An armed guard patrols illuminated mining rigs mounted inside racks at the BitRiver Rus LLC cryptocurrency mining “farm” in Bratsk, Russia
Features

Wild ride for the Bitcoin billionaires

Cryptocurrencies have gone from geek heaven to serious business

The old billingsgate building by the Thames is both an incongruous and yet appropriate venue for a cryptocurrency conference. Incongruous because cryptocurrencies, running on computer chips that make trillions of calculations per second, couldn’t be further removed from those squamous quickly-expiring assets that the Billingsgate fishwives used to sell there.

Appropriate because many cryptos are quickly-expiring assets that are often sold and debated with the proverbial vigour and profanity of the Billingsgate fishwives. In fitting homage to its piscine heritage, one halibut was actually sold, blockchain-style, on stage at the CoinGeek conference in February.

Shilling and trolling, and good old-fashioned face-to-face abuse, are very much alive and well in crypto. Crypto is in fine form, despite regularly receiving its obituary from financial grandees and government officials.

One of the luminaries of crypto who attracts much of the clamour is Dr Craig S. Wright, an Australian who claims to be Satoshi Nakamoto, the pseudonymous author of the white paper that 11 years ago launched the first and to date mightiest cryptocurrency, Bitcoin.

Many people in the crypto life, who should know what they’re talking about, view Craig Wright as a fraud, and refer to him as “Faketoshi”. And it’s true that Wright isn’t good on real-world detail when he makes pronouncements. But perhaps you could put that down to traditional mad professor absent-mindedness.

But here in Old Billingsgate, the crowd that has gathered are his disciples. CoinGeek, one of the companies behind Wright, has merchandise, T-shirts and mugs on sale. The event is closer to a rock concert or religious ceremony than an academic consideration of the merits of Cassandra databases versus blockchain, or investment advice. Powerful, shoulder-jiving music blares out as Jimmy Nguyen, an American lawyer with a sharp suit and tie who looks as if he works out, bounces up onto the stage in front of one the largest screens I’ve ever seen, projecting text and images of him. His elated energy could sell you a used car or salvation. Nguyen is the MC of the event and the spin doctor of BitcoinSV, the coin and the blockchain that Craig Wright is now pushing. Nguyen starts by hailing Wright as Satoshi Nakamoto and explains that Wright was inspired by a Pokemon character, Satoshi, and Tominaga Nakamoto.

Nakamoto, Nguyen informs us, was a Japanese philosopher and the Japanese “version” of Adam Smith. From his work Writings of an Old Man we get a quotation: Makoto no michi — the way of truthfulness. Nyguyen points out how often the word “honest” appears in the Bitcoin white paper, because honesty is a quality greatly valued by Wright.

Nakamoto (1715-1746) was certainly a Japanese philosopher, but he ruminated on the shortcomings of Shintoism, Confucianism and Buddhism. Like Wright, he infuriated many of his contemporaries. I admit I’ve only been able to research him in English, but I haven’t found a single reference to him being an economist. Makoto no michi is also a slogan you’ll find on the walls or doors of many dojos, since the martial arts are at pains to emphasise they’re not only about breaking bones. Somehow this is typical of the rhetoric that swirls around crypto and Wrightworld — not quite right.

Nguyen is followed by a couple of developers who praise the power of the BitcoinSV blockchain. The SV stands for Satoshi Vision, Wright’s insistence that he is returning to the original principles of the white paper. It’s interesting that throughout the conference there is much greater emphasis on the blockchain (a distributed public ledger maintained by a peer-to-peer system of computers) rather than the cryptocurrency that runs on it.

Dr Craig Wright:
Brains behind Bitcoin?

The prominence of the blockchain rather than the currency is probably to do with Wright losing the so-called “hashwar”. The original Bitcoin, now often referred to as Bitcoin Core, was getting slow and expensive years ago, and Wright and others wanted bigger blocks to boost the system. There was a “hardfork”, a split, which resulted in the creation of Bitcoin Cash in 2017. Bitcoin Cash, with bigger block sizes, seemed to be gaining ground, and performing the function of cash, but then Wright and one of his principal backers, Calvin Ayre, a billionaire who had made money in the online gambling industry, wanted even bigger blocks and engineered another “hardfork” to create BitcoinSV in 2018. The miners and the crypto exchanges mostly stuck with Bitcoin Cash and cold-shouldered Wright. It looked as if Wright had lost. But he hadn’t lost a war, just one major battle.

The irony is that if all the Bitcoin jihadis had stuck together, Bitcoin would now probably be a household feature. But the schisms and confusion put off merchants and investors. However, BitcoinSV has now climbed into the top ten of cryptocurrencies, often as high as number five, usually just behind Bitcoin Cash; both, however, a long way behind the supreme ruler, Bitcoin Core.

