Page 31 – Dug Campbell

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:-

The Academic Stage: the emergence of the community
The Vice Stage: the use of Silk Road and reliance on anonymity
The Speculative Stage: where we currently are, with huge price volatility
The Transactional Stage: where merchants start to accept and the public start to use bitcoins generally
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:-

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

The Unstoppable Rise Of Bitcoin?

If you’ve been following the news online, it’s unlikely that you’ve made it all the way to the end of this week and not heard the word ‘Bitcoin’ in one context or another. This week, on the heels of the first Congressional hearing into the digital currency, the value of Bitcoin broke the symbolic $1,000 mark for the first time (according to MTGox). I’ve written a brief introduction to Bitcoin before.

But, in amongst various press reports in which journalists continue to peddle the usual scare stories of bubbles being formed now as in days gone by in relation to such commodities as gold, land and tulips – and not entirely without justification I should add – I still think that the real significance of Bitcoin has again been for the most part entirely ignored.

I understand that the price volatility makes a good story. After all, who doesn’t like to hear such cautionary tales of modern-day foolishness as the one involving the guy whose hard drive containing $4 million in bitcoin is now buried somewhere in a Newport landfill site and no doubt continuing to appreciate in value.

But for me, Bitcoin isn’t simply an opportunity for us to gamble on making a quick buck by risking everything under the pretence of somehow being able to predict its future movements. It is far more important than that.

As Mike Hearn said earlier this week in a quote that I shared on Google+:

“It’s easy to forget that Bitcoin’s true value is not in an arbitrary exchange rate, but in its ability to enable new applications and services which aren’t possible with today’s payment networks.”

There’s a very important post by Albert Wenger of Union Square Ventures (‘Bitcoin As Protocol’) that sets this out far more eloquently than I can. In essence, Bitcoin has the potential act as the foundation upon which a whole range of significant innovations can be built over the coming years. As Albert points out, in the same way as a car driver doesn’t need to know how the car engine works – or a web surfer doesn’t need to understand how HTTP works – the important thing to take on board is that the introduction of an electronic public record of every financial transaction (in the form of the blockchain) in itself presents all manner of new possibilities.

It’s likely that the adoption of digital currency will lead to the creation of a whole new ecosystem for commerce and innovations in existing processes which has not only the potential to be significantly more efficient but importantly also lets us do things as a society that just aren’t currently possible.

If you’re with me so far, please do take a look at the talk that Mike Hearn gave at the Turing Festival earlier this year to get a sense of where this could lead in the next 50 years – truly mind-bending stuff:

Of course, I don’t know if it will be Bitcoin that wins the race. There are a range of other competing digital currencies that are vying for supremacy. But in my view there’s no doubt that we will reach that tipping point one day when a digital currency will be generally accepted (and not just by Edinburgh’s First Bitcoin Taxi, as I discovered this week). The potential benefits are just too good to be ignored. So please don’t fall for any of the red herrings around the unstable value, the facilitation of illegal activities or any similar superficialities. This is going to be far, far bigger.

photo credit: zcopley via cc

Is Technology Really Destroying Jobs?

If you’re reading this blog, the chances are that you’ve got at least a passing interest in technology. At the same time, you’re probably creating jobs for others as an entrepreneur or you’re an employee yourself. Either way, at some point, the question of whether technology could replace jobs – even yours – in the future has probably crossed your mind.

As I’ve mentioned before, the general public tends to overestimate the current ability of robots to rise up and consign mankind to the scrapheap. But clearly there’s still a tension here. After all, any time an industry is disrupted by the development of successful new technologies (think Skype, Netflix, Tata Nano etc), its always likely to result in job losses as the traditional big players struggle to keep up.

In the ideal world, everyone should ultimately win following advances in technology: the consumer gets cheaper, better services and products; the new business creates new jobs; and, as the technologies collide with mainstream demand, there’s an exodus of talent from the existing industries to the new exciting frontiers. The identity of the employer might change but, for the most part, everyone finds something to do and keeps working.

But does the evidence actually back this up?

Rising Productivity But A Slowdown In Employment Growth

Not according to Erik Brynjolfsson, a professor at MIT School of Management, and Andrew McAfee, associate director of the MIT Center for Digital Business at the Sloan School of Management. They argue that current developments in computer technology are destroying jobs more quickly than replacement roles are being created.

