This week in bitcoin: Why financial and legal experts are as critical as engineers to bitcoin’s future

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This week’s bitcoin review includes a talk with the creator of the Digital Currency Council.

A Q&A with David Berger, CEO of the Digital Currency Council

If you want to learn about bitcoin, where do you turn? Google might provide the basics, but many people will turn to their normal go-to source for financial information — accountants, lawyers, portfolio managers, whoever they trust.

“I think the professionals, the traditional advisors, are as critical to the long-term digital currency economy as the engineers,” Berger said. “To build a new economy, which is what is happening, requires the involvement and intellect of a really diverse group of people just like our traditional economy does. There’s just so much opportunity today that the demand for these professionals is out-stripping the supply.”

In September, Berger launched the Digital Currency Council, a consultancy and education center, to help boost the supply of bitcoin-familiar professionals. The program already has 400 people and will be launching a certification test on Dec. 1 to start creating a legion of digital currency-trained professionals.

I spoke with Berger a little bit about the challenges facing bitcoin and the added challenge of training people in it. The following Q&A has been lightly edited for length and clarity.

Biz Carson: What was lacking in the big picture of bitcoin that you decided to create an organization like this?

David Berger, DCC CEO and co-founder

David Berger, DCC CEO and co-founder

David Berger: I’m a lawyer myself and, over the last couple of years, I’ve been working with a similar professional association for ultra-high worth individuals and their chief investment officers. I spoke with hundreds of wealth managers, lawyers, accountants and one of the questions I would talk to them about is bitcoin. I would ask them what do they think, what are they telling their clients, and almost without exception they had one of two answers: Either they pled ignorance and said I just don’t know enough. Or they shared some myth or legend that they had heard in media reports or through the grapevine, and none of them have done any diligence. I really believe that if you are charging fees for advice then you need to have prepared and done the diligence that merits that fee.

I’ve been studying bitcoin for three years and when I first started learning about bitcoin and the network, the information was unclear. It was sporadically sprinkled throughout the net. Today’s professional doesn’t have three years to study bitcoin. It’s progressing very, very quickly, and they need a way to get up to speed and sufficient so they can get started in a much shorter period of time. We wanted to create that training platform so they could get up to speed quickly and then a certification platform so those that did take the time and effort to get up to speed can differentiate themselves from those that decide not to. If consumers can’t tell who has an expertise and who doesn’t, they’ll often times be disappointed with their professional advice.

Obviously a hot thing right now is Apple Pay, which some people view as a direct competitor to bitcoin. How do you think Apple Pay relates to the digital currency world?

The history of financial innovation shows that as new means of exchange are developed it doesn’t eradicate the old means of exchange. Way back to 7000 BC there’s a recorded history of barter. People still barter today. People still use coins, they still use traveler’s checks and obviously paper money as well. As long as there is a use case and it’s easy to use for the end user, I think the new financial instruments and new means of exchange are welcome. I don’t see them necessarily as competitive, but I do see them for different purposes. When I go to a convenience store today, I’ll admit that I’ll pull out a dollar bill if I want to buy a pack of gum. If I want someone to do something around my house, I might offer them a six pack of beer, that’s a barter. I use whatever the means that’s most useful and easy at the time and I think the same will go for Apple Pay and bitcoin.

Marc Andreessen, who is obviously a big advocate for bitcoin, has talked about the need for education in bitcoin. The DCC is part of that. Do you view educating the public as a hinderance to adoption right now? Where should bitcoin adoptees or enthusiasts be putting their energy right now?

Every financial innovation, every time you mess with someone’s pocket book, there is skepticism. I recall when the first ATM came into my town and my mom saying “I don’t trust that machine. I want to go look someone in the eye at the bank.” Over time, convenience and usefulness won out and people use ATMs now all the time. You need to educate people on how to use the next technology. We at the Digital Currency Council see professional advisors as a channel to that education. We’re working on a study right now and the early data shows that 75 percent of people when they start to think about digital currencies will turn to a lawyer, accountant and a financial advisor. A traditional trusted advisor is who people turn to when they have questions related to their finances. That’s why we’re focused on educating that group. So they can offer a reasoned, considered response when they’re asked about bitcoin.

The market this week

The stock markets may have been having a rough and tumble week, but bitcoin continued to coast. Sure, the prices remains in the $300s, but it was a week without flash crashes or any major market turmoil. The price was around $390 last Saturday, but has been falling all week to close last night at $355.86.
coindesk-bpi-chart (30)
For background on why we’re using Coindesk’s Bitcoin Price Index, see the note at the bottom of the post. 

Here are some of the best reads from around the web from the past two weeks:

  • Bitcoin sidechains are here. Adam Back and a group of developers co-invented the “sidechain,” which could theoretically do away with altcoins by creating a “sideline” version of the blockchain that can be experimented with while not hurting the main bitcoin protocol. I need to read over the whitepaper again myself, but it’s already being heralded as a more flexible way to develop things using blockchain technology while maintaining the bitcoin blockchain as a “parent” version.
  • Dorian S. Nakamoto is planning to sue Newsweek, which labeled him as bitcoin’s founder in March. On his site, NewsweekLied.com, Nakamoto is asking for donations to support his defense fund, which can be paid in bitcoin of course.
  • Maybe the BitLicense won’t strangle bitcoin companies after all? CoinDesk reported that the state of New York will not regulate cryptocurrency software developers or miners.
  • It’s been two weeks of Reddit AMAs. The Bitcoin Foundation’s Global Policy Counsel Jim Harper did an AMA on the foundation and the New York BitLicense proposal. Coinbase’s founders Fred Ehrsam and Brian Armstrong did their AMA live on YouTube so you can watch the whole video below, or check out the thread here This week, both Gavin Andresen, chief scientist at the Bitcoin Foundation, and Adam Back, who just co-invented sidechains, did more technical AMAs: Andresen’s is here and Back’s is here.
    https://www.youtube.com/watch?v=w3OWzZSr8Nc
  • In a bitcoin beginner’s guide for entrepreneurs, the Guardian highlighted the pros and cons of small businesses adopting bitcoin — if they can stomach the volatility, that is.
  • Bitcoin is more than just a cryptocurrency, the Wall Street Journal reminded us yet again. The “imminent” future of decentralized computing will showcase the Bitcoin’s block chain as the technical achievement that it is.

Bitcoin in 2014

The history of bitcoin’s price

A note on our data: We use CoinDesk’s Bitcoin Price Index to obtain both a historical and current reflection of the Bitcoin market. The BPI is an average of the four Bitcoin exchanges which meet their criteria: Bitstamp, BTC-e, LakeBTC and Bitfinex. To see the criteria for inclusion or for price updates by the minute, visit CoinDesk. Since the market never closes, the “closing price” as noted in the graphics is based on end of day Greenwich Mean Time (GMT) or British Summer Time (BST). 

Disclosure: I currently own a very small amount of bitcoin for product testing purposes.

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Tim C.

I thought the cell phone was a fad. From 1983 to 2014, worldwide mobile phone subscriptions grew from zero to over 7 billion

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