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Bitcoin is 10 years old this month, and what a ride it was – the initial darkness; the type of exponential price peak seen for the last time by Dutch tulip hawkers; the rise of imitators based on its underlying blockchain technology; and, in the last year, a sharp drop in price. The old joke about the life cycle of a Hollywood star applied to Silicon Valley: what is Bitcoin? Make me Bitcoin! Give me a Bitcoin type! What is Bitcoin?
The decade since the pseudonym creator of the project, Satoshi Nakamoto, has extracted the bitcoin "genesis block" offers more than a parabola of oddity. Focusing on wealth creation (early adopter) and institutional destruction (particularly centralized banks), Bitcoin provides direct access to the Silicon Valley character. If you think that companies like Facebook and Google are manipulating the public to make money without worrying about the damage done to the company, then the story of Bitcoin should be your urtext.
Noam Cohen is a contributor of ideas to WIRED, a writer who lives in Brooklyn, and author of The Know-It-Alls: The Rise of Silicon Valley as a Political and Social Power Wrecking Ball.
I arrived in Bitcoin as a journalist relatively early in its history (the price of a coin was $ 17, but even then it was recovering from a price collapse), and I remember thinking of it as an incredible mental experiment. Some wizards had invented a virtual currency that could not be copied – an obvious problem for a digital currency – and that announced to all those who owned that currency, through a constantly updated and indelible ledger. There were no obvious uses yet; I tracked down a few companies that accepted bitcoins, one in Vermont, one in Hungary, which however appeared agnostic about the whole effort. Even so, Bitcoin seemed a potentially powerful online collaboration tool.
Was it a way to earn credits within a group that did not want to exchange money? After all, even Wikipedia was a code used by a group of enthusiasts to create value; It operates with great transparency and has a more recent version that everyone recognizes as the one in circulation. But because someone would agree to accept this as a payment without a sort of shared conviction or a project outside of me. (At the time, my reports appeared in the economic section of a national newspaper, but as it should be obvious now I did not have much talent for corporate or dystopian fantasy).
If you think that companies like Facebook and Google are manipulating
the public to make money without concern for the damage done to
the company, so the history of bitcoins should be your ur-text.
Looking back on 2011, however, there were menacing signs. Gavin Andresen, who was the main developer of the software that runs Bitcoin, told me that he thought of Bitcoin in terms of "market capitalization": that is, Bitcoin was worth the price of a currency multiplied by all the coins in circulation. The mental experiment had turned into a business. (At that point, Bitcoin could be estimated using the Andresen method at $ 100 million, with this same calculation, Bitcoin peaked at over $ 300 billion at the end of 2017.)
It is not clear to everyone how seriously take Bitcoin. In 2011, the Electronic Frontier Foundation began to return donations made in bitcoins due to their legally dubious status, only to change gears and start accepting them again. An organization eager to urge bitcoins was the global online muckraking site WikiLeaks. In 2017, a Twitter feed associated with the founder of WikiLeaks, Julian Assange thank you sarcastically the US government for making it so difficult for the organization to accept ordinary donations from 2010. "He made us invest in bitcoins," he wrote "with a return of 50,000%".
These two qualities – the potential to "own" part of a growing business and the alleged ability to do transactions outside of government control – would come to define Bitcoin and its early growth. In 2012, a Bitcoin expert estimated that the main use of digital currency was the purchase of small amounts of drugs on Silk Road. And since this use has given some value to bitcoins, those looking to make a quick, IRL buck has started buying bitcoins as an investment. The new investors made the coins more valuable, which made them aware of other potential investors. Rinse and repeat.
Instead of seeing these trends as worrying, Silicon Valley is betting on Bitcoin. Large VC companies invest in businesses designed to encourage speculation by converting bitcoins into dollars; prominent technological figures such as Peter Thiel and, more famously, Cameron and Tyler Winklevoss have made it known that they have personally invested in Bitcoin. The phrase billionaire bitcoin he started to introduce himself.
TO KNOW MORE
The WIRED guide for Bitcoin
With an openly crude purpose, Bitcoin-related investments were difficult to disguise in typical "making the world a better place" than Silicon Valley's rhetoric. Many have tried, however. In a tweet of 2014 that was subsequently deletedThe venture capitalist Marc Andreessen has advanced the idea that investor speculation on the price of bitcoin serves an advertising purpose. "The bitcoin system was specifically designed for speculation for the start of the hens / eggs network effect." In other words, millions come for a moment but remain for boundless and peer-to-peer exchanges.
In the same month, venture capitalist Reid Hoffman revealed that he was investing in a startup called Blockstream because he thought that Bitcoin, and blockchain more generally, was a tool for liberation. He promised to lower the rates for financial services; allows micro payments, which can be used to support important institutions such as newspapers and artists; will bring a global currency to the remote parts of the world.
"All in all," he wrote, "the idea of blockchain and the types of transactions it empowers is a fundamental addition to the Internet that has the potential to massively expand the ways we interact with each other." Bitcoin was connecting the world, and Hoffman, in Silicon Valley fashion, argued that the radical transparency of the ledger could manage a financial system more efficiently and fairly than one dependent on bureaucratic norms.
Not mentioned in these Bitcoin posters was the idea that making bitcoins useful would make them more valuable and therefore a good investment. The text may have talked about simplifying cross-border transactions, "especially when it involves places where there are no credit card networks or solid banking systems", but the subtext was that the more bitcoins are used, the more valuable they are. And, of course, those who bought the most bitcoins at the lowest price would be banned, with an oligarchic control over a currency.
Which, in reality, is what Silicon Valley has become: some companies that divide world profits, while they say they do not worry about profits. They guard their projects with messages of community building and connections, even if we realize that rather than promoting the community, these companies have encouraged extreme individualism and the imagination that each of us can do alone.
Bitcoin has celebrated hyper-individualism rather than disguising it and has never managed to entrench itself in culture. But from the points for honesty. Big tech companies have learned that if you're going to use manipulation and deception to make a fortune, it's best not to publish a second table on how much money you've made. You're just asking for trouble.
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