The US statistics seem to back this view up. Despite productivity and employment growth enjoying a very similar upwards trajectory ever since the Second World War, things changed abruptly in 2000 when productivity kept rising whilst the growth in employment stagnated.

So have we reached a tipping point in the continual development of new technology? Or is it pointless worrying since people have always found something else to do when faced with unemployment caused by technology in the past?

If we assume (perhaps naively) that the statistics are correct, we face a key question that economists know only too well the world over: can we honestly identify technology as being the main reason for this slowdown – or should we also be looking at the vast range of other macroeconomic factors?

The ‘Hollowing-Out’ Of The Middle Classes

I’m no economist. But putting aside the anecdotal scare stories in the popular press about the threat of faceless technological progress for a moment, the area that’s really of interest to me is how technology is affecting certain types of roles, such as clerical work and professional services. I’m not about to define the middle class here but if we’re looking at trends, it’s clear that computers are being used very effectively in certain areas of the workforce that share similar traits.

A report was released this week by the Oxford Martin Programme on the Impacts of Future Technology which shows that nearly half of US jobs could be at risk of computerisation, with transport, logistics and office roles being the areas most under threat. If you’ve got the time, you can get the full 72-page working paper at ‘The Future of Employment: How Susceptible Are Jobs To Computerisation?

Arguably, it’s those in the clerical and professional jobs that may have more to worry about as computers continue to improve their problem-solving abilities using a combination of artificial intelligence and big data. Take Watson, for example, IBM’s computer that beat the human contestants in a version of the TV show ‘Jeopardy!’ in 2011. That technology is now being directed towards a whole range of areas, including healthcare, customer service, investment advice and cooking.

So, for example, if you look at how Watson is being used in the field of medicine, the computer is now learning how to diagnose patients by combining its ability to assess vast amounts of medical data in conjunction with natural-language processing and analytics that are continually improving. It’s still early days but the potential for this scale of computing power are becoming clear.

How To Keep Your Job

Want to protect yourself? Current thinking is that you need a job further up the chain that requires you to use creative, social and problem-solving skills which will be far harder to automate over the next few years. In these areas, technology isn’t able to replace the individuals but is instead assisting them. Technology is used to enable the employee to do his or her work more effectively – think of the joiner who uses an electric drill to work more efficiently. He doesn’t get his P45 because the employer chooses to employe the drill instead.

An even more relevant example presents itself here when you start to think about the implications of the widespread adoption of technologies such as Google Glass in a work environment. It seems to be vital for employees to maintain a culture of curiosity whilst actively striving to become increasingly technologically literate if they want to continue to pay their bills.

Yet increasing number of people are still required to carry out low-skill jobs. Automation is just not very good yet at replacing janitors, home helps and restaurant workers, for example. Plus it’s important to remember that in many cases, technology is helping businesses not only to survive but also to expand quickly when they’re faced with a lack of available labour to employ to meet the growing demand for their new products and services.

Is It Just A Case Of Learning New Skills?

The reality is that many new technology companies are still heavily reliant on the humans behind the scenes. For example, Amazon might be increasingly dependent on Kiva to replace human warehouse staff with robots, but Kiva itself has a huge demand for new software engineers. The success of that business depends on finding talented individuals to constantly develop improved algorithms to ensure that the robots act more efficiently. Robots have never been good at dealing with change and uncertainty so if your job has that in droves, it’s safe to say that there could be a growing demand for your time.

The Autonomous Economy: Waiting In The Wings

But there’s (at least) one more significant factor that we need to consider when looking at how the development of technology in the modern era differs from the past. And that is quite simply that, in some areas, our economy is now developing without any direct involvement from humans.

Or, more accurately, more can now be done automatically by computers that are learning how to do things as a result of applying themselves to big data using new advances in artificial intelligence and smart analytics. According to W. Brian Arthur, a visiting researcher at the Xerox Palo Alto Research Center’s intelligence systems lab, means “digital processes talking to other digital processes and creating new processes”.

Result? We can do more with fewer people and some jobs become obsolete.

Here’s one of his examples. You no longer speak to humans as often when you check in for a flight these days. Now you simply type your booking number into a machine in the airport. That one simple act sets in course a chain of events that involves many machines speaking to each other simultaneously about a huge range of topics without any human intervention (including flight status, your past history, security checks, seat choice, foreign immigration and, in some cases, making automatic decisions about weight distribution on the plane). Decisions are being made automatically in a way that was inconceivable before the networked internet age.

