Is Bitcoin Worth the Hype? Experts Sound Off
WASHINGTON – At the ShmooCon hacker conference here this past weekend, two security experts went head-to-head over Bitcoins and other cryptocurrencies. The debate quickly devolved — or evolved, depending on your point of view — into Gilbert-and-Sullivan-style light verse.
"The concept of cryptocurrency is really quite extraordinary," began Jack Gavigan, chief operating officer of the Zerocoin Electric Coin Company, who had been assigned the anti-cryptocurrency side despite his day job. "But the value of a coin seems to be entirely arbitrary."
Despite the constant jokes, the conclusion was that even though prices may be volatile, the interest in cryptocurrencies was fueling valuable research into financial technology and cryptography.
I am the very model of a modern Bitcoin blockchain
The normally skeptical Jack Daniel, a veteran hacker who had augmented his normal wizardly appearance – tall with a long white beard – with a monk's robe, argued the pro-cryptocurrency side.
Gavigan, an information-security expert with an MBA who used to trade for Morgan Stanley and now manages the Zcash cryptocurrency, had rightly guessed that he'd have to debate against his own means of making a living. He came armed with 32 lines of rhyming patter.
"When people try to justify the price, the logic isn't there," he said. "It feels like all they're doing is creating money out of thin air."
"Wait a second," said debate moderator and ShmooCon co-founder Bruce Potter. "Are you debating in verse?"
"In theory, Bitcoin should be great for making payments peer-to-peer," continued Gavigan, not looking up. "Cutting out the banks and middlemen meant it shouldn't be as dear. But while that's great in theory, in practice that's not true. You have to pay huge transaction fees to get your payment to go through."
"The Bitcoin Lorax speaks!" someone shouted from the crowd.
Gavigan went on for six more stanzas, and received a standing ovation at the end of the last: "In conclusion, whether you think that cryptocurrency is good or bad, the question we must address is 'Is it the future, or just a fad?' The answer will make the Bitcoin fans hot under the collar. But for now, it's clearly safer to stick with the good old U.S. dollar."
(Gavigan posted the full text of his "cryptopoem" on Twitter.)
But in all serious, cryptocurrency has some value
It would have been difficult for anyone to reply to that, but Daniel made a good show of it. He pointed out that arguments about the volatility of cryptocurrencies could just as easily apply to more traditional forms of investment.
"Bitcoin is not the only way to lose money," Daniel said. "Anyone here buy a house in Las Vegas or South Florida 15 years ago? How'd that work out? There is volatility in everything."
He argued that while Bitcoin itself may not succeed, he said that its current notoriety ensured that "we're learning things — how to make a distributed trust model, how to make blockchain actually useful."
"The world is more global than ever, but our traditional currencies don't reflect that. Cryptocurrency gives us a global currency, and it is the future," Daniel concluded.
Wendy Nather, another well-known information-security expert who now works at Duo Security, jumped in to recommend a skeptical book called "Attack of the 50-Foot Blockchain." She lampooned blockchain advocates who say the technology is the magic solution to all sorts of problems.
"There are scams and Ponzi schemes, but what if we just put people on the blockchain?" she asked. "There will be no room for mistakes and error. Then we'll have cured cancer."
Will governments step in?
Someone in the audience asked if governments might start creating their own cryptocurrencies.
"What they're all looking at is putting fiat currency on a blockchain," Gavigan replied in seriousness, adding that cryptocurrency makes it easy for a person living in one country to send money to a person living in a different country with a different unit of currency.
"We already have a mature economy with an abstraction layer, a credit card, that takes care of currency conversion for you," countered Daniel. "If I go to Norway, I don't have to convert dollars into the local currency — I just put everything on a credit card."
"There are other ways to have electronic transfer of cash without a middleman" than cryptocurrency, Potter said in support of Daniel's point.
Overall, it seemed that the pro-cryptocurrency argument had won out. Daniel's debate points in favor of cryptocurrencies, despite being insincere, were valid.
Potter pointed out that many of the flaws that Gavigan noted in his anti-cryptocurrency poem referred to Bitcoin specifically, and had been resolved in Gavigan's own cryptocurrency, Zcash. (Even Edward Snowden has weighed in on behalf of Zcash.)
And no one could really dispute that cryptocurrency was fascinating, and was making us think about the ways we devise and control money.
"Cryptocurrency is funding research into this space, and into cryptography itself," Gavigan said.