Something historic and very interesting is happening right now with what we are calling The Token Frenzy. There is no way that Satoshi could have predicted what’s happening now when he released Bitcoin, but it is actually happening, and this Token Frenzy, like “Blockchain not Bitcoin” mania before it, is having a negative effect on businesses trying to penetrate, create a new market and grow. This negative effect will be short lived thankfully, but no rational man wants to waste time teaching people how to drink out of a glass, and they don’t want to see people get hurt through losing their money to irrational exuberance.
We received a letter today from a company interested in investing in new ideas. This company is run by men who have no idea about the fundamentals driving the excitement fuelling interest in Bitcoin, and who get all their information from the wrong sources. They are explicitly looking for, “people who are reinventing the building blocks of the internet using the principles of distributed computing through blockchain technology”.
If you have read and understood any of my writing on this subject, you are now triggered. I’ll take this letter apart piece by piece. As usual, it doesn’t matter who said this. What matters is that it is an example of thinking that we’re seeing again and again; it is essentially a generic response. The sender says they are interested in companies that are…
reinventing the building blocks of the internet
First of all, the building blocks of the internet are its low level protocols. These will not be disrupted any time soon. Everyone has built on top of them, and if it happens at all, it will take decades for the underlying infrastructure to be replaced, and that will only happen if there is a real need. Look at IPV6 for an example of that. Also, there is no money in it. The only way you could make money out of a new internet protocol is if you did what Apple tried to do with “itms://” — widely recognised as a strategic blunder. Internet protocols need to be open, the property of no one, and not under the control of any single country or jurisdiction. Looking for someone to bring this to you is like saying you are waiting for someone to bring you the Philosopher’s Stone.
using the principles of distributed computing
Distributed computing has been around for a long time. Anyone who ran Stanford’s Folding at Home software knows how it works. It’s useful, and can solve big problems, but it is not a replacement for the underlying architecture of the internet, and cannot be used to make new building blocks or replace old ones. The best you can do to add new services to the Internet is add a layer on top. Once you concede that is the only way to contribute, then the only rational choice is Bitcoin, because it is the only fundamentally new idea that adds a crucial, world-changing missing layer to the Internet; money.
through blockchain technology
There is no such thing as “blockchain technology”. There is only software. There is no blockchain without Bitcoin. If you have been reading my Medium posts on this subject you know this is true.
The triggering in this letter continues, “There are plenty of onramps for Bitcoin already which we agree will be the onramps to the the crytpocurrency ecosystem. They certainly could be more user friendly and their are opportunities to build an application layer that is more approachable, akin to what Netscape did tot he internet and browsers. We are just much more interested in funding what happens after that event occurs”
Oh dear me.
There are plenty of onramps for Bitcoin already which we agree will be the onramps to the the crytpocurrency ecosystem.
No, there are not “plenty of on-ramps”. There are very few on-ramps to Bitcoin, and most of them are hideously complicated, slow and invasive. It is a fact that Coinbase, one of the worst offenders, has a staggering backlog of 400,000 new users in their account “verification” and activation queue. There are almost no easy on-ramps to Bitcoin, and the ones that are easiest to use charge up to 20% for the privilege of using their services. The on-ramps of today are absolutely horrible, and ripe for total disruption. Anyone who knows what they are talking about understands this. The amount of friction on the Bitcoin on-ramps is so great, that it’s amazing that anything can touch the surface of them, such is the heat generated by the rubbing.
Several companies are working on solving this problem; Azteco and HodlHodl are two of them. Both of these companies are streamlining and removing friction from the process of getting Bitcoin, and making access to it so simple that literally anyone can do it, and in the case of Azteco, do it with a delay that is close to 0 minutes. That is disruptive.
They certainly could be more user friendly and their are opportunities to build an application layer that is more approachable
If this is true, then there is an interesting market opportunity. There is a clear problem that even these people have identified, that the process of getting Bitcoin is not user friendly, and they have also identified that there is an opportunity to build an application layer that is consumer friendly. This means that in fact, “Yes, you have an idea, and this is a problem that needs to be solved”, to which the correct reply should be, “Lets discuss this in detail as soon as possible”.
akin to what Netscape did to he internet and browsers. We are just much more interested in funding what happens after that event occurs”
The Netscape analogy does not work here in the way they describe, and actually inadvertently makes a case for Azteco. Netscape built a browser that abstracts away the complexity of using the web from the user. Before browsers, people used to use terminal based tools to look around the early web. They were hard to use. You didn’t use a mouse to navigate; it was all done via keyboard shortcuts.
