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I woke up this morning to several articles about Bitcoins. From Dave Taylor’s explanation in the Boulder Daily Camera to a paywall article that you can’t buy with bitcoins (ironic) in the NY Times (A Bitcoin Puzzle) to Fred Wilson’s blog (A Note about Bitcoin), I was surrounded by words about them.
We have an awesome CEO list that covers plenty of topics. Early in the week I posted a link to Fred Wilson’s post Buying Your Holiday Gifts With Bitcoin. That generated a fun discussion including lots of “what are bitcoins and why do I care”; “here’s what they are” kind of things. And then Kwin Kramer of Oblong weighed in with a phenomenal essay. It follows.
I’m with Seth; I think bitcoin is interesting on several levels, including as a real-life experiment with a semi-decentralized currency.
Bitcoin is a software engineer’s implementation of money (as distinct from, for example, a politician’s, banker’s, or economist’s).
There’s a lot of overlap between bitcoin fans and folks with strongly libertarian views. Many of bitcoin’s most vocal proponents see bitcoin as a currency, a replacement for currencies that are created and managed by governments. These folks tend to view bitcoin as a sort of electronic version of gold, a new currency that’s not a “fiat” currency.
I’m deeply skeptical of this set of ideas. First, and very generally, I don’t tend to think that dis-intermediating government institutions is a useful goal in and of itself. I would describe a well-run central bank like the United States Federal Reserve the way Churchill described democracy: the worst solution to the problem of managing a monetary system, except for all those other forms that have been tried from time to time.
In addition, core design decisions in the bitcoin spec make bitcoin a pretty terrible store of value and unit of account, which are two things we expect from a currency.
As has been noted in this thread, the total number of bitcoins is capped at 21,000,000. Currently there are about half that number of bitcoins in circulation. The rate at which new bitcoins are mined is designed to decrease over time. This means the bitcoin market behaves more like a commodity market than like a currency market, prone to volatility and some specific kinds of market pathologies. In my view the fact that the money supply can’t be “managed” by a central bank that is able to turn various “knobs” (interest rates of several kinds, the amount of money in circulation) is a bug, not feature!
The cap also means that a bitcoin-denominated monetary system will be a system built around deflation — the opposite of how the monetary system we use today is constructed. Over time, prices will fall, rather than rise. Economists generally view deflation as a problem. If prices get cheaper over time, all the time, people have strong incentives to delay purchases and to save money. If everyone saves, rather than spends, economic growth is impossible.
Economists have lots of tools for talking about this stuff. And, while economists often disagree violently with each other, the collective knowledge in the field is important and valuable. To draw an analogy, non-programmers can and often do have very insightful things to say about digital technology. But it’s definitely worth talking to experienced programmers when trying to understand a particular platform, protocol, or application.
I’m not an economist, but I find convincing the economists’ consensus that deflation is “bad.” At the very least, I’d argue that we don’t know how to build a stable monetary system on top of a currency that is fundamentally deflationary.
On the other hand, even if bitcoin makes for a poor currency, it may well be a very useful payment mechanism. The original bitcoin paper focuses heavily on this aspect of the system design.
To explain this a little more, we can think about how we use US dollars in normal, every-day life. I usually keep some printed dollar banknotes in my pockets. These banknotes — these “dollars” — are a store of value. (They’re worth something in an economic sense.) The banknotes are also a unit of account. (Lots and lots of things I encounter every day have prices denominated in dollars.) Finally, each banknote is a payment mechanism — a transaction mechanism. I can hand over a banknote to most people I might want to buy something from. They’ll accept it. We’ll both know what that means.
But physically handing over a “dollar” isn’t the only payment mechanism I regularly use. I have credit cards, and checks (sort of — that’s kind of changing), and now some other electronic payment mechanisms like PayPal and Amazon points.
It’s possible to separate the functions of value store, unit of account, and transaction mechanism. They fit together neatly and are systemically related, but they’re three different things.
The bitcoin peer-to-peer transaction protocol is pretty cool. It’s basically strong cyptography, good timestamps, and a consensus protocol for blessing transaction reporting.
