Credit: Shutterstock photoI feel a nasty sense of déjà vu when covering this subject, but some things deserve repeating, no matter how many times you say them. It is quite possible that the distributed ledger idea behind Bitcoin that is known as the blockchain can have other applications, but those who use that as evidence of the inevitable demise of the currency itself are missing the point, or, more frequently, displaying willful ignorance in order to talk their own book.
I was prompted to come back to this subject when I read an article this morning at Fortune.com headlined “This bitcoin startup is changing its name and moving away from bitcoin.” It is the story of the re-launch of what was formerly Bitreserve and is henceforth to be called Uphold. Ignoring for a moment the fact that the new name feels like it should be followed by an exclamation point (it sounds like the product of an image consultant to me, but if you are interested, there is an explanation of why “Uphold” was chosen in the article referenced above), the story is interesting on a couple of fronts.
Firstly, the story makes it clear that neither the founder of Bitreserve, Halsey Minor, not its current CEO, Anthony Watson, are supporters of or believers in Bitcoin. It seems that the plan all along was to separate the blockchain from the currency and the use of the “Bit” prefix in the company’s name was all about convenience.
Both Minor and Watson are actually very dismissive of the currency in the article. Despite actual hard evidence of the continued growth of bitcoin usage and acceptance as well as the ecosystem surrounding it, Watson says “ I’ll be surprised if Bitcoin is here in five years...” and Minor opines that it “...will get destroyed”.
The idea behind Bitreserve is that currency, stocks, gold, and other assets can all be exchanged and moved around using a distributed ledger system similar to that of the blockchain. Many of the arguments that Bitcoin supporters have been making for years, that assets and wealth can be transferred almost instantaneously and at little or no cost by using the system, are repeated by the company. They just believe that Bitcoin doesn’t have to be a part of that.
Of course, in theory they are right on that point. It is interesting, however, that they started as a Bitcoin company, and even more interesting when you hear the reasons why. According to the article the lack of regulation and fast time to market are what made that necessary. In other words, they piggybacked on the idea, which once again will undoubtedly upset some, but doesn’t really bother me. Capitalism is about seizing opportunity, not following Queensberry rules.
The question I would have, though, is why they think their enterprise will escape the stranglehold of regulators now that they are accepting deposits in, among others, Dollars and Euros, rather than Bitcoin? I may be missing something, but neither the ECB nor the Fed is known for being particularly tolerant of unregulated platforms or businesses that take deposits in their respective currencies. They like to maintain control. Why should this time be different?
To be clear I have nothing against Uphold and wish them every success. Even given the historic failure rate of startups in heavily regulated industries it would be foolish to bet against a management team with the experience and success of that of Minor and his recruits. That success will be difficult given the array of deep-pocketed Wall Street firms investing in similar ideas and the difficulty of effectively monetizing a free service, but, as I say, these guys know what they are doing. I would, however, take issue with the belief that somehow their separating themselves from the currency is an omen and the beginning of the end for the digital currency.
Part of the appeal of Bitcoin to its adherents is that it is a “trustless” system, and as far as I can see Uphold would be an extension of the current status quo, where a third party ultimately controls the wealth of the individual. There are still, and probably always will be, those that dislike that enough to pursue an alternative. When that is combined with the practical difficulties of separation it looks to be sufficient to ensure the survival of Bitcoin, as inconvenient as that may be to some.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
