After long remaining mostly mum on Bitcoin, Microsoft’s legendary co-founder Bill Gates has spoken. At the Sibos 2014 financial-services industry conference in Boston, America's richest man just threw his weight behind the controversial crypto cash. Well, at least as a low-cost payments solution. At the event, when asked about Bitcoin’s potential to ease the cost of payment transactions for moving money from one place to another Gates waxed mostly positively about the virtual money.

“Bitcoin is exciting because it shows how cheap it can be,” he told Erik Schatzker during a Bloomberg TV’s Smart Street show interview yesterday. “Bitcoin is better than a currency in that you don’t have to be physically in the same place and, of course, for large transactions, currency can get pretty inconvenient.”

Gates again reiterated his stance on cryptocurrencies when he delivered the event’s closing keynote address, in which he stated that, in the future, financial transactions will eventually “be digital, universal and almost free.” While he seems relatively bullish on how inexpensive transacting in Bitcoin can be, Gates isn’t singing the praises of its anonymity. The billionaire alluded in an oblique, somewhat rambling fashion to some of the more nefarious anonymous users associated with Bitcoin.

“The customers we’re talking about aren’t trying to be anonymous,” he told Schatzker. “They’re willing to be known, so Bitcoin technology is key and you can add to it or you could build a similar technology where there’s enough attribution where people feel comfortable that this is nothing to do with terrorism or any type of money laundering.” The last time Gates publicly commented on Bitcoin was last February, the day Bitcoin currency conversions debuted on Microsoft’s Bing search engine when he skirted questions about Microsoft’s stance on the cryptocurrency and subsequent others during a lively Reddit Ask Me Anything (AMA) session.

Instead of answering Bitcoin-related queries head on, Gates shifted the focus to the Bill and Melinda Gates Foundation-backed Vodaphone M-pesa, a mobile phone-based money transfer and microfinancing service in Kenya. Gates said that his organization is “involved in digital money, but unlike Bitcoin, it would not be anonymous digital money.” He went on to predict that “digital money will catch on in India and parts of Africa and help the poorest a lot” over the next five years. Now that Gates is officially Microsoft’s technical advisor, perhaps he’ll make a push for Microsoft to accept Bitcoin (or another virtual money) as a form of payment and/or weave cryptocurrency into the company’s nascent “Zero-Effort” mobile payments initiative. Only time will tell.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

Blockchain Without Bitcoin:
Big Banking Babble

 

Blockchain Without Bitcoin?

There has been a recent change in the mainstream narrative surrounding bitcoin. The message is shifting; what was once a story about get-rich-quick imaginary gold or hacker criminals is turning into a story about banks and regulations. The new story is more widespread and more positive. Bitcoin is slowly becoming part of everyday conversation, although bitcoin itself is often downplayed.

Bitcoin has found new support in the mainstream media, mostly couched in praise for its underlying blockchain technology. From Nasdaq and Blythe Masters to The Economist, finance giants are realizing the value of what bitcoin’s blockchain accomplishes in terms of network security and trustless record-keeping. As a result, bitcoin coverage in the mainstream press is normalizing.

The Talking Points

There are three main themes to the new mainstream message around bitcoin:

1. Blockchain is important; forget about bitcoin.
2. Banks must harness blockchain technology.
3. Blockchain technology is far too dangerous for regular people.

One recent example that hits all these points comes from this IBM advertorial piece in Forbes. In this article, IBM researcher Arvind Krishna presents his argument for the importance of blockchain technology and its transformative power. The piece hits the first talking point very overtly, giving bitcoin a cursory mention before saying that the “blockchain is the more interesting phenomenon.” It differentiates the blockchain from bitcoin and then disparages bitcoin.

For the second talking point, the piece offers a few examples for the use of blockchain technology — such as smart contracts and document verification. These are use cases that bitcoin currently serves, but all the examples take place between companies or banks. Not once in the IBM article are individuals using blockchain technology by or for themselves. Talking point number three is found in what was cut from the original version of the article, posted to IBM’s Smarter Planet blog, which was two paragraphs longer. These words from Krishna’s original blog post did not make it into the paid Forbes piece:

“To understand the potential of blockchain, consider how global business is typically transacted today. Say a sheep farm in rural Sweden wants to pay a supplier of sheering equipment in New Zealand. The two businesses use different banks, logistics companies, and currencies, and they might also be subject to different government and industry regulators. So their seemingly simple transaction is actually a lengthy chain of interactions between a number of banks, intermediaries, and auditors. Each party maintains its own systems of record. The result is a complex, inefficient process that’s costly and time consuming.

But what if all the parties from the farmer to the supplier to their respective banks participated in a system using blockchain technology? The entire process could be handled within a single, transparent system shared among all parties, minimizing the potential for human error or malfeasance. And the entire process could probably be completed in minutes rather than days.”

These two paragraphs tell a story of slow, inefficient financial transactions and institutions, and how the blockchain can do a better job than those institutions. In terms of narrative, there’s not a big leap between sheep farm and sheep farmer, and by the end of the example, you wonder why they need a bank at all.

Pay no Attention to the Man Behind the Curtain

Banks and other financial institutions do recognize the value of the bitcoin blockchain, as evidenced by the bitcoin projects backed by three major credit card networks, not to mention Nasdaq. Banks also know that they desperately need to improve their electronic security. But once some understanding of Bitcoin’s potential begins to come into view, banks want to divert attention from it. On one hand, it’s embarrassing that the blockchain innovation did not come from them. On the other hand, they want to be the ones at center stage, and that’s difficult since they spent a long time saying how stupid bitcoin was.

The banks see what bitcoin’s blockchain accomplishes in terms of network security and trusted record-keeping. But they are in the uncomfortable position of having mocked this thing they now find useful. They want to keep it for themselves; at the very least, they don’t want to be left behind. Banks want to know how Bitcoin can cut their costs, but they are not interested in actually becoming faster or cheaper or more open. They want to charge high fees. They want a 2-day float. They want to be in possession of your money.

The message is all about banks doing damage control. It is not about disintermediation or disruption; it is about services you can be charged for. The open secret, the fact that the message tries to obscure, is that people don’t need banks to use bitcoin. Bitcoin’s primary advantage is not to do some things faster or more reliable than a centralized trusted third party, it is to do those things without a third party. Bitcoin empowers individuals to take their finances into their own hands. The revolution will not be centralized.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member

In the last seven days, 54.7 percent of trades on one major exchange called Bitfinex have been to sell bitcoin. The other 45.3 percent have been to buy. At the same time, from bitcoin's all-time high on March 10 to midday on March 23, the number of short positions on the Bitfinex exchange were up 18.9 percent, hitting levels not seen since February 17. Short positions refer to people betting against a price rise in bitcoin.

Jason Hamilton, a bitcoin trader in the U.S., told CNBC that the long-term supporting trend line for bitcoin is around $735, and that bitcoin is in a bubble right now. He said that a potential upcoming fork, as well as the rejection of the ETF and tighter regulation in China, is the reason he is shorting the digital currency. "All these reasons are the catalysts it needs for the bubble to burst and the long term trend line to be revisited," Hamilton told CNBC by a private Twitter message.

Chuck Reynolds
Contributor

Alan Zibluk – Markethive Founding Member