Thursday, 22 August 2013

An Idiot’s Guide to Bitcoin: the man behind the book

The man in the beanie and glasses, sipping a flat white, looks very at home in amongst Sydney’s Bondi crowd. But he is not there to talk to me about the surfing or cafĂ© culture. We are there to discuss bitcoin, and in particular, the book he has written about bitcoin.

Gustaf van Wyk is man who wears many hats (today’s is a blue beanie). He is architect, designer, artist, bitcoin enthusiast and now, author. An Idiot's Guide To Bitcoin is a book which, he says, “makes it easy for the average man to get involved with bitcoin.”

 But how did a man, who comes from South Africa and started out studying architecture, come to write and illustrate a book about digital currency? For a start, it came down to passion. “What made it possible for me was that I was passionate about it. I can’t do anything I’m not passionate about,” he says. It was for that reason that architecture fell by the wayside because he was not able to “sit at a desk and draw line drawings for someone else for ten years.” He began freelancing and bar tending but it was bitcoin that got him “really excited.”

“I discovered bitcoin about two years a go,” he tells me. The way he discovered it, he says, “is an interesting story,” and one which started out on the Silk Road, the underground website, known for being an online market for drugs, aka the “ebay for drugs”. The site accepts bitcoin and this was where Gustaf was introduced to it, although he could instantly see its potential was a lot bigger than the black market. “I have a bit of an alternative view on life and I could see through the fact it was drugs and that caught me and I thought this is really interesting, and I took it from there.”

His alternative view stems from the belief that “the use of force has no place in human society.” Once we are on this subject, his eyes light up and it is clear this is one area he is passionate about. “Bitcoin immediately to me was the removal of force from economics. It comes down to volition and mutual consent. There are no third parties, no pressure. I’ve always wanted something to fight for and there are so many causes and you do your bit here and there, but nothing was really an umbrella cause, and bitcoin became that for me. Through bitcoin I could see a better world. I’ve never been able to project a better world through any other projects that have come my way. Bitcoin was that – I immediately started learning as much as I could and finding out what was going on and getting involved. In fact I only used Silk Road twice and after that, then I started buying bitcoins and trading them,” he says.

He admits to initially making “a bunch of money,” just through bitcoin’s value increasing as he first bought them when they were around $10, but he says, “I quickly realised, you can’t treat bitcoin as a commodity. It really is a means of trade.” Is he one of the “bitcoin millionaires”? No. “I spent them too quickly, I was too enthusiastic,” he laughs.

He is, however, a libertarian. He seems hesitant at first about labelling himself as such. “There are a lot of connotations of words,” he explains, but then he nods and is certain. “Yes, absolutely. Yes, I am a libertarian. As far as the root of the word libertarian, as in liberty and freedom, then yes I am a libertarian. I think mankind only has one right and that’s freedom; all other rights are derivatives of that right.”

Some of the things he says seem to follow the same school of thought as the bitcoin evangelists, people such as Roger Ver and Erik Voorhees. He agrees. “But one my big influences, which I am proud to admit, was Ayn Rand, growing up: her theories on objectivism and the basic human right of freedom, and how she arrived at that point, where objectively our minds are our survival mechanism. We don’t have claws, we survive with our minds and therefore we have the right to use our minds. That’s where it comes from for me… The freedom to do what I want, as long as I don’t violate that exact same right of someone else."

"It came down to a very simple truth and that is freedom and bitcoin was that, and when I saw that, it was so exciting.”

It was, he admits, like an epiphany, although he laughs, “There was no moment. It was probably over a matter of weeks, but by the end of those weeks, once I had really cleared up what bitcoin was in my mind, and I had gone through it, I knew it had to be driven as hard as it could.”

So, today that is exactly what he is doing and An Idiot’s Guide To Bitcoin is his way of doing it. The 100-page e-book, available from his website, first establishes, “what is money?” by giving some context and background, before taking the reader on a light-hearted, and at times humorous, journey into the world of bitcoin.

What makes this book even more unique are the beautifully-drawn illustrations, which are interspersed throughout, usually at the start of each chapter. “That was the most fun part,” he says. “Some of them are a little bit cryptic, just a bit of fun to add my own flair because I am an artist. I think I did about one hundred drawings before I chose the right ones.” He tells me he might add some more and he has left himself open to do that, by publishing this book as version 1.0. “Bitcoin is a new thing and it is growing. I can’t release a book and sit on it. But that’s part of the fun, keeping up with things.” When I ask him about that point, about how quickly the bitcoin ecosphere is evolving and how the statistics are becoming outdated, he smiles. “The phrase ‘at the time of writing’ comes up often,” he says.