Which boils down to a way to “hand someone cash” electronically. With no trusted third party having to broker the handover. And, theoretically, anonymity for both the payer and the payee.
As a software person, I think of this as a platform. A new electronic payment platform that may have significant advantages over most of the existing ones. To get broad adoption, platforms need killer apps. So far, there aren’t killer apps for bitcoin. But there are some possible raw materials for killer apps. Cheaper international payments. Completely anonymous electronic payments. But the great thing about platforms is that it’s often quite hard to predict early on what the killer apps might be. Particularly for the really disruptive ones.
A couple of final caveats. It’s not clear (at least to me) whether it’s possible to separate the currency aspects of bitcoin from the transaction platform aspects. If bitcoin does turn out to be a flawed currency, that could be a problem even if the transaction platform stuff is really useful.
Also, the bitcoin platform is pretty new and there may be some fatal flaws in the design of its anonymity features and its transaction log. For example, the transaction log is a global, permanent thing. To verify any bitcoin transaction you have to have a full record of every bitcoin transaction ever. That’s okay now; the system is small. Our computers and networks will keep getting faster as bitcoin use increases. But a broadly used currency will have to be able to support a lot of transactions. Maybe the design can be patched, either in a technical sense or in a social/institutional sense. But we don’t really know.
This is a picture of me completely and unapologetically engrossed in a game of Space Invaders on a VIC 20. Here’s an early commercial for it, featuring the one and only William Shatner.
Several weeks ago the team at the Media Archeology Lab (MAL) celebrated their accomplishments to date by hosting an event – called a MALfunction – for the community. Attendees include founders of local startups, the Dean of the College of Arts and Sciences of the University of Colorado, students that are interested in computing history, and a few other friends. The vibe was electric – not because there were any open wires from the machines – because this was truly a venue and a topic that is a strong intersection between the university and the local tech scene.
Recently, Amy and I underwrote the Human Computer Interaction lab at Wellesley University. We did so not only because we believe in facilitating STEM and IT education for young women, but also because we both have a very personal relationship to the university and to the lab. Amy, on a weekly basis, speaks to the impact that Wellesley has on her life. I, obviously, did not attend Wellesley but I have a very similar story. My interest in technology came from tinkering with computers, machines, and software in the late 1970s and early 1980s, just like the collection that is curated by the MAL.
Because of this, Amy and I decided to provide a financial gift to the MAL as well as my entire personal computer collection which included an Apple II (as well as a bunch of software for it), a Compaq Portable (the original one – that looks like a sewing machine), an Apple Lisa, a NeXT Cube, and my Altair personal computer.
Being surrounded by these machines just makes me happy. There is a sense of joy to be had from the humming of the hard drives, the creaking of 30-year old space bars, and squinting at the less than retina displays. While walking back to my condo from the lab, I think I pinned down what makes me so happy while I’m in the lab. An anachronistic experience with these machines are: (1) a reminder of how far we have come with computing, (2) a reminder to never take computing for granted – it’s shocking what the label “portable computer” was applied to in 1990, and (3) a perspective of how much further we can innovate.
My first real computer was an Apple II. I now spend the day in front of an iMac, a MacBook Air, and an iPhone. When I ponder this, I wonder what I’ll be using in 2040? The experience of the lab is one of true technological perspective and those moments of retrospection make me happy.
In addition, I’m totally blown away by what the MAL director, Lori Emerson, and her small team has pulled off with zero funding. The machines at MAL are alive, working, and in remarkably good shape. Lori, who teaches English full time at CU Boulder, has created a remarkable computer history museum.
Amy and I decided to adopt MAL, and the idea of building a long term computer history museum in Boulder, as one of our new projects. My partner Jason Mendelson quickly contributed to it. If you are up for helping us ramp this up, there are three things you can do to help.
1. Give a financial gift via the Brad Feld and Amy Batchelor Fund for MAL (Media Archeaology Lab).
2. Contribute old hardware and software, especially stuff that is sitting in your basement.
3. Offer to volunteer to help get stuff set up and working.
If you are interested in helping, just reach out to me or Lori Emerson.
