that you have the money you say you have.

The benefits are just too powerful to ignore.

  • Instantaneous direct transfers between individuals or corporations anywhere in the world? Now you can trade not just with the 1 billion people who have access to bank accounts but with another 6.5 billion people who can’t currently access banking facilities. As the physical location of workers becomes less important in a digital economy, you can now employ that skilled individual from that far-off country whilst being secure in the knowledge that both sides can understand, trust and value the payment mechanism.
  • Providing a native payment protocol for the web? Pay directly online without going through the laborious process of first paying cash into a bank account and paying a high transaction fee. It also opens up the potential (via micro-billing etc) for businesses to charge users accurately for content consumption according to usage.
  • Developing a system of programmable money? The world of smart contracts now starts to become a reality. No more lawyers writing contracts to deal with holding money in escrow until certain actions are carried out by one party. No more expensive trips to court to seek damages because the transaction itself is structured to pay out damages automatically in certain situations.

These are just a few basic areas. The reality is that the list goes on and on. But despite its limitless potential, Bitcoin’s adoption faces clear barriers. The general public continue to read media reports that constantly refer to its current volatility as a currency and its use in facilitating otherwise illegal transactions. We’re so early in the cycle that people are focusing on the immediate financial gains (and losses) and not hearing just how important Bitcoin is going to be as a protocol (a method of exchanging data over a computer network) – which in itself is shaping up to be one of the most significant inventions since the advent of the internet itself.

The speed of development in the world of Bitcoin is fast but there’s still a timelag whilst we wait for enthusiasts and startups to develop the killer usability that will enable the average man in the street to both understand it and then to adopt it.

I honestly believe 2014 is the year that Bitcoin will explode into the mainstream in a way that seemed unlikely maybe 18 months ago. The current market cap of the Bitcoin economy is currently over £6.7 billion, HMRC are said to be looking to reclassify bitcoin in the UK soon, bitcoin ATM’s are spreading around the globe and businesses are slowly but surely introducing it as a payment option (Overstock.com in the US being the highest profile retail organisation to do so so far).

To be clear, I don’t advocate piling your life savings into it. It’s currently risky as a short-term investment, driven by speculators and its success in maintaining its position as the number one digital currency is still uncertain. But, in my view, the benefits of crypto-currencies are just far too significant to disappear. The concept of decentralised finance is here to stay and the problems that it has been designed to solve only get more pressing with each day that passes. So please, if you are going to do one thing this year, do yourself a favour – read up about it, question it sure but above all try to understand what’s going on.

And, as ever, if you want to chat Bitcoin, get in touch!

A Deluge of Opinions On Uber’s Surge Pricing

Surging ocean waves
The storm continues online around Uber’s surge pricing model

As the weather starts to worsen for us Northern Hemisphere types, it’s been interesting to watch the debate develop around Uber‘s use of surge pricing during a particularly wintery snowy December weekend in New York.

Cards on the table, Uber fascinates me. Whilst I’m not quite as bullish in my assessment of their future as some who are confidently predicting that it’ll grow into a more significant company than Facebook, I’m convinced they’re on the cusp on something huge and far more important than simply providing high-end transport through a slick app that handles payment directly (see my previous post on the two-way feedback mechanism they employ for both drivers and riders). The moment they start to use that data to morph into more than simply transporting customers with high levels of disposable income, things could really start motoring (excuse the pun). To quote Shervin Pishever:

“Uber is building a digital mesh – a grid that goes over the cities. Once you have that grid running in everyone’s pockets, there is a lot of potential for what you can build as a platform”  

Like all modern businesses, there’s a potential goldmine of user data being generated. But it’s the current use of that data that’s the current hot topic. By using surge pricing, Uber relies on an algorithm that temporarily increases the price of a journey when the supply of cars gets tight. Relying on basic economics, a sharp increase in demand for rides (due to weather or infrequent events, such as New Years’ Eve) causes prices to spike upwards in order to entice more drivers out onto the roads to satisfy that demand.

It all sounds fine in principle, although there are plenty of suggestions about alternative models that Uber could be using. But the current problem is that every time they use surge pricing, Uber walks headlong into a customer backlash, fanned by the social media platforms that are so integral to the daily routines of their target customers. Many are now asking the question: is it worth making extra money out of your loyal customers during peak times if it means risking customer dissatisfaction over the longer term?

Of course, variable pricing as a concept is not new. Every time you fly, the chances are that you’ll end up sitting next to someone on the plane who paid a different price. Yet there are still a huge number of companies who leave their prices unchanged whilst supply and demand vary on a daily basis. Is it just the case that we as consumers need to catch up with dynamic pricing models as they become more common? To my mind, it’s not too far-fetched to imagine society moving towards an individual ‘e-bay on steroids’ style of commerce as we become increasingly connected and systems get better at accurately identifying demand.

But for that to happen, customers need to be comfortable about how the prices are being set. In Uber’s case, the app displays a clear message about the temporary price hike before any journey takes place. But it’s prompted a debate about how those prices are set – in this case, how transparent an algorithm can ever be that is used to identify high demand and power the price spikes. Once a company starts to build up significant data about you, it goes without saying trust becomes critical. What happens, for example, if a price rises simply because the data shows that the customer is a regular has always been happy to pay higher prices in the past?

Remember when Amazon tried charging a higher price to regular shoppers who hadn’t cleared their cookies back in 2000? Not their most popular move. Of course, there’s no evidence that this will be Uber’s chosen path. But in the wider scheme of things, it’s possible to see this question being asked more frequently as the market becomes increasingly frictionless, search more powerful and transactions faster to conclude digitally.

One thing that is certain is that Uber is a young business that is making enviable sums of cash. It’s clearly doing something very right by focusing on monetisation (as opposed to traction) far earlier than many other tech giants did at a similar stage. It’ll be interesting to see how it pans out over the longer term however as Uber becomes more ubiquitous.

photo credit: AGrinberg via cc