The Future?

Whether you believe in the argument that technology is destroying jobs or not, it does seem beyond question that income is moving gradually in favour of the so-called ‘tech-savvy’. The untapped potential of computer power, big data and individuals skilled in developing the sector is large enough to drive an exponential advance in digital technologies over the next few decades.

Whatever the eventual outcome, the one thing that’s clear is that change is a constant. The sooner we learn to continually recalibrate our expectations and skills, the more effectively each of us will be able to respond. In my view, anyway. After all, “anyone who claims they can reliably predict the future is a huckster with something to sell you – even if their product is only themselves”.

photo credit: Stuck in Customs via cc

Digital Skills That Pay The Bills

As technology continues to develop, it’s fascinating to watch how people react to enforced changes in the workplace as a result. Some actively try to keep abreast of developments whilst others remain passionately focused on ignoring anything that is not directly relevant (as they see it) to the functions of their daily job. But whilst arguments vary as to how quickly those changes are taking place, it’s becoming increasingly clear that we’re developing a skills gap in the country.

The vital importance of the UK’s digital sector

Economic forecasts from the Boston Consulting Group predict that the digital sector will contribute £225 billion to the UK economy by 2016. To put that in perspective, that’s up from £121 billion in 2010.

With numbers that large, it can be hard to grasp what they mean in practice. So it’s maybe useful to consider one statistic in particular: how much the internet contributes to UK GDP when compared to other European countries. When the UK has been identified as ‘the most internet-based major economy‘, it’s a safe bet to assume that we face greater potential opportunities than many other places – for example, UK citizens spend on average £1,083 per year on online shopping, compared to say those in France (who spend £487 p.a.). I don’t think that we’re a country that’s so far ahead of our peers competitively that we can afford to ignore the kind of opportunity that comes from this level of online activity.

Recently the CEO of O2, Ronan Dunne, wrote an article that was widely shared online about ensuring that we build a workforce that’s fit for the digital age. With the UK economy now starting to turn the corner, it seems to me this is a pretty significant issue for us all going forwards. He argues that we should be looking at developing three areas in particular.

1. Digital infrastructure

Using technology that helps people be increasingly flexible about how and where they work has obvious advantages whilst the decreasing cost of more efficient technologies can help to protect jobs that are currently threatened by cost-cutting.

2. Digital transparency

Most people are aware to some extent of the upcoming privacy battles in the technology industry. For example, I’ve previously touched on the challenges that the widespread adoption of Google Glass might represent and there are other key areas as the number of devices that connect to the web via the internet of things increase that will continue to create challenges for us all. However, Roan argues:-

“If we are to make the most of the big data opportunity, business and government need to take collective responsibility for helping the public to better understand the value exchange“

I think this is a key point. If you’re running a business, it’s up to you alone to convince your customers that by choosing (and that choice is the key) to share their valuable personal information with you, they will be rewarded with a far more efficient and enjoyable shopping experience as a result. For every modern business, it’s my view that building that trust by continually ‘getting it right’ (for which read not assuming that a customer has somehow given implied approval to your intrusive and unwanted marketing campaigns) is absolutely crucial for long-term success.

Of course, others have varying views. You might subscribe to the Zuckerberg belief that the age of privacy is over or disagree on principle with any privacy statements that are uttered by anyone who has a financial interest in the outcome.

Or perhaps it’s not quite that simple. J P Rangaswami, Chief Scientist at Salesforce, gave a fantastically powerful talk at the recent Turing Festival in which he reminded everyone that in the days before the costs of mass migration dropped and people became strangers to their neighbours, it was entirely normal to only ever buy goods and services from people that you knew personally, where privacy was no big deal. It’s a source of conflict but, whatever the outcome, there’s no denying that as more commerce (and real life) is conducted using technology, these issues will only get more acute.

3. Digital literacy

Yet it’s this final point that was the original reason for this meandering blog post. For the country to make genuine headway and grasp the opportunities that lie ahead, we need to get the talent in place. And the incredible thing is – for the most part, that talent’s available already. We’re just not using it properly.