One of my heroes is Jim Collins. Of all books that I’ve ever read about business, Built to Last: Successful Habits of Visionary Companies and Good to Great: Why Some Companies Make the Leap…And Others Don’t are two of the most important ones I’ve ever read. While I read Built to Last first, I didn’t really get how important it was until I read Good to Great. I went back after, read Built to Last again – and slowly – and realized how powerful Collins’ research and thinking was.
So it was an incredible honor to interview Jim for 45 minutes last week at the Startup Phenomenon event about Startup Communities. We spent the time applying the ideas from Jim’s books and research to the idea of Startup Communities.
I learned a lot. I also had a lot of fun. And I came up with a few new ideas as Jim tossed out a few absolute gems during our 45 minutes together.
If you are interested in Startup Communities, or are a Jim Collins fan, I think you’ll like this a lot. Enjoy!
Just under two months ago, Occipital launched their new Structure Sensor on Kickstarter. Over the course of 45 days, it raised more than $1.2M to become the 6th most funded tech-category project ever on the site.
Kickstarter backers aren’t the only people who are enthusiastic about Occipital’s new creation. Two of the technology world’s biggest names have now added the Structure Sensor to their roster of award-winning new technology products for 2013 and 2014.
Every year, Popular Science chooses 100 products they consider to be the “Best of What’s New.” This year, they chose the Structure Sensor as one of 8 products in their “Gadgets” category to receive this honor, alongside other products like Google Glass. Check out Popular Science’s “Best Of What’s New” for 2013 here.
The 2014 International CES show in Las Vegas is just two months away. Along with organizing CES, the Consumer Electronics Association also runs the annual CES Innovation Awards to recognize those new consumer electronics products that are outstanding in their field. For 2014, the Structure Sensor is one of 11 products to be named a CES Innovation Design and Engineering Honoree in the “Tablets, E-Readers & Mobile Computing” category, alongside others like the new Sony VAIO Flip PC. See the CES Innovation Awards for 2014 here.
If you missed the Kickstarter campaign but want to get a sensor, Occipital just launched pre-orders today at structure.io.
In my mid-20s I was part of an amazing experience called Birthing of Giants. It was a gathering of 60 entrepreneurs over four days (for three years) who were all under 40 and founders of companies with more than $1m in revenue. It was the first time I discovered my peer group and while I was young (24 years old) and small ($1m in revenue) I felt like I immediately fit in.
One of the guys in the group from from Brazil. He had this delicious accent and intense passion whenever he spoke. I remember being across from him in some conversation when he pounded on the table in reaction to something and said “focus focus focus.” But it came out as “fuck us fuck us fuck us.” And I’ll never forget that moment.
The message has stuck in my head. I was in several meetings the past few weeks where I wanted to bang on table and scream “focus focus focus.” In each case, I restrained myself and tried to be constructive. Each situation had differences, but fundamentally there was a vector where the company had no focus. Each company has an amazing core technology. Each one has a clear mission. But in one case, they don’t know what “word” they own, in another they are serving two entirely different customers that had no relationship to one another, and in the third they were going after three completely different markets with different products.
Now, there are plenty of cases where it makes sense to have two threads going at the same time. If you’ve got an API business and an end-user business that deal with the same core data and feed off of each other, you can effectively combine them as long as you own a single word or concept. If you’ve got enough scale, you can go after different market segments. As you get bigger, you can expand your product line.
But early on, especially pre or early revenue, lack of focus is the death of so many companies. Sure, there’s a point where you are still thrashing around looking for “the thing.” You are using all the Lean Startup and Lean Launchpad techniques to find your product-market fit. You are iterating and pivoting. You’ll want to use a freemium model to capture the low-end customer while selling directly to a high-end customer. How’s that – I just used a bunch of buzzwords to help rationalize the “search for focus” – clever, eh?
But at some point you have to focus. What word do you own? Who is your customer? What are you selling them? How are you selling them it? Why are they buying it?
This is especially true when something is working. You’ll feel like hedging your bets. But don’t – go all in on the thing that is winning. Do it over and over again. And build scale quickly with it so that you can start experimenting with more things.
Focus focus focus. Or you will end up saying “fuck us – it’s over.”