4 Reasons Why Banks Should Provide Bitcoin Wallets

Banks must start offering cryptocurrency wallets before they get left behind, argues guest writer Bijan Shahrokhi at Venturebeat.  

Surge in Price Results in Investor Interest

Shahrokhi, senior product manager in the financial industry, and previously the co-founder and CEO of Virtual Next, has a few suggestions as to why banks should adopt cryptocurrency wallets.

With the current surge in cryptocurrencies’ value, they are quickly becoming a new global market for assets and banks are being left in the dust.

Shahkrokhi notes:

The market cap of cryptocurrencies has grown from less than $30 billion in March 2017 to over $110 billion in June 2017, and this is just the beginning.

The sheer speed of the technology and money transference can easily work against the investor, especially with so many rogue interests in the field, with exchanges like Mt.Gox and Crypsty disappearing overnight. Personal internet security is important too to protect your own coin storage from hackers. Banks do offer a security that only a long established institution can bring.

Whilst security like this is already achievable to Bitcoin users in the form of a hardware Trezor wallet, only banks can truly bring a veneer of historical accountability.

Banks’ advantage over new cryptocurrency startup operations, such as Coinbase is tangible but superficial. Investors already trust traditional banking institutions and while this is purely a superficial viewpoint, as companies such as Coinbase are regulated and insured too, it is a psychological reality when it comes to issues of trust, especially when large sums of money are involved.

Banks Can Address a Real Pain Point for Their Customers

“Cryptocurrency investors are concerned about trusting recently established organizations to hold their assets,” claims Shahrokhi.

People implicitly trust banking institutions and any bank entering the cryptocurrency field could solve real financial problems already facing their customers. Transferring money internationally without high bank transfer charges is

Bitcoin is Still Illegal in These 6 Countries

As the Bitcoin revolution continues to spread throughout the world, there are still some places where buying or using Bitcoin is illegal and can get you in trouble.

Bitcoin Still Illegal in Some Countries

As Bitcoin’s popularity continues to grow throughout the world, some governments are beginning to realize its benefits and potential and are integrating Bitcoin and cryptocurrencies in their economy, rather than trying to punish those that use it with restrictive policies and exaggerated taxes.

Japan, for example, has recently passed a law that makes Bitcoin a legal form of online payment, removing taxes and setting up a regulatory framework for Bitcoin-based businesses. Australia has also taken a stance in favor of cryptocurrencies and removed the double-tax that was penalizing average Bitcoin users.

However, not all countries are as forward thinking especially when it comes to cryptocurrencies. Believe it or not, Bitcoin is still illegal in some countries, which says a lot about Bitcoin as a disruptive technology.

To be clear though, the world’s first decentralized cryptocurrency is not illegal because it poses any risk to the citizens of the countries we will list. Rather, it provides an alternative, open, P2P monetary system — and an exit for some  — which is seen as a threat to their centrally-controlled, legacy monetary system.

All of the countries listed below banned Bitcoin in 2014, following the Mt. Gox disaster. As Bitcoin begins to gain traction throughout the world, it’s possible that these countries may eventually change their stance on Bitcoin and digital currencies.

Vietnam

Although Bitcoin can be freely used by citizens, the State Bank of Vietnam issued a statement in February 2014 warning against the use of Bitcoin and prohibiting credit institutions to deal with the cryptocurrency.

The statement reads:

All bitcoin exchanges that allow users to trade anonymously, therefore, can be

Why National Cryptocurrencies Will Never Beat Bitcoin

National cryptocurrencies will never be able to compete with Bitcoin because no one will trust a system that requires advance permission from and which is controlled by a government to use it. 

[Note: This is an op-ed, edited by Allen Scott] 

National Cryptocurrencies Will Never Be Global

News is just in that the mint of a very important, historic sovereign nation has just hired a company in a separate nation to help it launch its own “Blockchain not Bitcoin” attempt to ride the Bitcoin wave. This is extraordinary in several ways, and allows a general principle to be explored.

First off, this mint doesn’t understand how Bitcoin works. That is clear. They’ve made the common error of believing what computer illiterates in well regarded newspapers mistakenly repeat verbatim about Bitcoin; that you can have “Blockchain without Bitcoin”. And this is only the first of their many errors in this project.