It might be a truism to say that many young people in the country already have many of the digital skills that are necessary to fill the gaps that will become more acute with each passing month. But it’s a truism because, quite frankly, it’s true. In May to July 2013, 960,000 young people aged 16-24 were unemployed. When many current business leaders are struggling to keep up with the pace of change, it’s hard to believe that many of those digital natives don’t possess exactly the type of digital skills that are going to be increasingly required by businesses in the developing environment.

Who’s Going To Lead The Charge?

But who’s going to stand up and take responsibility for this? As Simon Devonshire writes on his blog:-

“If we believe it is Government, then exactly which Minister is accountable for the digital transformation of the economy? I don’t think we have one. I’m not aware that the Bank of England has anyone focused on understanding the economic impact of the internet, despite the UK’s lead of e-commerce as a percentage of GDP. Universities offer computer science education, but that is only one of the ingredients necessary to realise the digital opportunity”

We’re in real danger of losing ground here by sitting back and relying on others to make the necessary changes. Some progress is being made — for example, the decision to make coding (sort of) compulsory in UK schools from 2014. But at the same time, we can’t assume that the current system of education was developed many years ago with the best structure to deliver this. I’ve mentioned the quote on this blog that “65% of kids at school today will end up in jobs that have not yet been invented”. Parents could do worse than helping their kids to learn coding at an early age. Not sure where to start? Check out CodeAcademy or another option on this list of resources for inspiration.

But it will take more than this.

We Need A Culture of Curiosity

As the demand for workers with digital skills is exploding, we need to train the young to learn the skills that will make them employable over the coming years whilst working hard to fill existing skills gaps in businesses today with those who are currently desperate for a job.

When you consider that the Internet has only been around (in broad terms) for thirty years or so, it’s important to remember that every single one of us – from the executive who understands no more than simple email to the most advanced coder – has been a learner at some point. As Gillian Andrews writes in her blog:-

“Part of what needs to be learned is how to learn, over and over again. Simply learning where the button is for ‘cut’ or ‘undo’ is not enough.”

To me it seems that it’s not necessarily about teaching the skills quite so much as ensuring that we each develop the curiosity that’s required to adopt a mentality where we’re all hungry to learn. Each and every day. And that responsibility falls squarely on each of our shoulders as individuals.

If you’ve got any thoughts, I’d be interested to hear them.

@dugcampbell

photo credit: rolvr_comp via cc

Ten Reasons To Startup In Scotland

Spend any time around tech startup circles in the UK and you’ll know just how many people view Silicon Valley as some kind of Shangri-La, where world-changing ideas are ten-a-penny, the VC’s grow on trees and world market domination by your mid-20’s is standard.

Yet whilst listening to this sort of chat can be inspirational (and it’s surely a good thing for a business to have global aspirations), it can have a far more damaging result when such talk of opportunities elsewhere ends up demotivating people who become convinced that they’ve been dealt a poor hand in the location stakes. You’ve no doubt heard it before: investors would love my business if only I’d been born in America/been to MIT/had Mr & Mrs Zuckerberg for my parents [delete as applicable].

So I was a big fan of the talk given by John Peebles, CEO of local business Administrate at the excellent Turing Festival recently. John did a sterling job in dispelling some of the location-envy that at times is all too common both in online discussions and in bars following local startup events throughout the country.

Whilst some businesses have to be close to their customers, for the most part geographic location is becoming increasingly less important. At times, it feels that many people use location as an excuse for a lack of creative thinking. So as someone who’s built businesses in different locations across the globe, John brings a useful perspective to the startup scene in Edinburgh.

Here are some of the reasons why, instead of spending time complaining about just how high the barriers are which are preventing you from building a global venture in Scotland, you should be thankful for the advantages:-

1. High profile

You’re a big fish in a small pond. There may be few other big businesses to compare yourself with but it means that everyone knows you. Good news: this can often give you a recruiting advantage in the constant war for talent as people gravitate towards the success stories.

2. Lower costs

Compare the costs of setting up a business in Silicon Valley – or even London – to Edinburgh. Avoiding the centre of the universe means cheaper wages, lower rental, a lower cost of living… The savings soon start to stack up and each one can be essential in the cash-strapped early days of the life of a business.

3. Cheaper healthcare

Regardless of your views on how it could be improved, one side-effect of having National Insurance on this side of the pond is that there’s one less cost to consider in the recruitment process. In the US, the healthcare plans that employees seek will sometimes come with a price tag that tips the balance from deciding to hire that individual and putting off the decision until a later date.