Then the first browser NCSA Mosaic came along, pushing all the complexity away so that anyone could use the web. Going to an ftp site meant clicking on an ftp://foo.bar link, rather than opening an ftp only command line curses tool. Everything was now in one place, handling all file types, protocols and all the services built on them, with a point and click interface.
This is coming with Bitcoin. Right now, getting Bitcoin means engaging in a process that is far worse than using WAIS or Lynx. It’s worse because not only is the experience horrible, but you have to submit to the violation of your personal data, and agree to a custodian potentially arbitrarily denying you network access. Users of Lynx never had to put up with those bad things, all they had to do was learn some keyboard short cuts.
Azteco, and the products we have planned, will be the equivalent of the browser transition from Lynx to Netscape. Tools like OpenDime will make storage extraordinarily simple. We make getting and using Bitcoin extremely simple, so that everyone can use it, just like Mosaic and later Netscape made using the web simple enough for everyone. This is a large market opportunity, obviously, and it is bigger than Netscape’s was because we are not dealing exclusively with access to information; we are dealing with access to money, the reserve currency of the entire internet: Bitcoin.
We are just much more interested in funding what happens after that event occurs
Assuming for a moment that there is something coming after this Straw Man construction (which there cannot be) how are you going to be able to spot it, if you don’t understand the fundamentals in the first place? In order for the event you are waiting to occur to happen, someone has to build and concentrate the fundamental elements that will make the critical mass event take place. What this person is saying, is that they can understand the potential of Netscape, but don’t want to invest in it until the browser revolution has happened. This is not rational, obviously.
There is nothing wrong with a “wait and see” position. Conservatism and being risk averse is sensible, however, you cannot say you are interested in fundamental disruption and be conservative and risk averse at the same time. If we are to take this letter at face value, you must understand that you only have one chance to get in at the beginning of the construction of fundamental technologies. That means embracing risk, preparing to fail, embracing the unfamiliar and being reflexively attracted to ideas that seem strange or wrong on their faces, but for which there is no obvious objection and there is a working application.
Which brings us back to the Token Frenzy. The people who are investing in these Tokens and the start ups selling them are all making a huge error in calculation, but they are absolutely correct in the larger calculation of embracing the big risk. In super complex software systems (and in this case, it’s not just complex software, but economics and investing that most people don’t fully grasp) that only a handful of experts comprehend, it isn’t possible for everyone getting involved in them to understand the fundamentals. They use proxies to determine what is right and wrong, and these proxies are normally pseudo experts with a fractional hold on the total picture.
These pundits, “Tech Oracles”, understand (mostly pretend to understand) the underlying software that powers these ideas. They condense, or chew, the ideas into easy bites that are then swallowed whole by people with spare money who are looking to make high returns on investments. The Token Frenzy is exactly this, and it is having an effect not only on investors looking to buy into high performance instruments, but it is having an effect on a few Venture Capitalists, who appear to be as rudderless and adrift as anyone else trying to understand the sea change that is happening. The only difference between these two groups is the amount of money they have to invest.
During the “Blockchain not Bitcoin” frenzy, companies built by rational entrepreneurs could not get anyone to pay attention to them because the word “Bitcoin” was in their promotional and public facing materials. People wrote them off simply because a taboo word was on display. There was no consideration or understanding of what was built, how it worked or the underlying principles; it was all feelings, impressions, gut, and what the Tech Oracles were saying that counted.
Now that Bitcoin is still here, and having a meteoric rise, the word “Bitcoin” is no longer taboo, and its proposition is accepted, even by mainstream thinkers who previously scoffed at it. It is very important in software to know something about how things actually work. It’s the only way to make sense of what is going on, and to properly assess any business model and its potential. Thankfully, the tide is changing:
Important people have finally begun to realise that the innovation is Bitcoin, Blockchain without Bitcoin makes no sense at all, and trying to remove Bitcoin from “The Blockchain” is just a fantasy. In parallel, people are waking up tot he fact that Bitcoin is not a threat or in any way dangerous. It’s simply another tool that can be used in an innumerable permutation of ways, just like a screwdriver, water or the English language. The question is no longer “What is Bitcoin?” but “How do you design an optimal service to deliver Bitcoin to the public?”. We have answered that question with Azteco.
As it has been for decades, after the pioneers have showed everyone what is possible, there is not a single person left who will scoff at a radical idea. A perfect example of this is Steve Balmer scoffing at the first iPhone, and the others who laughed out loud at the idea of a mobile phone without any buttons on it. Now the idea of a mobile phone with buttons on it is the butt of jokes. The same thing will happen with Bitcoin, and everyone will understand that the models presented by Ethical Bitcoin Companies are the correct ones, both in terms of business model, and the rigorous, innovative approaches to this fundamental addition to our internet toolbox: the one Internet native money, Bitcoin.
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