25th April 2019

Bitcoin & Crypto with Paul Gordon of Coinscrum – Part 1

Colin Platt here once more, time for another blog, exploring some of the topics that Zeth, Shaun and I found interesting and noteworthy. Taking a break from our regular posts, I caught up with Paul Gordon for an insightful two-part interview covering his long history that goes back to the early days of Bitcoin and cryptocurrencies in London. We discussed what he’s seen, trends, and what the future may hold. Paul really has deep experience, so today we present part-one, and will follow-up next week with his view looking forward.

Colin Platt (CP): Hi Paul, great to see you again, and thanks for taking the time to catch up with me. Can you tell us a bit about you?

Paul Gordon (PG): Hello Colin, good to see you too, and thanks for covering me in the blog. I run the Coinscrum meetup, we started as a small group of enthusiasts in 2012 meeting at a pub in Paddington to discuss Bitcoin and have since grown, welcoming some of the most innovative people in the space.  We welcome everyone, from people first learning about Bitcoin and cryptocurrencies, to those who have been around since the beginning. I’m also a founding member of the UK Digital Currency association, one of the first industry trade associations, as well as the founder of Quantave, a company working to help bring institutional liquidity to digital assets.

CP: Paul, I want to dive right in here. What are the trends that you’ve seen in cryptocurrency and blockchain technologies?

PG: In terms of trends, given the length of time that I’ve closely been following the evolution of these technologies and since a time when it really was all about Bitcoin and not much else, I guess it’s worth looking at just a few of those trends that have persisted in some form or another since those earliest days, all if which I firmly believe will ultimately deliver positive outcomes.

Many of the most critical issues relating to the mass adoption of this technology are really quite simple. I know it feels like we have moved on in leaps and bounds since those early days but many of the most critical questions remain as true today as they did then and still await an ideal resolution.

Tribalism

One of the less-than-helpful trends that started emerging after 2012, both within the Bitcoin community and then moving beyond those borders, has been the obvious tribalism that has formed around, with mudslinging between, these various decentralised blockchain projects.

As a networking group, we’ve always tried to remain agnostic to any particular technology, confident that our members are educated enough to weigh up the pros and cons of anything we might put in front of them for themselves.

Nevertheless, the trend has been real and how damaging it might be in the long run is hard to tell. I think Arjun Balaji tackled it very well in his recent article, A Conflict of Crypto Visions, that applies Thomas Sowell’s concepts of Constrained and Unconstrained thinking to the design and development philosophies of any Bitcoin-inspired project you can care to name – the positive conclusion being that neither should be considered right or wrong, but that these naturally conflicting schools of thought will mutually benefit each other in the long run.

Fortunately, and no doubt tempered by the cold realities of another crypto winter, I sense that this problem is finally dissipating somewhat. Many of these projects are competing for the attention of a relatively limited number of developers and founders looking to build upon decentralised networks. The 2017 hype-cycle was driven by a narrative that every app we use will inevitably be replaced by a decentralised counterpart – often without any real consideration for the problem that was actually being solved or the trade-offs being introduced.

Early evidence suggests that we may need to go back to the drawing board and rework things a little if that vision is to become a reality.

However, I do detect some early winds of change with a softening of these tribal attitudes and that we’ll start seeing competing projects and their communities looking more closely at how they might complement each other instead.

Techno-attachment

When I started paying it attention, and having come from a markets rather than software development background, I was probably in somewhat of a minority within the Bitcoin community – although certainly not alone.

One of the things that quite quickly became apparent to me was that these very smart developers would often become somewhat glued to the novelty of an idea without necessarily questioning what problem it was they were actually solving – or worse, what new problems they might actually be introducing.

The basic concepts that Bitcoin has now brought to such broad attention go way beyond its underlying technology alone, opening up a wide number of non-technical considerations such as information asymmetry, human behaviour and other deeply-embedded social constructs.

I think this was less obvious when following the debates amongst the early Bitcoin development team who were mostly focused on patching the holes in Satoshi’s original code.

Bitcoin seemed to fix a particular problem very well and there wasn’t too much conversation around trying to make it something it wasn’t – apart from the early conversation relating to how the damn thing would eventually scale.

However, as these concepts started to inspire more ideas, it seemed clear to me (and many others) that the trade-offs that alternative use-cases might have to make in order to become viable weren’t necessarily being fully considered.

Just because you can, doesn’t mean you should.

For example, the conversation around Asset-Backed Tokens emerged in 2012 with the release of the Mastercoin whitepaper and Colored Bitcoin proposal.

On the surface, and from a technical standpoint, these seemed like very exciting propositions indeed, especially to simpletons like me – potentially offering the capacity to expand Bitcoin’s basic feature-set way beyond its original intent.

But it didn’t take long for some of the wiser minds on the forums to identify the risks they introduced or to question what problems they were actually solving.

For example, placing a huge amount of additional “value” (in the form of asset backed tokens) on top of the Bitcoin (or any similar) network would completely skew the economic game theory that underpins its network security.

Or that any asset backed token would carry exactly the same type of counterparty risk that bitcoin was designed to eliminate in the first place.