4. Access to markets

The US often represents a huge (and lucrative) market for a startup. Yet it’s often easier for a European startup to break into other non-US markets. A fast-growing European startup is likely to be multi-lingual from the start and can be better placed to deal with local variations, even when it comes down to simply dealing with different currencies across the various markets.

5. Better employee retention

When you’re building a tech startup, you can’t get away from the fact that the level of talent in the Valley is unsurpassed. Yet it also leads the way in the size of financial packages and competition for the best employees. Factor in the prospect of many exciting startups being based closely together, the risk of employees choosing to hop around between the hottest businesses is very real and you have to start factoring in significant HR costs.

6. Increased investor patience

Not to be relied on perhaps, but there’s a greater chance that the investment community in a smaller pond is likely to be more patient. Sure the local investment scene in Scotland may not be perfect but it’s still easier for an entrepreneur based up here to get in front of any London-based VC’s than a US startup based in Missouri (for example) can get to a VC on Sand Hill Road.

7. Education ecosystem

We have great education over here and a university system that in some notable areas leads the world. That sort of talent is looking for opportunities to work in exciting, growing businesses. Engage and enthuse others with your vision for the business.

8. Tax breaks

EIS, Seed EIS and Entrepreneur’s relief are all good examples of how the UK’s current tax system is designed to help entrepreneurs – and investors who provide the essential support – where possible. A country that has “the world’s most generous scheme for angel investors” is evidence that everyone is working hard to close the gap between the Valley and the UK.

9. Work/life balance

Yeah, I know. Another mythical Shangri-La concept for a founder, perhaps. But at least you have the (theoretical) option of being able to take a weekend off now and again and head into the unspoilt hills of the north for some relaxation if that’s your thing. Even if it’s not, there’s few people that can actively wish they had a longer commute to work in the mornings.

10. The chance to impact others positively

But of course, it’s not all about improving your own life. Do it right, with just the right amount of luck, and you also get to help others by creating jobs, spreading wealth, inspiring your local community – you know the drill. In a smaller location, you can be one the few, rather than one of the many, who achieves this level of success. In the right set of hands, that power to both inspire and to actively support others as they strive to be successful can really help a local community.

No-one’s pretending that it’s in some way easier to succeed simply because you’re based away from the centre of the universe, wherever that might be in your line of work. But there’s only ever likely to be one outcome for any would-be entrepreneur who focuses only on the hurdles that face him or her, rather than on the opportunities.

Thought I’d end with a video. It might be created for a US audience but it’s always important to remember that there’s never been a monopoly on achievement. Wherever you’re based, it’s up to you to do the best with what’s available and use your own creativity to work out how to get the things that you need to succeed – after all, isn’t that what entrepreneurship is supposed to be all about? There’s a reason why Edinburgh is home to businesses such as Skyscanner, FanDuel and others after all.

Any other thoughts about why you think it’s good to base yourself outside the Valley – or even London – or if you disagree, feel free to let me know below.

@dugcampbell

Robots: Seeking Jobs Or World Domination?

Robot from Edinburgh University — Dark The Robot is a very friendly chap

I’ve always been interested in robots. I don’t know who’s to blame – R2D2, Twiki or the Gunslinger. I have a soft spot for books like ‘Robopocalypse‘ and actively seek out discussions about how long we have to wait until we hit the technological singularity. So when I was asked by the Beltane Public Engagement Network (thanks Sarah!) to go along to one of their events titled ‘Robots Rise‘, it’s fair to say there wasn’t too much arm-twisting going on.

Robotic Historic

At first, the idea of discussing robots in the lavish and dated wooden and mirrored surroundings of The Famous Spiegeltent felt slightly surreal. Now I realise it was ideal. Why? The Spiegeltent was built in 1920 – exactly the same year that the word ‘robot’ was used for the first time ever in a play called ‘R.U.R. (Rossum’s Universal Robots)‘ by Karel Capek.

The word ‘robot’ in Capek’s native Czech means the forced labour that serfs were required to carry out on their master’s lands. Of course, in fiction, robots often appear as metaphors for human problems, whether slavery or racism. But as they become increasingly visible in society, will we end up teaching them such concepts as cruelty – or will they be capable of learning such flaws themselves? In essence, how human do we actually want our artificial intelligence to be?