Even if their technical and economic assumptions were correct, there is no way that their private money system can beat the market. The Russians and the Chinese will never accept domination of a global e-money by a single foreign nation coded by a second party.

They will at a minimum, launch their own central bank altcoin, or more likely, settle on Bitcoin as the civilized global standard. These people have made the fundamental error of thinking that they can beat the market. It is the same error the Americans made thinking that everyone would use CDMA instead of GSM.

This new money will never be international. No one will trust a system that requires advance permission from and which is controlled by a government to use it, that can exclude any actor based on arbitrary rules of a hostile government when Bitcoin is available. There is no logical reason to trust

Digital Currency Defense Coalition Formed

DCLDC

Working with digital currencies is a fickle thing legally. Different states have different regulations and there is not enough precedent to accurately predict which way a judge will go in a case. To help address this concern, more than 50 attorneys from around the nation created the Digital Currency and Ledger Defense Coalition (DCLDC). Designed to protect the civil liberties and constitutional rights of cryptocurrency users and companies. They hope their formation will encourage more companies to innovate without fear of legal reprisal.

“Law enforcement and regulatory actions relating to this technology have been steadily increasing over time and are all too often misdirected or premature[.] It is all too common for responsible entrepreneurs and companies to be subjected to unfair scrutiny by some federal or state agency, which, at a minimum, stifles them and broader innovation.” stated DCLDC chairman Brian Klein, who is also a partner at Baker Marquart LLP, in a statement given to the media.

Besides the over 50 lawyers spread across 40 lawfirms, universities and non-profits have also joined the coalition. The statement includes a list of participants.

dcldc-list

All emergent technologies have issues with established laws and politicians who struggle to understand them. When Automobiles first started gaining popularity, Britain passed the Locomotive Act of 1865, which limited automobile speeds to 2 mph in towns and cities and 4 mph in rural areas. The cars also had to be led by a man carrying a red flag. The flag bearer literally had to walk in front of the car to warn pedestrians and horse drawn carriages that the car was coming.

More recently, the government and free speech activists went to battle over pornography on the internet. Not understanding how the internet works, lawmakers in New York passed Senate Bill 210E. It prohibited the transmission of content “harmful to minors” to any minor, from any state or country. The obvious problem was that site owners have no way of knowing if the user on the other end is a minor or an adult. The courts ruled that the law unconstitutional the same year it was passed after the American Liberties Association challenged it.

The DCLDC is a completely separate entity from Coin Center. It does include two Coin Center members, Executive Director Jerry Brito and lawyer Peter Van Valkenburgh. They hope the DCLDC will defend decentralized technologies like the ACLU and the EFF defended the internet.

“The early internet could not have reached the kind of global scale we see today without the work of motivated entrepreneurs and tinkerers[.] Historically, defense coalitions similar to the DCLDC have played a key role in keeping the way free for innovators pushing the envelope to build out promising network technologies” said Brito.

Cryptocurrency regulation has been an issue for the space for years. Ever since Senator Charles Shumer (D-NY) called for the shut down of the Silk Road, Bitcoin regulation has been an issue for lawmakers. While regulation of some form or another is coming eventually, organizations like Coin Center have been fighting to make that regulation as favorable to the industry as possible. Now, the DCLDC will be working to help people and companies deal with that regulation, regardless of what it might entail.

DCLDC will provide pro-bono (free) legal advice for those who can’t afford it. The DCLDC will also issue amicus briefs in cases that could set precedent. Amicus briefs are comments to the court from a group that has not been called as a witness by either party.

You can learn more about DCLDC and how to contact them, on their website.


 

A quick and unrelated note for our longtime readers. Inside Bitcoins is hosting a conference in New York City on October 8th. While it will be going on the same day as Scaling Bitcoins in Milan, Italy, it has a different focus. The Cryptocurrency Pub Con is designed to be accessible to people not actively working in the industry. We have a great line up of speakers, including yours truly. Industry focused conference tickets are often priced in the hundreds of dollars. The Cryptocurrency Pub Con tickets are only $10 if you buy in advance and $20 at the door. It will take place at the Turtle Bay NYC restaurant and bar. It is located at 987 2nd Ave, New York, New York.

