Joshua Sherman August 4, 2014 August 4th, 2014
Bitcoin Foundation Bitpay centralization Coinbase decentralized currency Regulation
The Bitcoin community is in need of centralization. By centralization I do not mean a core authority, but rather a core voice. This is not an optional element in the future success of Bitcoin. While the origins of motivating adoption to Bitcoin have been grassroots, a continual shift in the way Bitcoins are earned by new users is a key reason why a central voice to the currency is essential for merchants and new users to trust adopting the currency.
The transition to exchanges & authorities
The nature of mining has changed dramatically for cryptocurrencies in the few years Bitcoin has existed. As the computing difficulty grew exponentially with the arrival of ASICs, the ability to earn Bitcoins shifted from the hands of independent users and into those with more powerful (and expensive) hardware. Meanwhile, new users no longer turned to their GPUs and CPUs for Bitcoins, and would instead buy Bitcoins with fiat currency. This transition has already brought the access of Bitcoin away from independent users and toward authorities of some shape and size. It is not difficult, if not impossible to independently acquire Bitcoins without a major capital investment totaling thousands of dollars. Even Satoshi Nakamoto’s original whitepaper expected this eventual transition.
In either case, this transition is where we are today. When people are encouraged to adopt Bitcoin, they don’t need to be tech-savvy or already own powerful computers. Instead, they only need an interest in the currency and a bank account. Acquiring Bitcoins with fiat currency is easier than ever, where not too long ago you’d have to meet with someone in person and exchange prepaid gift cards. This is all evident of how beneficial these exchanges and authorities have become, even if some still ground the success of Bitcoin on its ability to be anonymous and decentralized.
In reality though, the term “decentralized” will forever, at least with Bitcoin, remain an oxymoron. Bitcoin is not developed through an anonymously maintained, flat-hierarchy development team. It has a lead developer and a core team. That core team decides the future developments and goals of Bitcoin. Even though the currency could technically fork, the amount of money and resources invested into the core team almost completely assures they are the ones who will be followed for future developments. This fact is why embracing the decentralized nature of Bitcoin is impossible, at least for Bitcoin. A future cryptocurrency could be created that allows for a more decentralized core development, but Bitcoin is pretty much centralized, whether you like it or not.
The woes of the Bitcoin Foundation
For many, disliking the centralization is easy when you consider which organization sits at the center. The Bitcoin Foundation has had a harsh amount of criticism directed at it for being more or less a lobbying organization. Membership is not based on your commitment to the currency but instead your financial commitment to the Foundation.
Another core flaw of the Bitcoin Foundation is the type of companies it best represents. At this time, the Foundation is seen very closely aligned with exchanges and ASIC providers, but not large merchants and firms that help spread interest about Bitcoin to new users. The Bitcoin Foundation should be partnering and rewarding the companies that commit to offering Bitcoin as a trusted payment method, as well as bringing new customers directly at the cash register.
But this thesis is not about the Bitcoin Foundation. It just so happens the Bitcoin Foundation is in charge of core development, but chooses not to do as much as it can to mold a central message about Bitcoin. So far the groups doing the best job of painting Bitcoin in a positive light are Coinbase and BitPay. This is evident not by what they claim or say, but by the customers they’ve convinced to adopt Bitcoin. The Bitcoin Foundation and the Bitcoin community at large could learn a lot from these companies about how to market Bitcoin from these organizations.
Developing mission critical goals.
With this concept of a central voice in mind, what Bitcoin then needs is a set of mission critical goals: objectives that are possible and are measurable. While goals like less volatility are ideal, they cannot be easily controlled. One goal that can be controlled and measured well however is adoption of Bitcoin. Getting people to buy and then spend Bitcoin is what will help fuel success for the currency in the months ahead. Building trust is another element behind growing adoption. What The Bitcoin Foundation ought to do is develop a roadmap for these goals to succeed, much like many other public advocacy organizations. If they choose to collect fees, they should also demonstrate how those funds are reinvested into the currency, not stored at the core or spent on lobbying – neither of which compare well to the efforts of Coinbase and BitPay.
Ultimately, this also crosses over with a major flaw behind Bitcoin users: An inherent desire to hold, rather than spend. Many people see Bitcoin in its potential value, as opposed to its present value. As a result, many are waiting for some sort of price to then sell Bitcoin like a stock. This however isn’t best for building trust, encouraging adoption or the overall utilization of Bitcoin as a currency. These are the values that some core organization – be it the Bitcoin Foundation, a company like Coinbase, or the communities of /r/Bitcoin and BitcoinTalk – should be sharing.
via The necessity of a centralized voice for Bitcoin | Coin Manual.