More than currency: the importance of Bitcoin as a technology and financial model

A review of the European Bitcoin Conference, Amsterdam 26-28th of September 2013.

Media discourse about Bitcoin is live, abundant and hectic. Academia is still sketching a clear, structural approach on the topic. The Bitcoin Europe conference, on another hand, gave good pulse of what the developments and key concerns are at the moment.

The European Bitcoin Conference (Amsterdam 26-28th of September) aimed to address a more or less complete spectrum of perspectives on the digital currency by inviting tech, legal, economical and entrepreneurial experts and innovators.

Bitcoin is more than a currency, it is a technology. This is what Bitcoin Magazine founder Mihai Alisie stated in his key-note address and it was the underlying subject for most of the discussions.  Being a technology, it is relevant to look at the structures supporting the currency. How do these new, open source and decentralized networks propose an alternative financial system altogether, not just for individuals but for businesses too?

Several start-ups and non-profits present at the conference tackle this question directly. Monetas is an open transactions library that offers open source software; with it, individuals, communities and start-ups can rethink many of the traditional business models, with a more ethical, open approach. The library lists software for people to send remittances at very low costs, create their own digital currencies or wire money without needing a bank account. Furthermore, businesses can create and organize their own, jurisdiction-less financial systems (for example using Bitcoins as payment method for their products and services but also as an internal labor remuneration). BitPay is a start-up that helps businesses integrate Bitcoin as payment method on their web-shops. Bits of Proof allows for a similar opportunity, but adds Bobshop mobile app to their services. TransferGo is just one example of how you can send money and Bitcoins to anyone in the world at low fee rates.  Another interesting project is Anonymous Ads. Picking on the Google Ads functionality, Anonymous Ads allows advertisers to place online banners on websites and pay the website owner for banner impressions with Bitcoins. Unlike Google Ads, the websites visitors’ privacy is respected in as much as the only considered metrics are impressions, banner clicks and conversions. Google Ads services are known for the huge amount of analytics and extensive user behavior monitoring. As an alternative advertising model, it would be interesting to see how the Anonymous Ads could become a good business proposition for advertisers, while protecting the privacy of their target.  Right now, advertisements done via Anonymous Ads are mostly for gambling and digital goods.

The technological opportunities of Bitcoin should address society needs – this was yet another key note of the conference. A critique of existing financial systems and banking practices was accompanied by ways in which Bitcoin can provide solutions to some serious gaps and limitations.

One particular problem seems to be that of remittances – the flow of money circulating from foreign workers to their home countries –  which are often subject to high transfer fees and huge delays. Another problem addressed are the areas where banking systems are unavailable and global payment methods don’t offer their services; as a result, alternative payments such as mobile money (in Africa specifically) are an emerging market. Another topic of concern – and perhaps relevant to many small and medium sized businesses everywhere –  is the difficulty in getting the loans or fundraising support to launch themselves in the first place.

With this in mind, the focus of many speakers was on the importance of bringing back the freedom of transaction to individuals, communities and organizations. Pragmatic solutions included that of Meni Rosenfeld, who discussed the possibility of colored Bitcoins. Bitcoins could technically be assigned a color in order for them to more easily represent the purpose they serve (are the Bitcoins one transfers to someone else for a physical asset, like buying a car? Or are they bonds / shares within a company?) . The larger implications of this is that users can transfer these colored Bitcoins as their own currency (for example, one company assigning a particular color to their Bitcoins and selling them as shares). Further on, Celso Pitta talked about how his company, BTCJam, allows anonymous loans and P2P lending.  Joerg Platzer, Bitcoin Foundation Director and owner of Room 77, the first business to accept Bitcoins in Berlin’s Kreuzberg, discussed ways to communicate or rather, market Bitcoin as a good proposition for merchants and buyers alike. Platzer reported that more and more restaurants and pubs in Berlin are opening up their tellers to Bitcoins. The other project he is involved with Crypto Charity, is a new crowdfunding model combining Bitcoins and micropayments for fundraising.  Mihai Alisie, founder of Bitcoin Magazine, discussed his soon-to-launch platform – another way of rethinking community platforms of exchange (the likes of eBays or Marktplaats) as decentralized, P2P and with Bitcoin-payment.

On a more conceptual level, Johan Gevers from Monetas looked at the four pillars of a decentralized society – decentralized communication, production, exchange and law – encouraging the audience to envision how would decentralized societies would look like. He also pose the important question of how could more and more people adopt alternative currencies and open transaction systems and what implications will that have?

All in all, the conference clearly outlined how discourse around Bitcoin as currency has evolved to discourse around Bitcoin as an alternative revenue model altogether.

The first questioned relationship is with legitimacy: how does the new model evolve in the currently regulated market? Mirko Sprengnether, a German Attorney at Law, offered a balanced and informed account of when and why Bitcoin interferes with laws. He explained that it is the use of Bitcoin that dictates when and what regulation applies. Bitcoin as private money and in the context of purely P2P transfers should not pose legal threats to individuals, albeit in Germany as in The Netherlands a VAT applies. However, Bitcoins used as commercial money could enter a different, taxable legal scheme. Yet how would regulation affect Bitcoin overall? Mihai Alisie focused on the negative consequences of regulating an emerging and highly experimental currency, as it will limit and possibly drown its huge potential too early. While arguably the use of Bitcoins within illegal exchange platforms such as the recently closed down Silk Road raise immediate arguments pro regulation, regulation might also affect the overall development of the currency, especially when it is adopted by innovative start-us, NGOs and online communities in general. An analogical situation might be considered that of the early days of the internet: with the highly disruptive idea of a chaotic and virtual space, the lack of regulation allowed for the full and ongoing development of what Internet is today.

The second questioned relationship is with traditional economic theories; Peter Surda offered an overview of current myths that economists attribute to Bitcoin, which is uploaded here.

Finally, the third questioned relationship is with the potential users of Bitcoin. With most presentations focusing on tech development and the business innovation side of Bitcoin infrastructure, few speakers discussed how the currency and its model should be communicated outside the tech and entrepreneur-savvy communities. Joerg Platzer’s face-to-face meetings with restaurant and pub owners in Kreuzberg is an organic strategy to encourage common businesses and their clients to engage with Bitcoin, yet how would a wider communication strategy look like?

With an abundance of speakers actively involved in programming and handling the Bitcoin economy, what was missed overall was a more reflective, research-oriented perspective. With the the growing  list of conferences about Bitcoins and meetups next year, locally and globally, it would be interesting to observe to which extent the discourse gets more critical, structured and reflexive, and the audience more diverse.