We hope to see you there. I will have signed copies of my book for sale as well.

[Image: Inside Bitcoins]

‘Hate Group’ Steven L Anderson Claims BitPay Shut Him Down, Should It? (Opinion)

BitPay Shuts down Hategroup

A controversial Pastor whose ministry is on the Southern Poverty Law Center list of hate groups, claims to have had his BitPay account shut down. Steven L Anderson, leader of the Faithful Word Baptist Church in Tempe, Arizona, claimed in a blog post titled “Paypal is Not our Pal” that several payment processors closed his accounts, including Bitcoin processor BitPay.

It comes as no surprise that Paypal, Givlet and Qgiv would cancel Anderson’s account. They have been closing accounts of controversial and outright repugnant companies, people and causes for years. Most famously, Paypal joined major credit card processors in blocking donations to Wikileaks in 2010. That BitPay, a company that facilitates the exchange of Bitcoin into fiat currencies for merchants and users, would close an account of someone not convicted or even accused of a crime, is a bit more surprising.

We contacted BitPay for comment but they would not provide any details. “No comment. BitPay does not comment on merchant’s account or activity” we also reached out to Anderson, but have not heard back at press time. Assuming Anderson’s story is correct, it seems BitPay has taken the same stance of its more traditional payment processor counterparts when it comes to financing hate groups.

Since the posting of the article, Paypal donations and purchases have returned to the Church’s site. There are no options for any other payment processors.

Steven L Anderson and his “Faithful World” Baptist church consider themselves to be “fundamentalists” and have drawn heat for, among other things, their views on homosexuals. In a blog post in response to the Orlando shooting, Anderson stated that he ”would hope that most fundamental Baptists weren’t mourning a bunch of perverts carousing in a ‘gay’ bar” and frequently refers to the LGBT community as “sodomites.”

In a video response to the same incident he stated that “The good news is that there are 50 less pedophiles in the world, because these homosexuals are a bunch of perverts and pedophiles.” He later continued “The bad news is that a lot of the homos in the bar are still alive, so they are going to continue to molest children and recruit people into their filthy homosexual lifestyle.” That video was removed from YouTube, but was picked up by media outlets and re-posted elsewhere.

Anderson has also taken heat for advocating that the death penalty be applied to adultery, the execution of every homosexual in America in order to “cure” AIDS, and that the country would be better off if President Obama died in office.

What Should BitPay’s Role Be In This?

Anderson’s views are worth noting because it explains, if not justifies, BitPay’s alleged decision to close Anderson’s account. That said, bitcoin is often called an uncensorable technology and the ability to send bitcoin to anyone, anywhere is a major selling point of the technology. That still holds true. Anderson could accept bitcoin donations without the help of BitPay or any other Bitcoin payment processor. He may run into issues trying to turn bitcoin into fiat. But Anderson could sell his DVDs and take donations without any payment processors.

The real issue is that bitcoin’s core technology is opaque to the average consumer. The solution has been to depend on third parties to make the experience user friendly. What obligation do third parties like BitPay have to embody the tenants of bitcoin itself? Anderson’s views are repugnant, but many people around the world feel that Edward Snowden is a traitor and that Ross Ulbricht was a drug dealer poisoning our youth. How would the Bitcoin community feel if BitPay cut off donations to those causes?

It is often said that freedom of speech only works if it is applied across the board. The same could be applied to the “freedom of financial transactions” that bitcoin supposedly affords us.

Those are intentionally bad examples, because neither Snowden nor the FreeRoss campaign use BitPay; they both have dedicated bitcoin addresses. But using these admittedly bad examples allows me to illustrate another point. Putting aside his views for a moment, Anderson is representative of people who are technically competent enough to use payment processors like Paypal and BitPay, but are not likely to be technically capable of running Bitcoin Core. Bitcoin can be used without companies like BitPay. But does Anderson know that? His first bitcoin experience certainly wasn’t of a technological tool, free of outside influence. It sounds like his experience and by proxy his follower’s experience, was similar to that with traditional payment processors. That seems like a failure to me.