Illustration by Gustaf van Wyk

Within the book there is a little history, a sprinkling of statistics and importantly, some practical information about how to use it, including useful websites and simple explanations of much of the terminology surrounding ‘crypto-currency’. “If you read the book with no technical background, apart from knowing what the Internet is, you will understand it,” he says.

Simplifying the concepts was very important to Gustaf, especially as he comes from a creative background and, by his own admission, the two worlds, of art and finance, are often very separate. “We don’t really know too much about finances, especially when it comes to the bigger vocabulary of accounts and things,” he says. This is where bitcoin taught him a valuable lesson. “You assumed money was a complex thing,” he says, “and through bitcoin I learned money really is not a complex thing and it shouldn’t be a complex thing. They hide so much from us through complexity and then you just accept that you do not understand it. Then the question came to me: What is money really then?”

This was the question that inspired the first two chapters of An Idiot’s Guide To Bitcoin and really got him thinking about how big the financial industry has become, quite literally. “The tallest buildings in the city are always the banks, when money is really just a facilitation between two parties. It has become a third entity, this powerful thing in the middle, and bitcoin to me was back down to the basics of what money is: just a facilitation between two traders, people who have value to offer.  It becomes an exchange of value with no strings attached and then I realised that people need to understand that money is not complex and I wanted to show them that, and bitcoin was the vehicle.”

He even says his third chapter, outlining what bitcoin is, comes down to a simple idea that, “bitcoin is money.” He adds, “Everyone tries to describe what bitcoin is on the Internet and everyone has a different little phrase or solution but at some point, you don’t need to understand what it’s all about, you just need to know that bitcoin is money.”

But what about the future of bitcoin as money? Gustaf believes it will not necessarily be smooth sailing. “The nature of bitcoin threatens the nature of the world right now: all this banking and all these centralised powers. If bitcoin is going to succeed, they stand to lose a lot of that power. I realised if bitcoin is going to have its day in the sun, it is going to have to stand its ground to these people at some point. That fight will come because these central banks, they are not going to go silently into the night, why would they?” It is another reason behind his writing An Idiot’s Guide To Bitcoin. His “effort,” he says, to promote bitcoin to the wider public, “because I believe our only hope for the survival of bitcoin is if it grows, if enough people use it and if the bitcoin economy grows."

The banks and central authorities are not the only obstacles, he believes, facing bitcoin. Gustaf thinks the issue will be wider than that; that the struggle is going to be “with the Western world.” He explains, “Because I’m from Africa, I pay a lot of attention to what’s happening there. The developing world is absolutely poised to pioneer this revolution, if you want to call it that, because their national fiats are inflation-ridden, over-taxed and over-controlled; the places with the highest buy into bitcoin is the developing world.

“Then you have the western world, who are complacent, who are comfortable, who are kept that way and who don’t have an immediate, on the ground need for bitcoin, where the developing world do.”

It is those parts of the world where he is keen to go and do more work. He talks about bitcoin wallet, Kipochi, and its integration with M-Pesa, Kenya’s hugely popular mobile payment system (used by over two-thirds the adult population there.) He hopes that it can take off in countries such as India. “If it can go viral in India then a sixth of the world’s population will accept bitcoin. That would be wonderful. These are the places I would like to work and do more promotion,” he says. 

“Maybe it is time for the developing world to be the pioneers in something.”

For Gustaf, there are many other avenues he would like to explore and he is not afraid to admit one of the reasons he wrote the book was because he needed to make some money as well. He announced the sale of An Idiot’s Guide To Bitcoin just a week a go and already has had over 100 sales. He tells me he is making just enough to survive on while being able to promote the book and work on his other “bitcoin endeavours”. One of those involves hosting a free “bitcoin for beginners” event in Sydney at some point in the future. He is also looking into getting a physical version of the book printed with the help of crowdfunding.