The session was led by Subramanian Ramamoorthy, Lecturer in Robotics at Edinburgh University who gave his expert views on how far robots are already intertwined with our daily lives and how much further that’s likely to develop. A fascinating chat, here’s what I took away from the session:

When Will Robots Take Over The World?

Let’s cut to the chase and start with the million dollar question.

The answer? Not any time soon. I get the sense that it’s a question that researchers get asked way too often.There’s various reasons why robots actually taking over the world is unlikely but high up there on the list is the simple fact that there’s no logical reason that they’d want to. Even humans don’t seek world domination (well, most of us). And, even if they did change their minds, their batteries wouldn’t last (honestly).

Interestingly, many people seem to assume that robots will develop some malevolent intention as they evolve – perhaps a view that’s been heavily influenced by Hollywood (e.g. Skynet). Yet the reality is that most developments in robotics currently focus on assistive, rather than disruptive, technologies. The most obvious future uses of robotics involve helping humans to carry out manual and repetitive tasks (for example, cleaning cups) or remote exploration, for example.

Still, despite all of the evidence to the contrary by the experts, I still find it hard to ignore the march of progress under Moore’s Law and this animated graphic which shows just how long until computers will have the same power as the human brain. Makes you think, doesn’t it?

Will Robots Take Our Jobs?

At one level, it’s already happening. If you’ve ever ordered a book from Amazon, it’s likely to have been physically selected for you in the warehouses by a robot. Amazon didn’t pay $775 million to buy Kiva Systems Inc. last year for nothing. Returning to their charging stations automatically, these 24-hour workers won’t be asking for a coffee break any time soon.

Of course, there is always the possibility of unrest if robots displace vast numbers of workers. But in many ways, the more interesting question is how this technology could be applied to complement existing human roles. Consider how we currently search for a missing person for example. If there’s no trace found, it may be very difficult to justify the cost of a policeman searching a remote location for an extended period of time. But the cost/benefit analysis of asking a robot to carry out the task for an extended period of time may look entirely different.

For example, it’s not hard to see how any army will be able to make use of these (don’t worry, you’re not alone if you start to get a little creeped out by progress here):-

Robots In Space

Robots have been up in orbit for a while. But far from simply replicating fiction, it’s useful to understand why they’re actually required. Whilst an astronaut’s job might appear glamorous, the reality is that much of the daily routine is just that – a mass of repetitive boring jobs. I suspect few astronauts dreamed that the spectrum of tasks that they’d be required to carry out when pushing the boundaries of mankind would involve quite so many requests to empty the toilet on the International Space Station…

Robots are great at the manual tasks. Robonaut 2 is by all accounts carrying out a great job on the ISS and what’s more, he’s pretty funny on Twitter too (@AstroRobonaut).

But Why Focus on Humanoid Shapes?

The question was asked why we seem to be focusing on building more humanoid robot shapes than purpose-built structures. It’s clear that having a cute wee fella that speaks to you like Dark the Robot (pictured above) on a stage brings a favourable response that gets people talking. It’s almost PR for the field as it entices people into learning more about the subject.

There seem to be different lines of thought on this topic and the question of whether we are focusing on developing humanoid robots too readily is a source of real debate within the robotic community that’s likely to continue.

Misconceptions?

Those of us who live outwith the rarefied circles of AI/robotic research but within ready reach of great films appear to have an overly-optimistic assumption about the current rate of progress. Continued developments enable us to continually improve but the evolution of our robotic abilities still lags behind when compared to the development of a human child, for example. Progress is being made but it’s important to remember that in general, we’re still only able to teach robots how to carry out certain tasks with effort – we might have developed a robot that learned how to fold towels but it’s still taking 25 minutes per towel.

An Ethical Stramash?

Surprisingly not, for the most part. Despite only making incremental advances in the development of robotics, those involved in robotics apparently get asked questions about ethics frequently, way before any such issues could be faced. The reality is that, except in very specific areas (such as medical technology), researchers are still a long way from having to really tackle particularly taxing ethical problems.

So What Does The Future Hold?

Good question. Everything. And yet, many important limitations remain.

When you actually see a robot in the flesh (so to speak) as I did on Friday, I couldn’t help but be struck again by precisely how again complex they really are. OK, so we might laugh at their basic footballing skills, but the reality is that the work that’s taken place to get to that stage is incredible.