Anderson and his followers hold horrible views. That doesn’t change the fact that his church is hundreds or thousands strong. These are people who may have discovered Bitcoin as a technology that is indifferent to their political and religious views. Instead, their leader is telling them that Bitcoin doesn’t want them.

On the other hand, BitPay isn’t preventing Anderson from accepting Bitcoin for payments or donations because they can’t. Rather, they are simply refusing to help him do that. If someone I didn’t like asked me to help them exchange some bitcoin for dollars, I wouldn’t be under any obligation to help them. So, why should BitPay? When I attempted (unsuccessfully) to contact Anderson, I didn’t offer any information on how he could use bitcoin without Bitpay.

Everyone wants Bitcoin to be accepted by the masses. Should we as a community praise or decry BitPay’s decision to not service the hateful segments of the masses?

Assuming that BitPay did shut down Anderson’s account and that it wasn’t due to a court order, it begs the question: should BitPay be forced to facilitate the movement of money to a group it finds reprehensible? Morally and legally, the question may be up for debate. Let’s assume BitPay’s goal is to bring bitcoin and its benefits to the masses and not simply be a payment processor that happens to use bitcoin. Does it need to accept the entirety of “the masses” or can it surgically cut out the pieces it doesn’t like? Not if it is promoting financial freedom. I’m not sure if that is BitPay’s goal, but it should be the goal of bitcoiners everywhere.

Why is Bitcoin Important for P2P Lending and How Can the Industry Improve?

Bitcoin P2P Lending

P2P lending is often brought up as an industry that could benefit from Bitcoin, and Coinbase CEO Brian Armstrong has even talked about how this will be one of the key areas of development for Bitcoin on more than one occasion. While there are a few different Bitcoin-powered lending sites available right now, the industry has been plagued by low-quality borrowers who are often able to escape the loan platforms without paying back their lenders. It’s clear that Bitcoin can be a powerful tool in bringing frictionless payments and permissionless access to the world’s financial system, but there is still plenty of work to be done when it comes to applying some of the legacy protections for borrowers in these types of systems.

Also Read: PayPal To Integrate Peer-to-peer Payment Solution Venmo Soon

Bitcoin Enables Seamless Cross-Border Lending

Stu Lustman is a commercial credit analyst and P2P lending enthusiast, and he was recently able to shed some light on the Bitcoin lending industry via email. Before talking about the current issues with the Bitcoin P2P lending industry, Lustman provided a brief explanation of why cryptocurrency can be a valuable tool for this sort of online financial activity. Lustman explained that Bitcoin is perfect for cross-border money transfers, which is how he came across the technology in the first place:

“Bitcoin lending is great for diversification or cross border lending. I found Bitcoin as I was searching for a way to do P2P loans to [non-Americans]. Every country’s own securities laws . . . required being a resident or a citizen [of that country], so the only way I could lend to non-Americans was through Bitcoin.”

The Problems with the Current Bitcoin Lending Industry

Lustman understands that Bitcoin is a useful option for connecting borrowers and lenders from around the world, but he also sees serious issues with the currently available Bitcoin lending platforms. In his view, lenders are the ones who are being shortchanged under the current setup. Lustman explained that the lack of a collections apparatus is hurting Bitcoin’s ability to expand in the P2P lending industry:

“Some kind of collections apparatus needs to be instituted. It’s just too easy to walk away with someone else’s coin when there is so little to no consequence for doing so. Identity is only a factor to the degree that some real scammers try to open different accounts under different names, for example. Although, I think this is the minority.”

Lustman claimed that these sorts of issues used to be more common on Bitcoin lending websites, and he also has a post on his blog about some of the work he is doing with the Chamber of Digital Commerce to help protect the lenders on these sorts of platforms.

Using the Blockchain to Track Borrower Reputation

A large number of individuals and startups are interested in using the blockchain for identity management, which means there’s also the possibility that the system could be used for tracking people’s credit histories. If Internet users begin to use some sort of entry on a blockchain-based system as their online identities, it could also make sense to attach credit histories to those identities. Lustman called this concept a “great idea” via email, but he also stated:

“I still think that Credit Scoring, like what FICO does in the US, requires both information and human interaction since strength in some areas can make up for shortcomings in other areas, and you can’t program for every scenario.”