Finally, I ask him how he envisages the future for bitcoin. He laughs and looks a little sheepish. “I don’t know if I should admit this. The full potential of bitcoin is beyond our imagination. I don’t think we would recognise the world that we live in because if you think about the main purpose of political borders — to protect national economies — if everyone is trading in a global economy, those borders become obsolete. I think about the world John Lennon asked us to imagine …  I think the concept of one world economy that is not centralised is so massive, that we can all live as one.” So does he think John Lennon would be in favour of bitcoin? “Absolutely,” he says. “I don’t doubt that for a second!”

Gustaf’s own enthusiasm for bitcoin is contagious and it’s fair to say, the bitcoin world has probably not heard the last of him.  “The book is really just the beginning,” he says. “I’m just testing the waters.”

By Louise @ Bitscan

Tuesday, 20 August 2013

Bitcoin: The game-changer for the art world?

The romanticised notion of the starving artist may be a cliché but the fact is, unless you are one of the Damien Hirsts of this world, many artists struggle to make ends meet purely from selling their artwork. Finding a platform to sell their work, to get publicity, and take their work to a global audience can prove insurmountable tasks to the new creative on the block. Apart from costs of materials, marketing, exhibition or selling space, not to mention time and effort, these days you also need to factor in the additional costs of credit card transactions, bank fees and currency exchange when trying to expand the market abroad.

This is where bitcoin is offering a lifeline and the art world is starting to take notice. Since Art4Bit stepped into the bitcoin ring in February providing a platform for artists to sell their work for alternative currencies, a growing number of artists are learning about how accepting bitcoin can help promote their work and increase their profit margins.

It is perhaps unsurprising that artists and creative types are turning to using a decentralised currency. Some of the characteristics of both are strikingly similar: transcending the barriers of language and not suffering from being devalued. It is a unique example of art and science uniting with a common goal: freedom.

Speaking to Carla from Art4Bit, she says, “Bitcoin was born as a free currency and we think artists could profit from this liberty. Bitcoin does not have boundaries, and in this way, art also would not.”

On the Art4Bit website, artists can display their work and sellers can purchase it directly from them online for digital currencies, with Art4Bit taking a small, random percentage of the cost (anything between two and 20 per cent.) Artists dictate their own price for the work and if required, Art4Bit can offer free advice from a consultant or lawyer to help them value their work, thus helping to “sustain artists in giving a value that they think is fair,” says Carla.

It is part of their mission for a more ethical art market to flourish. The lack of banking fees is a clear benefit and people looking to use Art4Bit as a way of getting noticed have been attracted by the without-borders approach the company promotes. “The internationalisation of their work seems to be one of the most important elements,” says Carla. “When they hear about bitcoin, they seem very open and faithful to its uses, even if they don’t know exactly what bitcoin is. They obviously want to understand.”

Despite in their own country of Italy, adoption of and interest in bitcoin is negligible, Art4Bit say there is “a slow increasing interest and knowledge about the use of bitcoin in the art field… There is opening discussion about how bitcoin can be used.”

Having just travelled around the world raising awareness of their site and promoting their ideas to artists, they have a good gauge of how open artists are to using a decentralised currency. “In both [Japan and Hungary] we found several artists who already knew about bitcoin and would like to collaborate with us,” Carla says. “We have also received interest from artists in India and the US who are ready to collaborate.”

There are plenty of other examples as well. The ecommerce site, Etsy, known for its vendors selling vintage, art, and handmade craft items, currently has just shy of 180 sellers accepting Bitcoin and a members’ community dedicated to those that use it. One such vendor is Tracy Smith who owns Vancouver Stain Glass.

She says right now she only has one item for sale, which can be bought with bitcoin but she is enthusiastic about the currency. “The reason I chose bitcoin is I used to be an accountant and have studied economics. I like that it is an independent source of trade, and is not reliant on countries, elections, economies or the markets. It is brilliant. I also read that the value of a bitcoin never goes down, only up. This is the same as art. The value never goes down. It is recession-proof.”

Designers, photographers and printing shops are also getting involved. In Barcelona, Tostadero recording studio offers 10 per cent off if you pay in bitcoins. Bitmagination allows photographers and designers to sell their work for bitcoins, promoting their philosophy of a free market.

In fact, Art4Bit believe bitcoin could be a game-changer in the art market. “Bitcoin could free art from geographical boundaries, making it easier to move, digitally and physically. The art market could also gain a more personal dimension,” says Carla.

