Saturday, May 18, 2013

The Not So Impressive Winklevoss Twins Presentation: Notes from Bitcoin 2013

I'm at the Bitcoin 2013 conference in San Jose, California. The Winklevoss twins spoke last night at the conference. They are major Bitcoin owners. They come across as pretty decent preppie guys. The type you wouldn't mind going to a baseball game with or having a drink with, but their presentation on why bitcoins are here to stay was unimpressive.

Their presentation, and I am not exaggerating, came down to this:

1.Gandhi said that first they ignore you, then they laugh at you, then they fight you, then you win, therefore Bitcoin will succeed.

2. There was a guy who thought the automobile would never replace the horse, therefore Bitcoin will succeed.

End of presentation.

The real action was on the floor of the conference.

I ran into a number of Bitcoin entrepreneurs who left serious careers to get involved with Bitcoin, one was a medical doctor, another was a former Microsoft engineer. The ex-Microsoft engineer told me he made $30,000 last month "mining" bitcoins. The bitcoin mining process requires specialized computers calculating complex algorithms.

He said that he needs to keep his computers cooled down and so he has massive fans in the room where his computers calculate. He said he uses enough energy to run about 3 or 4 houses, he said he uses so much energy that the local police visited him because they thought he was running a pot farm in his house. I asked him about how the police knew how much electricity he was using, but he didn't seem to understand the privacy and snooping issues the police visit raised.

The engineer said his computer was so specialized for calculating Bitcoin algorithms that it was pretty much useless for anything else. He said outside of calculating the algorithms, the computer would only be good as a boat anchor. His guess was that there were about 1,000 people around the globe who are mining bitcoins the way he is.

One thing you quickly become aware of at this conference is the number of  virtual currency competitors Bitcoin has. There are many, though Bitcoin has most of the focus. I asked the Doc and the engineer which virtual currencies they were most impressed with beyond Bitcoin, The names they threw out included DevCoin, NameCoin and BitcoinX, though they emphasized that Bitcoin has about 99.9% of the virtual currency market.

Judging by this conference, the Bitcoin world is a very heavily male dominated world of the roughly 1,000 attendees, outside of women at booths working with sponsors,  I saw only three females in the early going.

The sense I am getting is that the Bitcoin world is going to end up very heavily regulated. Many of those involved with Bitcoin here at the conference are talking compliance with the government. Even the Winklevoss twins brought this up as something that will be necessary. The libertarian dream of anonymity seems like a distant memory to this crowd. It will be name and social security number in the not too distant future for anyone trying to open a Bitcoin account to buy or sell bitcoins through an exchange. Thus, Bitcoin, if it is not completely closed by government, will be no more than a faster PayPal type system, with a fluctuating value. There's pluses and minuses to a fluctuating value. During a strong price inflationary period, because of its fairly stable supply, Bitcoin could act  as a virtual gold---but with the one caveat that, because accounts WILL be registered, the government will have a pretty good idea of how many bitcoins you have and be able to demand you turn it over if they so choose---something they can't as successfully do with real gold that is buried in the backyard.

Then there is the possibility that government will attempt to shutdown Bitcoin completely. I would say about 30% of attendees fear a government shutdown, while the other 70% expect compliance with government regulations when opening an account to either buy or sell bitcoins for fiat currency. As a representative for CoinLab, an in development money- virtual exchange operator, told me, "Once we are through getting all the necessary government licenses at the state and federal levels, we will be up and running, but we won't open any accounts until we have proof as to who the account holder is."


  1. Fascinating report, Bob, thank you!

  2. This ranks up there among your best posts; illuminating, very well written. Great report.

    1. Agreed, lots of interesting information in this post.

  3. Bob,
    Isn't the global distributed nature of bitcoin a significant defense against regulatory controls of any one soverign?

    Imagine the Japanese yen starts a serious devaluation and tech savvy Japanese attempt to protect themselves by moving hundreds of millions of dollars of yen into bitcoin. A surge in value of this nature will spawn more exchanges and new identity systems. Any soverign showing aggressive action against bitcoin will drive new exchanges and new miners to more friendly locales.

    In the future workloads like bitcoin exchanges may leverage mobility enabled IaaS to foil pesky soverign specific regulators.

  4. Bitcoin exchanges are demanding a lot of customer data these days. They fear regulators will come at them one day and they don't want to be shut down. But as Bitcoin becomes more popular —and it will because its popularity feeds a positive feedback loop— more over-the-counter exchanges will pop up, making it harder and harder for authorities to control who buys and sells bitcoins. I myself use LocalBitcoins without giving my buyers or sellers details about my identity.