Stu Lustman will be featured on a Bitcoin lending panel at the upcoming Inside Bitcoins Conference in San Diego on December 16th. Lustman claims that he’s excited for the panel, as he will be the only American. He noted:

“It’s going to be full of insights on how businesses can access BTC as capital for their business as well as how BTC can be used as an investment tool. It’s going to be awesome.”

 


Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.

Will It Take a Crisis to Find Consensus in the Bitcoin Block Size Debate?

Bitcoin Crisis

Although there seems to have been a small bit of progress in finding consensus on the block size issue in Bitcoin, the reality is that there still isn’t a formal plan for altering the block size limit in Bitcoin Core at any point in the near future. Many proposals have been made, but it appears that some contributors are looking to raise the block size cap at a much faster rate than others. This has caused a bit of a rift in the Bitcoin development community, and some believe that no consensus will be found on the matter until the number of transactions in each block hits a crisis point.

Also Read: Is the Bitcoin Community Jumping to Conclusions on the Block Size Debate?

Crises Bring Us to Consensus

Vice Chairman of the Board for BitFury George Kikvadze and Bitcoin Core Contributor Peter Todd were both recently featured on a panel related to Bitcoin governance at Bitcoin Pacifica 2015, and it was Kikvadze who originally brought up the idea that consensus on the block size limit may not be reached until there is a crisis. Kikvadze used an analogy to governance in the United States to explain his point:

“I think consensus is reached when there is a crisis, simply put, because everybody has different priorities in operating business, and maybe a certain group that thinks there is an issue, which has priority number one but for me it may be issue number five or six — or I may just not be aware that there’s issue to a point where it’s different. But, when there is a discussion and when there is a crisis and your economic state is there, then you pay attention. So, I think there’s no perfect mode of how to design a structure for that, but typically, in United States history, when you have the highest rating of president, both parties rally when you have a crisis. It lasts for a couple of months then it drops off down to the 10, 20% rating. Typically, it’s very similar. You can extrapolate it to this system.”

There may be some truth to Kikvadze’s theory, and it would appear that Chicago Mayor Rahm Emanuel would agree with his point on American politics. In the past, Emanuel has stated, “You never want a serious crisis to go to waste. And what I mean by that — it’s an opportunity to do things you think you could not do before.”

Bug Fixes Find Consensus Quickly

There is also a precedent for crises causing changes in Bitcoin in the past. Peter Todd noted that it has been easy to gain consensus on critical changes in the past such as a bug in the code early on that allowed someone to create new bitcoins out of thin air:

“I’ll make a point because you just said how nearly every change we’ve made to bitcoin to the protocol definition has been in response to a bug. As an example, we had a bug which let people create money out of thin air. It was very easy to get consensus that that was not how the protocol should work. They should change that and that was probably fixed within 24 hours, if not even less. We’ve had issues with OpenSSL, deep down cryptographic details that could cause problems. In that case, it wasn’t an emergency fix, but we still got consensus very easily with very few people really involved.”

The fact that changes to Bitcoin Core are able to be made so quickly in times of crisis could have implications for any future changes to the block size limit. Although there are many contributors who are against a large increase to the block size right now, it would be interesting to see if consensus could be found on an increase to something like an 8MB block size limit if the change was warranted by the number of transactions taking place on the network. There could be a large amount of pressure on the developers from Bitcoin users and businesses to make such a change in that kind of scenario.

Why Finding Consensus on Block Size is Hard

Todd also shared some thoughts on why it’s so difficult to come to consensus on the block size during his remarks. In his view, the block size is about much more than just changing a number because it could have implications on who is allowed to fully participate in the system. He explained:

“We’ve never had, like the block sizing issue, where there is actual, genuine, and real disagreements. What’s really interesting about block size, it’s also an issue about who gets to influence governance in the future, which makes it a really, really charged issue. That’s very hard to get consensus with because part of the issue is you’re deciding who are we going to exclude from being part of the consensus the next time around? That’s not just true with let’s say a bug, like, let’s prevent people from making money out of thin air.”

