Some of the biggest names in the world of Bitcoin, the unregulated virtual currency with a small but devoted user base, are looking to give it a friendlier public face. Announced last week, the Bitcoin Foundation — which counts lead developer Gavin Andresen and Mt. Gox CEO Mark Karpeles among its board members — is meant to do for Bitcoin what the Linux Foundation has helped do for open source software, paying selected developers for full-time work and nailing down best practices. In a letter of intent, Executive Director Peter Vessenes said he hoped the Foundation could legitimize Bitcoin through standardization — a legitimacy that’s sorely needed now.
"If US economic history says anything, it’s that people will invest in things that seem too good to be true."In late August, virtual hedge fund Bitcoin Savings & Trust shut down, leaving investors unpaid despite allegedly sitting on $5.6 million in Bitcoin. BitFloor, a major exchange site, was hacked barely a week later; although it’s since come back online, the founder says he’s not sure when he’ll be able to pay back the $250,000 in stolen funds. The former was in retrospect an obvious scam, the latter a hack made possible by poor security, but it’s all part of the risk and volatility of using a nascent currency with no central control. Can the Bitcoin Foundation help build trust in Bitcoin without compromising a fundamentally anti-establishment system? We talked to Peter Vessenes to find out.
Vessenes argues that the currency isn’t more inherently scam-prone than standard dollars. "If US economic history says anything, it’s that people will invest in things that seem too good to be true." But while other currencies are legitimized by banks and nation-states, Bitcoin buyers and sellers may not even have a name or company to look for if things go wrong. One of the first Bitcoin Foundation goals is to create an opt-in certification process for merchants, testing security and other best practices to prevent something like the BitFloor hack from happening among certified members. Vessenes hopes it could eventually convince insurance companies to secure Bitcoin against loss and theft. A set of best practices could also help with things like accounting, which he admits is difficult for the "normal, law-abiding businessperson."
"I love [Bitcoin], but I don't spend a lot of time telling people that they want to use it. I spend more time helping people who want to use it."
More broadly, the Foundation wants to help promote Bitcoin to the uninitiated. That doesn’t, however, mean Vessenes sees much of a need to convince people of its merits. "I love [Bitcoin]," he says, "but I don’t spend a lot of time telling people that they want to use it. I spend more time helping people who want to use it." Plenty of people, myself included, don't have much use for Bitcoin, and Vessenes doesn’t try to persuade me otherwise. "I don’t know that my wife and kids will need Bitcoin. But that doesn’t mean that they won’t still be really valuable to legitimate, high-quality users." He thinks Bitcoin will "see hundreds of hundreds of companies coming out over the next few years," and when that happens, the Foundation hopes to be there to guide them into the community.
Not everyone likes the idea of creating a unified voice for a decentralized currency, especially when that voice is primarily made up of top-tier Bitcoin businessmen. "This feels like the beginning of the end to me," writes forum member BkkCoins beneath the Foundation’s announcement. "A good ol' boys club where only the Bitcoin rich get influence." The libertarian bent of many Bitcoiners also means people have raised concerns about everything from whether centralized control will leave Bitcoin open to government influence to whether the board members are "statist" or "pro-liberty."
"This feels like the beginning of the end to me: a good ol' boys club where only the Bitcoin rich get influence."David Perry of Coding In My Sleep acknowledges these concerns, but he sees reassuring parallels with the Linux Foundation. "Nothing about the way Bitcoin development happens is changing and the Bitcoin Foundation in no way controls the code — not any more than the Linux Foundation controls Linux." As long as members of the Bitcoin Foundation have a vested interest in Bitcoin, he writes, they don’t need to represent its user base perfectly in order to promote it.
More troubling for some is the fact that Bitcoin Foundation members must provide a real name and mailing address to join the Foundation and vote. While it’s a relatively practical move, it also deviates from the policy of anonymity that’s built into the currency. Bitcoin creator "Satoshi Nakamoto" operated under a pseudonym and disclosed little about himself, leading a few people to joke that he wouldn’t have been allowed to join.
In a response, Vessenes said he could "confirm that Satoshi is a Founding Member" of the Foundation, though he didn’t disclose who he was. He also sees the move away from anonymity as vital to building trust in Bitcoin. "I hope we’ll be able to provide a bit of social proof that people are high-quality and willing to tell their real names," he says of the rule. Obviously, this doesn’t stop anyone from using their coins anonymously, but if the group gains clout, it could incentivize putting your name behind your trades.
"Seems like a good idea to have a foundation so that the public image of Bitcoin isn't just a bunch of drug dealers and money launderers."
Even with these concerns, response seems to have been supportive or at least optimistic. Suspicion about the Foundation’s motives is often outweighed by the benefits people see in having an official group to speak up for Bitcoin. "The foundation is Bitcoin's face to the world, not a mirror for us to look at ourselves," writes one forum member. "Seems like a good idea to have a foundation so that the public image of Bitcoin isn't just a bunch of drug dealers and money launderers," says another.
Bitcoin evidently isn’t only used for illegal activities, which Vessenes says he doesn’t hear much about anyways. "Bitcoin lets any two people pay each other if they choose," he tells me, describing its importance. "It’s a totally distributed payment network. I think that’s really valuable," especially to people trying to send money internationally. Right now, though, neither he nor anybody else seems to have quite figured out what Bitcoin is meant to be. "I don’t think we’ll even understand how it will get used in fifteen or twenty years," he says. "People are still building horseless carriages: ‘We can pull that horse out of the harness and put an engine there!’ No one’s building airplanes yet."
"People are still building horseless carriages... No one’s building airplanes yet."
Bitcoin users are deeply enthusiastic about their currency, but if it’s to survive until the age of flight, it will need to be seen as more than an experiment or potential scam. The Foundation won’t solve all its problems, and where Bitcoin goes from here will ultimately depend on users more than board members. Despite this, the Bitcoin Foundation may end up providing just what the currency needs: a way to present it as a solid business decision rather than an ideological move for some, and a way to make ideology practical for others.