Idealogical battles over bitcoin
Some of the ones trending are the MIT giveaway, the edu acc giveaway, etfs and dark wallets
Wired has a lookback at two main players today, blockchain and coinbase, as well as the idealogical divide
He wasn’t the only one thinking about bitcoin’s broader potential. On a discussion forum about the currency, Armstrong met Ben Reeves, a British programmer who ran a bitcoin transaction-tracking website called Blockchain. Reeves understood the technology and was well respected within its tight-knit community of enthusiasts. He had been using bitcoin for a year already and had even built a bitcoin wallet that 10,000 people had tried out. Reeves also wanted to see the currency gain more traction. The two men hit it off and started spitballing ideas for a new kind of company: a PayPal for bitcoin. It would serve as a trusted broker of the cryptocurrency, taking a 0.5 percent charge anytime anyone converted dollars to bitcoins or vice versa. But spending money within the bitcoin network would be essentially free. With a digital wallet and payment-processing services, you could, say, pay that cash-only cab driver with bitcoins via your smartphone. They pitched the concept to the prestigious and highly selective tech-company incubator Y Combinator—and within hours had an invitation to join the class of summer 2012.
But the relationship soon ran into trouble. Armstrong felt that in order for bitcoin to gain mass acceptance, users who lost their wallet passwords would need a way of recovering them. That meant their new company would have to retain access to users’ private keys—the 64-character access codes that convey bitcoin ownership. Without that access, users could forever forfeit their entire bitcoin fortune as easily as forgetting their password.
Reeves disagreed completely. The whole point of bitcoin was that it put the person with the bitcoins in control. If you gave some company access to your bitcoins, you were essentially trusting it as you would a bank. It could lose them to hackers or, worse, steal them outright. These rip-offs were already an all-too-common occurrence in the nascent bitcoin world. If Reeves and Armstrong’s company maintained a backdoor into all of its customers’ wallets, it would be only a matter of time before the government began issuing subpoenas. Yes, the current system meant that users took on more risk, and that would probably turn off some of the more casual ones. But bitcoin wasn’t meant for them anyway. Though Reeves planned to build a currency for everyone, he wanted to start with the geeks. “There simply are not that many reasons why the average person would want to use bitcoin,” he wrote.
The hammer fell just 48 hours before Reeves was supposed to get on a plane to fly to Silicon Valley. Armstrong’s email was diplomatic, even kind. Still, like all breakups, it hurt. “Cofounding is really like a marriage,” Armstrong wrote, “and even though I think we have mutual respect for each other, we don’t work together extremely well.” Armstrong cut Reeves off from their shared online accounts. “I think we have pretty different aesthetics around what sort of product to build,” Armstrong wrote. He was going to Y Combinator alone. Reeves was out.
At Dove Mountain, Casares decided to play a little parlor trick. He’d show the high-powered tech guys at the table how easily bitcoin could move a crapload of money. He had each of his tablemates download a bitcoin wallet to their phone. Then he generated a QR code on his own phone’s screen and had the person seated nearest to him take a picture of it. When that person checked their wallet, they had 6,390 bitcoins—worth $250,000.
What followed was perhaps the world’s most high-stakes game of hot potato. From seat to seat, the capitalists squirted 250 grand at each other with nothing more than a button push or screen tap. Once the money was safely transmitted back to Casares’ wallet, everyone at the table had gotten a taste of how cool and dead-simple bitcoin could be. This wasn’t like PayPal, say, which merely lubricates some of the friction between banks and credit card companies. This was money set free.
“It was quite a demo,” says Chris Dixon, a serial entrepreneur who is now a partner at Andreessen Horowitz, the venture capital firm best known for its investments in Facebook and Twitter. As a fee-free transaction system, Dixon saw, bitcoin could be an ecommerce alternative for businesses small and large. And because bitcoin was an open platform like the Internet, software developers were free to build things on top of it that they never could with MasterCard or Visa, which carefully control access to their networks. Here was a way to make mobile payments without giving Apple’s or Google’s app stores a 30 percent cut; here was a way for a college student to write a micropayment app to fund a school newspaper.
One of these startups is Blockchain, the brainchild of Ben Reeves. After getting Armstrong’s breakup email, Reeves resolved to build Blockchain into more than just a data-gathering site. Like Armstrong, he saw the bitcoin wallet as a platform for financial services. But Reeves didn’t want Blockchain to have access to its customers’ bitcoins. So he hacked an ingenious wallet that can be accessed from a browser or a mobile phone but leaves the critical private key on the user’s computer. Blockchain can never lose your bitcoins. However, if you forget your password, it can’t find them for you either. None of the Valley’s investors wanted anything to do with Reeves.
The new bitcoin millionaires are a weird breed: government-hating libertarians rich enough to hack the systems that make Washington, DC, function. In that town they even began to sound a little like VCs themselves. “Setting regulatory certainty is very important for bitcoin,” Ver says. “I’m opposed to the regulations, but the bitcoin businesses need to know the rules of the game in order to move ahead.”