Peter Todd then expanded on this thought by specifically pointing out that changes to the block size limit could have an impact on who is able to run a Bitcoin full node:

“I mean concretely, enforcement of the rules is done by full nodes, and the only way you can run a full node is if people can keep with the data demands of the Bitcoin blockchain. Most people are not running full nodes because they’ve chosen to trust other people to do it for them. Right there, to an extent, you’ve shut out some people by the design of Bitcoin from being part of that governance.”

It’s still unclear if it will take a crisis for an increase in the block size limit to happen in Bitcoin Core, but there does seem to be some rough consensus that an increase in the limit to at least 2MB could happen in the relatively near future. Of course, the number of transactions on the Bitcoin network could grow exponentially in a short period of time, which means a change may not be made until blocks are full and transaction fees begin to rise.

Featured image via János Pálinkás.


Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.

Is the Bitcoin Community Jumping to Conclusions on the Block Size Debate?

bitcoin jumping to conclusions

The recent debate surrounding the Bitcoin block size limit has been the most controversial development discussion in the community up to this point. Some users are outraged that the Bitcoin Core developers won’t simply raise the limit already, while Mike Hearn and Gavin Andresen have gone as far as to try to fork the main codecase (and potentially the blockchain) in an effort to implement Andresen’s BIP 101. There has been a large amount of hysteria in the overall Bitcoin community regarding this key development decision (especially on Reddit), and cooler heads are beginning to question whether the debate has been a bit rushed.

Also Read: Block Size Debate Takes Turn: F2Pool Rejects XT, Adopts BIP100 Instead

Rash Decisions Should Be Avoided

Although Andresen and Hearn believe that consensus will simply not be found in the block size debate, Blockstream Co-Founder and President Adam Back seems confident that a compromise will eventually be found. In a recent interview with Epicenter Bitcoin, Back noted that time should be taken to test other proposals instead of simply jumping on the first idea that is thrown at the community:

“It’s much more predictable and much more likely that everyone will get on board with the same proposal, and it would be good to have a little bit of focus on seeing how the flexcap proposal works, otherwise we’re risking people getting on the first proposal that was out there to just change the parameters. Jumping on the first proposal that is dumped in the public community is a bad idea.”

More Research and Testing for Various Proposals

Obviously, there are certain proposals that Back prefers over others, but he claims more testing is needed to figure out which one is the right option going forward. In the past, Peernova’s Dave Hudson has also talked about the lack of “good data” in the block size debate. Back noted the importance of the series of Scaling Bitcoin workshops in testing various proposals during his recent interview:

“I think Jeff Garzik‘s proposal and flexcap are interesting, but we need more testing and more analysis. The parameters for flexcap need to be selected and we need informed debate. I think the Scaling Bitcoin workshop is going to be interesting there. We are going to be talking about selection criteria, see network measurements about latency and bandwidth, and it’s more like the way that NIST goes about selecting the new AES standard or the new SHA-3 standards where there are a number of proposals, a series of workshops, and it’s analogous in the sense that any encryption or hashing standard there’s a tradeoff between security and speed. People will do lots of benchmarking effort about measuring speed; they make hardware implementations in simulators and try to see which is most efficient, they will try to analyze the security properties; and those are much more able to stand the test of time. It’s extremely expensive to make a failure in the field. Bitcoin is far more complicated than SHA-3 or DSA.”

Getting Everyone on Board

One last key point made by Back during his Epicenter Bitcoin interview had to do with the level of consensus needed before making a change. BIP 101, which is implemented in Bitcoin XT, requires 750 of the last 1000 blocks to be mined by a BIP 101 node before activating a block size limit increase, but Back seems intent on gaining more consensus from the entire community before implementing a serious change that requires a hard-fork. Back explained his desire to get everyone on board before making a final decision during the recent interview:

“There’s all this pressure to jump on the first proposal or curtail review of potentially better proposals; it’s unfortunate but I think that if we do this sort of validation of the proposals, we can still get to scalability and get the network scaling faster because the trigger mechanism is to get everyone upgrading, not so much miner hashrate. If we get everybody — all the companies, all the miners and all the users — on the same page on a sensible compromise that doesn’t have any obvious attacks, then we can see upgrades in a really much shorter compressed period of time.”