The reason that any robot ever moves is down to a complex combination of factors involving software programming and hardware – every joint contains a motor, that is activated by programming in combination the use of its other senses, such as vision (identifying colour and shape), touch sensors, accelerometers and the use of sonar, amongst others. Putting all that together so that it works as intended is no small task, to say the least.

One of the stated goals of the Robot World Cup is to evolve the technology so that a team of robot footballers can actually defeat the human World Cup winners by 2050. Is it likely? I don’t see why not when you take a look at the most recent robot from DARPA.

Or Is The Future Already Here?

If you really think about it, we’re actually pretty far down the line in some ways already. Estimates state that by the end of 2013, there will be one smartphone for every five people in the world. To recycle the often-repeated statement, every single one of those has processing power far in advance of that used by the Apollo moon landing programme (as an aside, I just found out that you can actually build your own working replica NASA Apollo Landing Computer if you’ve got both the inclination and a spare $3,000).

Then consider what Google and the other search engines are accomplishing by indexing the word’s information. Start to tie that data in with what might be capable via wearable technology such as Google Glass and you really start to get a glimpse of the future.

For now, it seems that the field is focused on building fundamentally better robots (physically) whilst improving the existing skills of interaction (via programming advances). We’re still a long way away from developing robots that are self-powered with the ability to repair themselves at will. But whatever the evidence to the contrary, I can’t help but think that this is another area where things are just going to accelerate in the future.

It’s a fascinating topic. I’d love to fast-forward twenty years and revisit this post again. But in the meantime, I’ll leave you with one thought.

Rapidly ageing population of the world – meet ASIMO.

@dugcampbell

Bitcoin: Is It The Future Of Money?

Earlier this week, a judge in Texas ruled that Bitcoin should be treated as a real currency. Calling yourself ‘Pirateat40’ when launching a venture isn’t a great start when defending yourself from allegations that you’re running a Ponzi scheme. Bad news for the defendant – but what does the decision mean for everyone else?

If you follow tech developments or financial innovation, you’ll be familiar with Bitcoin. But if the phrase ‘crypto-currency’ means less than diddly-squat to you, I thought it might be useful to put up a quick summary since it’s an area that’s going to develop quickly over the next few years.

What is Bitcoin?

There’s a pretty big clue in the word itself. It’s a specific digital currency that isn’t owned or regulated by any bank or institution. Although it’s not been around for long, its ascent has been steep, particularly in 2013. Take a look at this quick video for details:-

What makes it different?

Standard currency (‘fiat money‘) is usually owned and controlled by the central institution(s) in a country. Whilst that brings with it the benefits of stability and reassurance for the masses, it also makes the currency susceptible to outside influence – whether in the form of political interference or plain incompetence. Facing a banking crisis? Your government can simply print more money – thereby diluting the value of everyone’s money within the economy, regardless of where any ‘fault’ for that crisis might lie.

In theory, bitcoins are cushioned from this influence and can be transferred directly from person to person, without territorial restrictions, whilst attracting minimal transaction fees.

The history of Bitcoin

The crypto-currency movement has been around for a number of years. However, the genesis of Bitcoin comes from an algorithm detailed in a paper published by a mysterious individual(s) by the name of Satoshi Nakamoto in 2008. If you track him down, let me know.

The mechanics

Want to create new bitcoins? In theory (ignoring advances in mining technology), anyone can become a bitcoin miner simply by downloading free software. To find the ‘virtual gold’, your computer has to try trillions of digit combinations to finds one that fits a certain pattern. If it does, it submits this combination to a massive peer-to-peer computer network of around 20,000 other ‘nodes’ to be verified, at which stage a fixed number of new bitcoins are created. In reality, however, the mining process has now become so computationally intensive that only those with powerful dedicated processing power can hope to see any real results.

Only one single log of the digital currency is maintained. This records the creation of every bitcoin, in addition to each transaction. By tracking every single bitcoin from the point of creation and checking this record repeatedly, it ensures that there is no way that a bitcoin could somehow be spent twice – or at least, not without pulling the wool over the eyes of the thousands of nodes in the network simultaneously. If your computer helps to verify the creation of new bitcoins or the transfer of existing bitcoins, you receive a small reward, in the form of a transaction fee (a small % of a bitcoin).