Or that tokenising or fractionalising something is not what makes it liquid in market terms – that’s an information problem, not a technical one.

Of course, this hasn’t stopped many of these ideas from being expounded ad infinitum, with the same questions and risks applying every much today as back then.

Decentralised prediction markets are another prime example. It’s intriguing that these things are now possible – it’s another question entirely as to whether the market will want them, with early traction hardly indicating otherwise, for now at least. My experience over the years in traditional markets tells me that demand for these things shouldn’t simply be assumed.

But looping back to the Arjun Balaji article I mentioned earlier, I’m not saying that the experimentation isn’t a good thing. It absolutely is. The Unconstrained school of thought is essential if the as-yet-unknown Killer-Apps that ultimately make this stuff fly are ever to be designed.

I just think the path to the ultimate adoption of these technologies will be somewhat different to that which most of us are imagining today.

Be your own bank!

Another clear trend with roots that can be traced back to the very beginning of Bitcoin relates to one of the hottest topics of the past year or so – crypto asset custody.

The early (and continuing) meme across all Bitcoin forums was that everyone could now be their own bank.

Amazing in principle, but questionable in reality.

As the numbers have gotten bigger, what seemed somewhat obvious to many, is now playing out on the ground with a realisation that people might not actually want to, or (in the case of highly regulated financial institutions) be able to, safeguard their own assets or wealth – trade-offs between technical theory and actual human nature abound again.

For now, at least, and for anything other than their crypto pocket-change, the vast majority of people (i.e. the 99% of the population that don’t yet own crypto) will not want to take on that responsibility for themselves, preferring to outsource it to others as they do now – essentially giving us what we already have today but with bigger security headaches.

Maybe this is simply one of those trans-generational issues whereby only time can bring about such a drastic change in mindset and, if so, we’re probably safe to assume that the much needed improvements in key management and user experience will evolve to meet that future demand once those of us that are over 30 years old have finally popped our clogs and taken our old-world attitudes with us.

Architected correctly, simple concepts such as multi-signature transactions may well introduce significant improvements over what we have now – but we’re definitely not there yet.

I could probably go on and identify many similar long-standing trends but I won’t for risk of sounding like a Nouriel Roubini!

I am your archetypal crypto maximalist after all. Just a rather cynical one – or, as I prefer to say, a pragmatic one!

I can see how these trends are evolving in a positive way too.

The mind-boggling explosion in awareness and investment in the space over the past two years has clearly increased the broader mind-share now tackling these issues, with the demand to do so now far greater than it ever was – this pressing need to find solutions will no doubt lead to them being found.

Most importantly, experienced talent from all walks of life and a variety of industries have now entered the space and will be here to stay – they’ll be the ones that pull the engineers aside from time to time to take a pause and ask “why?” a little more frequently.

CP: That’s fascinating, and a lot to take in. Having been there, are there any moments that you look back on and think: “wow, I really lived through that?”

PG: Ha, I’ve often said to my friends that the past 8 years of my life has been a little bit like living inside a movie. Looking back through the whole experience is really quite mad to be honest.

I think that anyone who became aware of Bitcoin back then went out of their way to deeply understand it and grasp its implications on a technical, economic and social level and will most likely feel the same.

I can well imagine that, to many of their friends and family, their somewhat unnatural obsession with it was more than a little concerning – I was more than a little concerned myself to be brutally frank!

But it’s been crazy to witness how far the idea as a whole has come in such a relatively short time-span.

I remember one of the earliest meetups in the pub when everyone excitedly got up and left early to get home when someone got a call telling them that Trace Meyer was due to appear on Newsnight to get a grilling from Jeremy Paxman about Bitcoin.

I think that might have also been the night when, in our haste, we left a large pile of the first print editions of Bitcoin Magazine that had been delivered by one of its founders on the table. When I checked on Ebay during the height of 2017 bull run, they were each selling for $800.

I think Paxman might owe us about $30,000!

But to see it then go from such a small, niche subject to become such a global phenomenon really has been a once in a lifetime experience – especially having crossed paths at one point or another with so many of the real innovators in the space; seeing friends’ businesses go from initial concept to multi-million dollar reality; recalling moments like Brian Armstrong posting the launch of something called Coinbase on Reddit and likely being one of the very first to register; sitting in a really shitty Chinese restaurant in Wood Green on a very wet Tuesday night being told about an idea called Ethereum by one of its co-founders and thinking, “hmm, that sounds cool….”; hosting events like the one in a gig venue in Hoxton in early 2014 with Amir Taaki, Andreas Antonopoulos and the Finance Minister for Guernsey all on the same stage – the energy in the room was incredible; Hosting an event at the 02 arena that saw Max Kaiser stage a fight against the World Kickboxing Champion in the name of Bitcoin! (yes, really).

It’s been a strange, roller-coaster of a journey indeed.

Part 2 of the interview on crypto and blockchain will follow next week, read it here

Check out the Coinscum meetup here or follow them on twitter. 

As always, nothing here should be construed as financial advice, recommendation or endorsement of any project or cryptocurrency.