Adam Back has talked about the possibility of a small increase in the block size limit as a fallback option on more than one occasion. He has noted Jeff Garzik’s BIP 102 and his own, similar suggestion are two possible options that would allow the community to continue the development of other scaling options, such as the Lightning Network, before trying to implement a long-term solution.

Featured image via Peter.


Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.

Andreas Antonopoulos on What It Will Take for Bitcoin to Beat the Banks

Andreas Antonopoulos Bitcoin Talk

One of the main memes that has been repeated in the Bitcoin community for many years is that the digital cash system will eventually replace the need for banks. While the general public still seems content with using Wells Fargo, Bank of America, and other traditional providers for their digital finance needs, there are plenty of Bitcoin proponents out there who plan to replace their bank account with a Bitcoin wallet as soon as possible. One such individual is Mastering Bitcoin Author Andreas Antonopoulos, and he recently discussed what Bitcoin companies need to do in order to defeat the legacy banking system in a talk he gave at the Harvard i-lab.

Also Read: BitNation’s Emergency Refugee Responds to Europe’s Lack of Union

Don’t Try to Be a Bank

One of the main issues that Antonopoulos has seen with a variety of Bitcoin companies over the past few years is that too many of them try to be like the banks they’re trying to replace. Instead of creating metaphors related to the legacy banking system, Antonopoulos believes that Bitcoin service providers should be designing entirely new experiences:

“Part of the trick is not trying to be a bank. Do not try to do anything related to traditional banking because all that does is pollute their minds. You want new users to have a brand new experience with Bitcoin that is unlike any banking they will ever see. You don’t want it to look like a checking account. God forbid you use the word checking. Open any one of the exchanges right now — Circle, Coinbase open them up. What is the name of your account on Coinbase? It is the checking account, and it has a balance. And it shows you a statement. Who the hell did they hire for this design?”

The idea that Antonopoulos is hitting here is that people should not be trying to compare Bitcoin to anything else that has existed in the past. It is something completely new, so developers and entrepreneurs should be starting from scratch rather than using designs that are seemingly based on traditional banking applications.

Banks Will Sell Bitcoin for You

After offering some advice on what not to do as a Bitcoin company, Antonopoulos took the presentation in a more positive direction. In his eyes, businesses built around Bitcoin should not worry too much about having to sell the technology because banks will be able to sell it for them:

“We don’t really need a hard sell to make Bitcoin win on the banks. All you need in order for Bitcoin to win against banks is for a person to use Bitcoin for a week and then the bank will take care of the rest. They’ll freeze their account. They’ll tell them they’re closed. They’ll hold their [money] for three to five business days, and you just sold Bitcoin. Banks will sell [it] for you.”

Antonopoulos then shared a personal story to make his point on how Bitcoin can easily outcompete the legacy banking system in certain areas:

“I was invited to do a talk at the Bundesbank . . . the German federal bank. They were paying me for this speaking engagement, but they don’t know how to do Bitcoin, which is a real problem because I usually get paid in bitcoin. So, we agreed to do a wire transfer. It took sixteen days. I sent them the details — actually no, first they asked for my account number. I gave them my account number. Then, the next day they came back and they said they need the SWIFT number. By that time, my bank was closed, so I couldn’t get the SWIFT number. The next morning I got the SWIFT number, and I sent it to the Germans. But by that time, their bank was closed. The next morning they used the SWIFT number and discovered it was the wrong SWIFT number. It was the SWIFT number for US dollars, not for foreign currency. So, they sent me an email, but by that time my bank was closed. So, the next day I got the other SWIFT number, and I sent it to the Germans. But by that time their bank was closed. They sent me the wire. My bank took one look at this wire and said, ‘Bundesbank? Never heard of them. Sounds dodgy. Let’s freeze this for fourteen days just in case they bounce.’ This is the third largest central bank in the world. This is the German Federal Bank. They do not bounce checks. So, fourteen days later — and this is the great part . . . They released $80 of the total amount, which was a four figure amount. $80. Why 80? What the hell is that? What am I going to do with — I mean, just hold all of it. Are you teasing me? This makes no sense. This is what we’re addressing with Bitcoin.”

