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This transition from ideological enclave to professionalized financial network was on display at the conference’s exhibit hall. Row after row was lined with the booths of professional venture-backed businesses, while nestled in between were those of the Seasteading Institute and Antiwar.com.
It’s just like the late-90’s rush to commercialize the Internet once entrepreneurs recognized its revolutionary potential. And just like the late ‘90s, the early adopters are not all fond of the gentrification.
“A year or more ago there was very much an ‘Occupy’ type feel to Bitcoin, where this is the anti-establishment currency, and now the establishment is getting interested in Bitcoin,” says Garzik. “There is a tension and you definitely see the libertarian crypto-anarchist roots bang heads with the venture capital that’s coming in right now.”
One point of contention is mixing. As professional and regulated businesses enter, they are keen to tie real identities to transactions, and they are loath to touch bitcoins of unknown provenance. Many in the community rightly see this as a threat to Bitcoin’s fungibility.
“If someone says, ‘I will not accept these bitcoins over here because I think they are stolen funds,’ then their value is different from these other bitcoins that are not necessarily stolen funds,” explains Garzik. “And so some people of the crypto-anarchist, libertarian mindset feel it’s very important to mix because that preserves the fungibility of Bitcoin.”
Mixing is essentially laundering. It is combining bitcoins of different origins in a pool before handing them back to their owners in order to obfuscate who has which coin. Some even suggest that mixing should be built into the Bitcoin protocol itself. Businesses, to say the least, don’t like the sound of that. Everyone, however, will have to accept that Bitcoin is an open source project, and it’s ultimately consensus that will resolve the differences.
There’s no escaping regulation
Just two days before the conference, the Department of Homeland Security seized accounts belonging to Mt. Gox, the largest Bitcoin exchange (and a major sponsor of the conference), in what looks like the beginning of a criminal enforcement. You’d think this would have put a pall on the festivities, but in a way it only served to underscore the growing professionalization of the Bitcoin ecosystem.
Mt. Gox seems to have been operating without the requisite money transmitter licenses, and DHS alleges it lied about its status as a money transmitter in bank documents. In contrast, the new Bitcoin businesses that are springing up are working with state and federal regulators to cross every T and dot every I. And panelist after panelist on the conference’s “Legal and Regulatory” track explained to attendees how to comply with the law, as uncertain as it is. Dilettante time is over.
If the message wan’t clear enough, the Bitcoin Foundation—which helps organize Bitcoin’s development on the same model as the Linux Foundation—announced that it would be hiring a full time lawyer in Washington to represent the community’s interests. The thinking is that Bitcoin businesses and users are going to be regulated even if the protocol itself can’t be, so it’s time to engage the regulators and policy makers before they make any hasty moves.
This willingness to lobby and work with regulators, however, was not well received by many of the old guard. As one exasperated Foundation member tweeted, “I got into Bitcoin to improve this miserable planet and ESCAPE the iron grip of privileged moneyed interests, not JOIN THEM!”
But the fact is that Bitcoin is growing up. Its revolutionary potential is greater than most have yet understood. Entrepreneurs and venture capitalists are seeking to professionalize and legitimizing the network, and to do that regulators will have to understand and accept it.
It’s true that Bitcoin could continue to operate even if it was outlawed outright, but then it would only serve as an underworld currency, and its development would not doubt be hampered. The more subversive path may well be to let regulators create their rules for what at base is an uncontrollable system.