This wasn’t just another currency: it would uplift the unbanked and succour the poor

All the big football clubs started off as ventures founded and played by local enthusiasts, before they became the vast corporations draining billionaires from around the world. The original Bitcoin came out of the largely Anglo-Saxon cypherpunk movement: coders on the left and right of politics who were distrustful of, or hostile to, banks, the government and the state.

Peer-to-peer electronic cash at the beginning meant individuals mining bitcoin (or epigoni like Ethereum or Monero) on a desktop or laptop, with a Rage Against The Machine poster on the bedroom wall, pulling on a joint, and getting a sense of satisfaction from “sticking it to the man”.

A fervent utopian message of justice was promulgated. This wasn’t just another currency; it would uplift the unbanked, succour the poor, topple corrupt government. You ran a crypto node (one of the links that makes up a blockchain) on your computer because it made you a cornerstone in the brave new world that was being built. A “full” node also allowed you to “mine” bitcoin (a reward for being part of the blockchain, a cryptographic lottery in which greater computing power gives you a greater chance of winning) and charge fees for processing transactions.

Peer-to-peer in the crypto now means billionaire-to-billionaire. The amateur, volunteer, do-it-yourself, homebrew, cottage, band of brothers, guerrilla phase is well over, although there are diehards indulging in that dream with cryptos well shy of the top ten. Now, just as in football, if your team doesn’t have a Mr Moneybags or two, you’re nowhere.

There’s a lot of misleading talk in crypto. Decentralised might mean there’s no formal CEO (although Dash does own up to having one) and no headquarters with a fancy atrium and a fishtank, but each crypto has a central committee of miners and developers, although they might be hard to identify and spread around the globe.

BitcoinSV has obviously got big money behind it and the ethos has changed. Steve Shadders, the chief technical officer of Wright’s company nChain, commented that if you’re not making money with your node, you shouldn’t be running one. You would have been stoned to death as a heretic for an utterance like that in the early days.

Jimmy Nguyen:
Crypto cheerleader

The two-day conference was mostly zeal being thrown back and forth, from the zealots on stage to the zealots in the audience, and back again, a regular crossfire of zeal. However, some optimism is not entirely unwarranted. Using blockchain as a basis for a new internet is a promising idea.

The data storage aspect of the SV blockchain was pushed hard — and why not? But the trouble with good tech is that consumers may simply not give a shit. Remember Betamax, MiniDisc, Super Audio CD?

The question of micro-payments came up a lot since the cost of transactions with BitcoinSV is very low at the moment. And it’s fast. It could function as cash and be used to buy the much-discussed cup of coffee or a pizza. It could. But it isn’t, because almost no one is using it. At the moment.

There were two sober presentations without the obligatory hallelujahs for BitcoinSV. One came from Thomas Lee, an analyst at Fundstrat Global Advisors. He made a very telling point. The good news, according to him, is that as part of global liquid assets, crypto currently only makes up 0.1 per cent. So if the big financial institutions wake up one morning and decide that it’s time to get into crypto, there will be what they like to call in those circles “parabolic” growth. Lamborghinis all round for current bag-holders. The bad news is, it’s hard to guess which cryptos will get the love. Lee listed the top ten cryptos three years ago: only four of them are still there.

The City types I’ve quizzed about crypto fall into two main categories: those who view crypto as a tulip mania, or simply dangerously radioactive and untouchable (generally people in their sixties or seventies); and those (younger) who find it intriguing, but are biding their time, yet like to work the word “blockchain” into their reports to show they’re hip. Bitcoin’s extreme volatility, and that it has been pronounced dead so many times after crashes, makes it less attractive to investors, though exciting to traders.

The association with the dark net, the Silk Road, drug-dealing and criminality is also off-putting, but as crypto fans delight in responding, the dollar bill was a favourite of Pablo Escobar and there isn’t a major bank in the world that hasn’t been caught up in money-laundering, mis-selling or other malfeasance.

The other speaker who resisted the euphoria was Jimmy Wales, the founder of Wikipedia. In a rather stiff debate with Craig Wright, Wales outlined his reservations about the utility of blockchain (sceptics often sneer at it as a “slow database”). Like others not intoxicated by the promised panacea of crypto, he realises that crypto is still missing the killer app or the bridge that will deliver crypto to the masses. If someone like Amazon adopts crypto, he said, then things would be very different.

In the end, it doesn’t matter whether Craig Wright is Satoshi or not. The debate is finally an academic one, like which was the first rock ’n’ roll record. Crypto is on the loose. Its death-defying resilience over 11 years has been remarkable.

Bitcoin looks set to be a digital gold, which still leaves room for a proper cryptocash. BitcoinSV? Litecoin? Dash? Monero? Beam? Zcash? There are many options on the table and, in the next few years, consumers will choose whether they want crypto and which brand. Or whether they’ll just stick to their old credit card.

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