The personal dimension comes from allowing artists to interact directly with the buyer. “We want to help artists have a favourable relationship with the public and with the buyers, very different to the methods of some art galleries,” Carla says, adding, “Artists could be free and at the same time, be more visible.”

Art4Bit, who are holding their first exhibition in Milan next month, believe the benefits do not just flow one-way, and art could also be mutually beneficial to bitcoin. “Art is one of the most valuable and least devalued goods and thanks to this, it can help bitcoin to stabilise and increase its worth,” explains Carla.

Suddenly the science of cryptography is uniting with art. Bitcoin and the Internet are starting to link people across the globe and nurture new markets in a very non-technical domain. 

By Louise @ Bitscan

Thursday, 15 August 2013

How likely is a decentralised exchange for bitcoin?

There is no doubt that for some, bitcoin is more than just a currency, or a commodity, it is an ideology. Its fundamental characteristics of being decentralised and open-source, and its disruptive nature, appeal to the libertarians out there.
Yet, when it comes to exchanging bitcoins, the majority still have to go through a third party; one of the exchanges, or a broker, who all take their cut. Even the partly-decentralised exchange platform of local bitcoins still requires users to go through a company-owned website, so for some bitcoiners, and not just the purists, a fully decentralised exchange cannot come soon enough.

It is a topic, which will be discussed in a panel at next month’s European Bitcoin Conference taking place in Amsterdam. One of the panel members is Mike Hearn, software developer for Google and one of the brains behind much of the bitcoin technology for Android. When we interviewed him, we touched on his first introduction to bitcoin and his dealings with Satoshi (see our earlier post) during the very early days of the currency, but soon moved on to his thoughts about decentralised exchange.

The problem is that centralised exchanges are financial institutions, which have to interface with the banking system, the one system bitcoin tries to remove. However, “they’re not going anywhere,” Hearn says, stating that, “if you want to move large sums of money they are the best way to do that.”
A direct, peer-to-peer exchange system sounds good in theory but in practise, Hearn believes there are limitations, and it comes down to trust. “It becomes very difficult to do this swap in an entirely fraud-free way,” Hearn says. “Someone always has to go first, and whoever goes first risks losing out... You can’t swap money for bitcoins atomically.”

Hearn explored some way of instigating a decentralised exchange system using social networks at the London bitcoin conference last year.

However, he says not too much has developed since then because “the centralised exchanges are working.” Despite the banking system being “slow and expensive” he says, “It is hard to get around that as your money starts off in the banking system.”

In a bitcoin utopia, the main exchanges might be redundant but Hearn thinks that is a long way off becoming the reality. “It is not clear the decentralised exchange concept is going to work very well so for now I don’t see them going anywhere.” He refers to the fact that even if a person were to try to trade through a social network via the internet, every movement peer to peer, would go through the banking system with the banks taking a small fee. He also raises the risks of taking part in a decentralised exchange system. “The assumption is that banks won’t figure out what you’re doing, and why you’re suddenly sending and receiving wire transfers. What we’ve seen is people getting their bank accounts terminated because banks view them as a money transmitter and abusing the banking system.”

Of course, some people circumvent some of these problems by meeting up face to face to trade small amounts of cash but the issue is how to scale that up. “A decentralised exchange would marry the best of both worlds,” Hearn explains. “You could have the scale of a standard exchange but with the decentralisation of in-person trading.”

One UK company has announced its plans to create a decentralised exchange for fiat and crypto-currencies. Metalair is looking for investors and donors for what it claims will be a “double-spending proof, fully decentralised exchange mechanism” for its open-source software. It is also hoping to promote the adoption of all cryptocurrencies by providing an exchange for bitcoin and litecoin as well.

Despite Hearn believing the future of bitcoin is bright, he is not quite as enthusiastic about that of other alternative crypto-currencies. When asked about such digital currencies as Litecoin and Feathercoin, he seemed sceptical. “Most alt coins haven’t introduced any compelling technical changes and I don’t see any reason why they’d be competitive in the long-term,” he says.

Mike will be speaking at the European Bitcoin Convention, which takes place from September 26th – 28th

By Louise @ Bitscan

Thursday, 8 August 2013

Will the real Satoshi please stand up? The mystery of bitcoin's creator: Interview with Mike Hearn

There’s an enduring mystery in the bitcoin world; it has nothing to do with mining algorithms or hidden features within the bitcoin coding; it is: who is Satoshi Nakamoto? 

