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Bitcoin in the middle of a transformation?

When you’re interested in Bitcoin and follow its daily news you won’t be bored. Not a day goes by without a Central Bank warning of the potential dangers of the cryptocurrency, but the market hardly reacts to that anymore. It is to be expected that that the institutions that may be replaced by Bitcoin will try to slow that process down.

Same thing for banks, some are punishing customers or trying to stop them from buying Bitcoin (this happened to me). Most don’t want Bitcoin-related businesses as clients, for reasons that are not always entirely clear. Sometimes I think something bigger is at play here to stop Bitcoin. But it does not really worry me because if you understand the Bitcoin protocol you will realize Bitcoin can’t be stopped because of its decentralized nature.

What does worry me more though, are the recent scandals in Bitcoin land. For example, Bitcoin Foundation founding member Charlie Shrem who was arrested and charged with money laundering, while on his way to the Miami Bitcoin Conference. Charlie is only 24 years old and that may have led to business decisions that he would not have made had he been a bit more experienced.

He also publicly made remarks like “I won’t hire you unless I drink with you or smoke weed with you”. I don’t have a problem with someone saying that if he runs a small start-up, but the problem is that Charlie also represents the Bitcoin Foundation. This foundation protects and promotes the use of Bitcoin, and therefore all negative news about Charlie reflects negative on Bitcoin itself. Luckily Charlie saw that himself as well and he resigned within a day of his arrest.

Another, more worrying, scandal is that of Bitcoin exchange Mt. Gox. This used to be the biggest Bitcoin exchange in the world until a few months ago and its price has been the reference price for Bitcoin until very recently. It turns out that its software had a flaw which made it possible for people to double spend their Bitcoins by changing the transaction ID. This is obviously a big problem for Mt. Gox and makes Bitcoin look even more dangerous to the average person.

But what’s even worse is that Mt. Gox tried to blame the Bitcoin protocol for this. It’s true that Bitcoin has an issue (transaction malleability) that has been known for several years, but that can easily be overcome if you program your wallet software correctly. The core developers of Bitcoin are aware of it and will eventually work on it, but it’s not a high priority for them.

However, Mt. Gox is now spinning the story to make Bitcoin look bad and trying to hide that it’s actually the company’s own fault. Can you blame a company for that? Yes, especially when your CEO is a board member of the Bitcoin Foundation! Mark Karpeles, the CEO of Mt. Gox, is a founding member of the Bitcoin Foundation and still serves on its board. One of the Bitcoin Foundation’s core tasks is to make sure no inaccurate reporting about Bitcoin occurs and what Mark did today is therefore unacceptable. In my opinion the Bitcoin Foundation should remove Mark from its board right away.

Actually, both scandals may be a blessing in disguise. Young guys like Charlie and Mark are great to start a movement and to evangelize it in the early stages. But Bitcoin is now close to a breakthrough into the mainstream world and then you’ll need different people to run the show. If the Bitcoin Foundation is smart (and I think it is) they will replace them with more experienced people with credibility in both the Biticoin community and the business world or government.

I think Bitcoin is in the middle of a transformation. The organization was started by libertarians with great ideas, but who can’t change the world without the help of people from the establishment. Many of the early Bitcoin people are young and idealistic, which is exactly what you need to get something new off the ground. But just as with a business, the people who started it may not always be the best people to lead it in the growth phase.

And that’s what’s happening now with Bitcoin. You can’t build a new global financial economy on systems that can’t scale. Mt. Gox was not built to handle the huge traffic it was getting and therefore will not survive. As Andreas Antonopoulos put it a few days ago “Mt. Gox has built an exchange based on a hodgepodge of technologies that are really not suitable for running an exchange. And it’s being run by people who don’t really have experience building and operating scalable systems”. New, more professional and well-funded companies like Coinbase and Circle will take over the space, making it ready for primetime.

In the Bitcoin Foundation people like Charlie and Mark need to be replaced by more experienced professionals. If that won’t happen I think the Bitcoin Foundation may not survive itself, which may be a serious but not life-threatening problem for Bitcoin.

I believe in the Bitcoin and the Bitcoin protocol and I’m sure they will survive this transformation and come out of this a lot stronger.  I will hold on to my Bitcoins and may even buy a few more at today’s low prices. Never a boring day in Bitcoin land!

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