Bitcoin is dangerous and people should steer away from using it. This is a bearish opinion held by many traditional investors, but not one you would expect from the man responsible for turning the virtual currency into a commodity worth billions.
Yet, that is the view of Gavin Andresen, chief scientist at the Bitcoin Foundation, the closest thing to a central bank for the nascent cryptocurrency. He is considered the leading custodian of the bitcoin code, the rules and software used to run the cryptocurrency. But far from being a cheerleader, Mr Andresen, is warning ordinary people to avoid bitcoin — for now.
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7CfHKl“It actually is dangerous and people should be aware it’s like the early internet,” he tells the Financial Times. “If you lived through time, you remember lots of press articles came out saying don’t give internet companies your credit card details. But the internet grew past that. Bitcoin will be the same way. Over time, I will stop saying to people, ‘Don’t use it unless you’re technically proficient enough to keep your computer secure’.”
Concerns about security were heightened on Monday after Bitstamp, Europe’s leading bitcoin exchange, suspended its operations following an apparent hack that led to the company losing 19,000 bitcoins, worth about $5m.
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7GZRdVThese safety issues have led to a steady fall in the price of the cryptocurrency. At its peak, bitcoin was traded for $1,240 on the Mt Gox exchange, the Japanese group that filed for bankruptcy last year after losing about $450m worth of bitcoin in a cyber attack. According to Coindesk, the bitcoin news site, the price is now about $283.
“Bitstamp is handling the incident well,” Mr Andresen says, by being transparent and explaining to customers what happened. “I hope they take the time to publish a complete postmortem on details of the attack, so other exchanges can learn from their mistakes.
“I hope Mt Gox does the same because we still don’t know what happened.”
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7JsTfvMr Andresen is considered the protégé to “Satoshi Nakamoto”, the name adopted by the supposed inventor of bitcoin. After collaborating on the project over email, Mr Andresen was given Mr Nakamoto’s blessing to become the “core maintainer” of the bitcoin source code, working full time on the project.
While Nakamoto appears to have vanished, Mr Andresen wields huge influence on the development of the currency. He helped to found the Bitcoin Foundation in 2012 and groups from financial regulators to the CIA seek his advice.
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7NPxwrHis knowledge of bitcoin has led to suggestions he may actually be Nakamoto. “I am not Satoshi,” he laughs. “Ask any geek. Point them to code written by Satoshi and point them to code written by me. You can tell, they’re not the same guy.”
His theory is that the inventor is “a young academic type, somewhere in the world. I don’t think Japan. Perhaps the British Isles actually because in Satoshi’s communications he [used British rather than American spellings]. I think there’s an academic thinking about other stuff, sitting on a big pile of bitcoin.”
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7QBzxrThe one person who Mr Andresen says is definitely not Satoshi Nakamoto is Dorian S. Nakamoto, the Japanese-American engineer that Newsweek named as bitcoin’s inventor last year. Mr Nakamoto, who lives in California, denies any role in bitcoin.
“He’s not the Satoshi I talked to,” says Mr Andresen. “I feel sorry for Dorian that so much personal attention got focused on this person. That shows why the actual Satoshi has worked so hard to stay anonymous.”
His influence at the Bitcoin Foundation could soon increase, after it emerged Jim Harper, its global policy counsel, was dismissed earlier this month. The move is seen as a shift in focus for the non-profit group away from policy and regulation and back towards developing bitcoin’s core technology.
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7UKT6x“It is always hard when an organisation pivots and priorities change,” he said. “Effective organisations have a clear mission and focus and there is plenty of work to be done on the technical front to keep the foundation busy.”
Though Mr Andresen concedes bitcoin remains in the early days of its development, he is confident it will mature, noting that more than $300m of venture money had been invested in bitcoin start-ups in 2014.
Mr Andresen is also at the forefront of efforts to ready the virtual currency for wider use. As it is currently designed, the bitcoin network can process just seven transactions a second. By comparison, Visa is capable of handling close to 50,000 transaction a second at peak times.
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http://www.ft.com/cms/s/0/9b27fb72-967f-11e4-922f-00144feabdc0.html#ixzz3Ob7dnZ00Mr Andresen’s proposed solution is to increase the size of bitcoin blocks, the files that hold the data that underpins the currency. Their size limits the speed at which the bitcoin network can process transactions. Larger blocks can contain more transactions and, therefore, increase the capacity of the network.
But there are concerns that increasing the block size will put a strain on the network. Bigger blocks packed with more transactions requires transmitting and storing more data. This may also make it difficult for hobbyists to store a full copy of the “blockchain”, centralising power in the hands of corporations that can afford expensive servers in big data centres.
The issue is being debated by bitcoin developers. But Mr Andresen says that “we’re really close to consensus” to approve his proposal, a move that “in 20 years, would allow us to have enough capacity to handle every single electronic transaction in the world”.
While Mr Andresen tries to prepare bitcoin for mass usage, he advises caution to investors. He holds thousands of bitcoins, enough to retire comfortably. But he has been cashing them in slowly, investing in stock market funds instead.
“Bitcoin is wild and crazy investment that I’m diversifying out of all the time,” he says. “If bitcoin is wildly successful, I’m still holding on to a good chunk of bitcoin. It could be worth tens of millions of dollars, but it could be worth zero. It doesn’t make sense to hold more than that amount. I don’t have a desire to be a multi-billionaire. That’s not what motivates me, I have no desire to be filthy rich.”
Copyright The Financial Times Limited 2015