Bitcoin Needs Better Designers

Although Antonopoulos seems convinced that Bitcoin will be able to outcompete the banks, he did admit that the technology needs better designs and applications that offer a better user experience. He briefly touched on this point near the end of his comparison between Bitcoin and the banks:

“It doesn’t have any of the good parts of a bank, like the ability to easily reverse transactions [or] get a refund if you lose your private key . . . It also doesn’t have any of the bad parts of banks, but we don’t pay attention to that. And so, we’ve created expectations that are entirely misleading. Bitcoin desperately needs design . . . It’s been created by engineers and is absolutely inscrutable, but I have hope. I have hope because we’ve done this before.”

When Antonopoulos mentioned the hope that he has for better user interfaces in Bitcoin, he was basing that hope on the history of the Internet. Although the Internet was impossible for the average person to use in the early days, the right designers were eventually able to create apps like Facebook, YouTube, and Gmail. Bitcoin has a long road ahead when it comes to general usability, but many companies in the space view this time as nothing more than an opportunity to help solve those design problems and bring this new technology to the masses.


Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.

Bitcoin is Suffering from a One-Size-Fits-All Problem

Bitcoin One-Size-Fits-All

Bitcoin means different things to different people around the world. For some, Bitcoin is a tool for protecting financial privacy in an increasingly digital world. Others see it as a cheaper alternative to PayPal, and there are even some individuals who believe the blockchain should mainly be used for storing data in a global, decentralized database. While it’s great that Bitcoin has a myriad of different properties that attract new users to it on a daily basis, the reality is that everyone will not be able to get what they want as the network begins to scale to a much larger userbase.

Also Read: FinTech 2020 Aims to Make UK a Hub for Financial Innovation

Everyone Can’t Get What They Want

Blockstream Co-Founder and President Adam Back was recently interviewed by Epicenter Bitcoin, and he noted the difficulties associated with pleasing every user in the Bitcoin ecosystem. While a change to the protocol may be beneficial to one group of users, others may find it to be disastrous. Back explained this issue in the interview:

“If you look at Bitcoin currently, one of the problems is it is one-size-fits-all, right? So, you’ve basically got to tradeoff the interests of different people. So, miners want to maximize profit and collect fees. Users and merchants would prefer low fees, so they can’t both have what they want, right?”

Back then talked about Bitcoin’s one-size-fits-all problem in terms of the peer-to-peer digital cash system’s scaling issues:

“What ends up happening is a general compromise and you got people that want to scale Bitcoin — like micropayments scale and maybe tradeoff a fair amount of decentralization to get there — and you got people who really value the decentralization and permissionless features that you get from that. And so, again, you can’t swing to one extreme. You [have] to do some sort of balance in the middle.”

Majoritarianism

One of the core issues that can arise when you have different groups of people attempting to guide Bitcoin in a specific direction is majoritarianism. Although democracy is almost universally accepted as the best model for governance in developed nations, this form of government also involves many compromises that lead to people not getting what they want. In some cases, the representatives on both sides of an issue may come together to create a law that doesn’t give either side what they desire. In other situations, 75 percent of the population may enact a law at the expense of the other 25 percent of the citizenry. These sort of issues could lead to a watered-down version of Bitcoin that isn’t as useful as Satoshi’s original vision — mainly due to a loss of decentralization. Additionally, a new version of the protocol may marginalize a minority of the userbase and push them towards alternative options.

Are Sidechains the Solution?

Sidechains is a concept that could potentially solve Bitcoin’s one-size-fits-all problem. Instead of having a single blockchain that everyone must use, sidechains allows a number of different blockchains to operate under the same currency network (bitcoin). Sidechains are essentially new blockchains that are backwards compatible with bitcoin. This allows users to choose between different versions of Bitcoin that may better suit their needs in different situations. Developers can also implement their own sidechains from scratch, which gives them more flexibility in terms of what features they can add to Bitcoin.

An alpha version of sidechains is already available, and the underlying technology for the concept is being pushed forward by Blockstream.

Featured image via Erich Ferdinand.


Kyle Torpey is a freelance journalist who has been following Bitcoin since 2011. His work has been featured on VICE Motherboard, Business Insider, RT’s Keiser Report, and many other media outlets. You can follow @kyletorpey on Twitter.