The algorithm was designed in such a way that only a set number of bitcoins can ever be created. Predictions are that we’ll hit that limit sometime around 2140. But once we do, remember that unlike gold, each bitcoin is infinitely divisible given its digital properties. The theory is that the currency will be strong enough to withstand the supply of new bitcoins drying up at that stage.

You store your bitcoins in a digital wallet and use them as you see fit with those who are willing to accept them with no external interference.

The bad rep

Perceived to be an entirely anonymous transaction (although in fact it’s not), it’s no surprise that many articles focus on extent to which bitcoins can facilitate black market transactions. For example, you’ll often hear talk of bitcoins being accepted on the Silk Road, an anonymous online marketplace in which drugs and guns are sold freely.

But to me, this sensationalism simply obscures the true story about the extent of the innovation at work here. The opportunity for frictionless payment to change parts of the modern world for the better has significantly wider potential impact – if it gains widespread adoption.

After all, drugs and guns have been around far longer than Bitcoin. Cash payments have always worked just fine before in the black market. In any event, it certainly wouldn’t be the first time that the push toward general adoption of tech innovation has come as a result of the early adoption by certain sub-sections of society.

Stellar growth…and over the cliff

Earlier this year, there was a lot of noise around Bitcoin. In March 2013, with the banks in Cyprus nearing meltdown, the Cypriot government announced that it wanted to confiscate 6.75% of the sum in every bank account in the country. Suddenly, demand soared for bitcoins, an example of people rushing to protect their wealth far away from government interference.

Bitcoin has its own exchange rate which fluctuates against other currencies – violently at times.

Weaknesses

And of course here lies one of Bitcoin’s key perceived weaknesses. Volatility.

Bitcoins have traded from a low of $13 to a high of $266 – within the last twelve months. With no central institution to regulate, audit and control it, and a relatively small number of owners, the roller coaster ride has proved too much for many speculators. But of course, speculation was hardly the reason for its creation.

The other significant risk is security. With the current system, there is always a risk that your wallet could get hacked. With each wallet being the sole record of the bitcoins you actually own, it’s not impossible that you could lose everything. A simple key logging piece of malware could in theory wipe you out. And if it happens, there’s no insurance that you’d expect to cushion your losses in the cases of bank deposit losses. No second chances.

But what’s happening today?

Plenty. Being able to use bitcoins to buy pizzas, donate to Wikileaks, in the WordPress marketplace or to gamble is one thing. But the currency really needs to win the confidence of the public at large if it is ever going to cross that line into mass adoption as a system that will challenge the status quo.

Renowned US investor Fred Wilson has discussed Bitcoin for a number of years on his excellent blog avc.com, and concluded in a post back in 2011 that the currency was at that stage in the ‘trough of disillusionment’ following the ‘peak of inflated expectations’ in terms of Gartner’s “hype cycle”. Subsequently, his VC fund, Union Square Ventures has put real money into a Bitcoin business (Coinbase).

Add to that the fact that the Winklevoss brothers (best known over their claims that Zuckerberg stole the idea for Facebook from them) recently committed to launch an ETF holding their vast bitcoin wealth, together with the recent exit of a bitcoin gambling business for $11.5 million, and the signs are strong that serious attention is starting to circle around the cypto-currency ecosystem.

The future for Bitcoin

I have a really strong feeling about this area. We’re at the start of a significant period of financial innovation and, just like (the original) Napster, I’m convinced the cat’s now out of the bag. Whether Bitcoin itself is ultimately successful, I wouldn’t like to hazard a guess. But I have no doubt that as the bonds between a global society strengthen and faith in institutions to protect individual’s interests continues to weaken particularly in times of trouble, the internet will facilitate the removal of the middleman as it has done in every other industry.

File-sharing didn’t die when Napster finally succumbed to repeated litigation. It lives on today in a variety of improved platforms and it’s inconceivable that the concept itself will now ever disappear.

In exactly the same way, it looks like virtual currency is here to stay. And that in itself raises all sorts of questions about the future of finance, government and business combined. I’d love to know your thoughts – let me know in the comments.

@dugcampbell

PS. By the way, if you’re about Edinburgh on 23rd August, head along to the annual Turing Festival 2013. In addition to some fantastic other speakers, independent Bitcoin developer Mike Hearn will be giving a talk. Grab me and say hi if you’re going.

PPS. For more Bitcoin information, check out this, this, this and this.

photo credit: zcopley via photopin cc