The other side of the coin
Welcome to the inaugural post of my brand-new newsletter, Networked. I'm starting this project for a few reasons: I enjoy thinking about and debating politics and technology and ad tech, I miss writing, and I'm looking for a more creative and slightly less stodgy alternative to a blog. But perhaps most importantly, I learn about a topic more quickly once I've forced myself to write about it.
How often I'll send out a newsletter, what subjects I'll cover most frequently, and the general format and length are all subject to change as I tweak things here and there. (I'll try to keep this first one relatively brief.) One thing that won't change: I always love to get feedback. So please shoot me a note (you can just reply to any of these newsletters) if you have anything you want to share, comment on, or debate.
Alright, onto today's topic: bitcoin. My interest in the subject has waxed and waned over the past couple years. I read Nathaniel Popper's excellent history of bitcoin, Digital Gold, when it came out in 2015, and I've occasionally followed the cryptocurrency's ups and downs since then.
But my fascination was especially piqued this August, when I randomly logged into my Coinbase account, for the first time in over two years, to discover that my forgotten $200 bitcoin purchase had ballooned to nearly $3,500 in the intervening period. Slightly giddy but mostly panicked, I cashed out immediately, patting myself on the back for my valiant stance against irrational exuberance.
So here's what's happened since then:
Ahem.
Clearly something is up. Over the past several days, as the price of a bitcoin has at times moved more than $2,000 in thirty minutes, I've found myself looking for new analysis and rereading pieces I'd found helpful in the past. I've included my recent bitcoin "reading list" at the bottom of this newsletter.
Probably the most illuminating discussion I've read on bitcoin is John Lanchester's April 2016 essay "When Bitcoin Grows Up" in the London Review of Books. Beginning with an extended riff on the definition of money itself, the piece expands into an extremely well-explained dissection of bitcoin's birth; its maturation as a platform for cyperphunks, tech geeks, and (of course) criminal enterprises; and, finally, its explosion into the mainstream, a development that has paradoxically increased the likelihood of its being coopted by the very financial intermediaries (banks) it was designed to obviate.
This last point is one that has especially bugged me this last week or so, in parallel with the cryptocurrency's meteoric ascent. Two of bitcoin's principal motivating factors, at its inception, were the decentralization of trust and the ability to conduct anonymous financial transactions. But bitcoin's skyrocketing price is a direct result of most users' abandonment of those same two ideals. In the U.S., for example, Coinbase is the predominant digital wallet for bitcoin-holders, with more customers than Charles Schwab and E-Trade. It is regulated by relevant financial authorities, meaning it is bound by "know-your-customer" laws.
In other words, the vast majority (of American users, at least) are conducting non-anonymized financial transactions and are doing so by entrusting their bitcoin wallets to a financial intermediary. It's enough to make you wonder whether the currency's initial promise has been submerged under a wave of financial speculation.
Only time will tell, and it may not take very long to find out. Bitcoin futures will officially start trading -- for the first time ever -- on the Chicago Board of Exchange starting at 6 PM EST tonight: that is, in under an hour from now. This will massively increase the broader financial world's ability to bet on bitcoin, and no one knows whether the price will rise or plunge (if short-sellers are feeling especially confident) as a result.
In either case, now is probably a good time to read up on Dutch tulips.
Reading list:
Yesterday. Why Bitcoin? Why Now? Paul Vigna, Telis Demos, and Peter Rudegeair ask the question we're all wondering these days: has everyone in the world of bitcoin gone crazy? The answer, as one might imagine, is "maybe."
2 days ago. Bitcoin Is None of the Things It Was Supposed to Be. In a piece that crystallizes much of what I've been thinking lately, Adrianne Jeffries points out that the principal factors driving the early excitement for bitcoin -- among them decentralization and the elimination of trust as a necessity in financial transactions -- have been tossed by the wayside as adoption has picked up among mainstream users.
2 days ago. The Bitcoin Whales: 1,000 People Who Own 40 Percent of the Market. Whales, or investors with significant bitcoin holdings, are likely colluding (informally, at least) in order to ensure that they stay up to speed on any market movements that could impact their investments, Olga Kharif reports.
2 days ago. Putting a price on Bitcoin. The Economist's Buttonwood column argues that bitcoin's uneven rise is indicative of a financial bubble, and that this volatility prevents it from being useful as a means of exchange.
2 days ago. The Onion has some fun at bitcoin's expense.
4 days ago. The real reason Bitcoin is skyrocketing and why CME is launching Bitcoin futures on Dec 18, 2017. Someone is close to building a real quantum computer. This is Reddit (not just vanilla Reddit, but /r/conspiracy, to be specific), so take it as you wish, but here's the theory: bitcoin is potentially nigh upon a monumental crash.
5 days ago. There’s an $814 Million Mystery Near the Heart of the Biggest Bitcoin Exchange. Ever heard of tether? It's a cryptocurrency pegged to the U.S. dollar, with the idea being that every unit is backed by its counterpart in cold, hard cash. The problem? No one's sure if it's true.
2 years ago. Can Bitcoin Conquer Argentina? New York Times reporter (and Digital Gold author) Nathaniel Popper explains how bitcoin is facilitating commerce in countries like Argentina that employ capital controls and suffer from divergent official and black-market exchange rates.
2 years ago. When Bitcoin Grows Up. John Lanchester's above-mentioned magisterial reflection on the allure, and the danger, of bitcoin.
9 years ago. Bitcoin: A Peer-to-Peer Electronic Cash System. The technical whitepaper, written by the mysterious (wo)man Satoshi Nakamoto, which laid the foundation for bitcoin by introducing the blockchain as a decentralized mechanism for verifying transactions on a distributed ledger.