The enigmatic character who created the original Bitcoin software in 2008 is the subject of many theories as to who he is and where he is from. Depending on what you read, or whom you listen to, Satoshi Nakamoto is a pseudonym for one person or even a group of people, and theories as to his location or place of origin range from Japan, to Britain to Finland.

On the P2P (peer to peer alternatives) site in February 2009, Satoshi Nakamoto introduced bitcoin on his profile page, which states he is a 38-year-old male in Japan.

Prime suspects as to the hidden identity of Satoshi have included OpenCoin founder and creator of Mt.Gox, Jed McCaleb, and  Finnish compuer scientist, Martti Malmi. Malmi states here that he contacted Satoshi Nakamoto after he came up with the idea of a decentralised Internet currency. He was also the first person to make a Bitcoin to US dollar transaction.

According to the bitcoin Wikipedia entry, an investigation by Fast Company links three men, Neal King, Vladimir Oksman and Charles Bry, who in 2008 filed an encryption patent containing similar encryption technologies to bitcoin and the fact the domain name was registered 72 hours later. Similar phrases were also said to have appeared in the patent and the 2008 bitcoin white paper.

Shinichi Mochizuki has been another name thrown into the ring. The Japanese mathematician was born in 1969, making him similar in age to how old Satoshi claimed to be and having lived and studied in the US also has fluency in English. On that point, it is also thought Satoshi could be British due to some of the language and formatting of his written work.

Even Paco Ahlgren has been mentioned and although much less widely circulated, his name has still cropped up in forums. The author and financial analyst has written articles extolling the virtues of bitcoin:

So, although we may never find out the real identity, one man who probably has a better insight into Satoshi Nakamoto than most, is Google software developer and author of bitcoinj, Mike Hearn, who I spoke to recently.

He first heard about bitcoin back in 2009 when it was just a few months old and there were no forums or communities in which to get involved. Interested in how it worked and with no one to transact with, he emailed Satoshi Nakamoto. “I asked him some questions about how it worked and stuff I didn’t understand and he sent me some coins and I sent them back,” Hearn says, adding, laughing, “I should probably have kept them.”

With nothing much happening in the early days, Hearn “lost interest for a bit” but came back to bitcoin in September 2010, realising a small community had formed and bitcoins now had a price, albeit of only around 10-20 cents. He started to develop on it himself at that point and says, “Throughout this time I emailed back and forth with Satoshi quite a lot about technical topics.”

But when asked about who Satoshi is or whether Satoshi is one individual or possibly a group, Hearn seems adamant that Satoshi is just one man. “I don’t know where this idea that it was a group of people came from. Some people seem to say, ‘this is really clever therefore it must have been a group of people,’ but that doesn’t really hold. I don’t think there is any evidence that it was more than one guy. For one thing, the way the code was written implies it was the work of one guy.”

With Satoshi Nakamoto having stepped away publicly from bitcoin, I asked Hearn what he thought he would be making of how quickly bitcoin is growing and in particular, what he might think of how the pace of bitcoin mining is evolving. “I don’t think anyone really understood the speed at which things would go,” he says. “[Satoshi] talked about maybe one day there would be industrial consortiums with farms of GPUs. The way he phrased it was ‘in the distant future, this might happen.’” However, he seems to think Satoshi would have liked to delay that moment to allow as many people as possible to take part with their regular computers. “Satoshi did anticipate that mining hardware would get better but it was remote, theoretical possibility. The whole idea that it would take off sounded so ridiculous back then.”

Hearn believes it is not only the speed at which hardware is changing but also how fast it is entering public consciousness that would surprise Satoshi. When people were encouraging bitcoin to be used for projects such as Wikileaks, Hearn says Satoshi believed it was “too early” and bitcoin was “too small”. That argument certainly couldn’t be used today. 

Whoever Satoshi is, Hearn thinks he would have liked him. He ends by telling me, “I think I would have liked him if I’d met him. I even tried to recruit him to work at Google once.”

For a little more from this interview, a short clip is available here. Please bear in mind this is not a quality, audio recording but hopefully you find might find it interesting.  

More from this interview on decentralised exchange and alternative currencies will be featured in another post soon!

By Louise @ Bitscan