A talk at the Institute of Economic Affairs London: Bitcoin and other private electronic monies
This is the text of the talk presented by Akin Fernandez of the startup Azteco

I’m going to surprise some of you and say from the off that, “Bitcoin is not money”. There are many reasons why I say this, most of them are to do with Austrian Economics. Or perhaps the Chicago School. Maybe even… shudder The Evil Keynesian

Nevertheless, Bitcoin is not money, it is software; specifically it is software that describes an on-line public ledger, known as the Blockchain. It is a system where software clients that run on any computer, use cryptography to prove ownership of entries in the public ledger.

These entries are scarce and therefore can have an arbitrary non zero value attributed to them. Bitcoin is the first time that something that is purely digital and therefore infinitely copyable can exhibit the properties of a scarce physical thing.

The fact that the value of Bitcoin doesn’t ever go to zero, means that it has the same utility as a means to transmit money no matter what its price is the price of Bitcoin doesn’t matter; only the speed at which you redeem it for goods and services matters.

Some Entrepreneurs have chosen to mimic the properties of money as the first business application of the Blockchain. Others are now working to replicate the process of issuing stocks in corporations.

The basic breakthrough behind all of this is the Blockchain; a method to prove that you own something in a way that cannot be forged and which does not require a third party guarantor or record keeper to verify you or that you own a thing.

Bitcoin is completely different to every private money that has ever existed. It is a form of programmable money. It’s money that you can write software against.

If the programmer writing an application using Bitcoin as a backbone can mimic the properties of sound money, then it can act as a form of money. Ideally how Bitcoin is used and what form the businesses that offer services with it decide to take, should be be left entirely to the market.

Whether or not Bitcoin is sound money is less important than its utility in a correctly formed business model. In any case, Bitcoin is more sound than the guaranteed to inflate fiat currencies that steal value from the people that are forced to hold them; money that does that to my mind, is a money that is inherently unsound.

Bitcoin is not a threat, any more than the web is a threat. The State uses the web and the many services built on it like Twitter, Apache, and Skype to manage its services and disseminate its messages, and eventually they will use Bitcoin to coordinate its services, whether those be signing and date stamping documents or any other form of public ledger registration or action.

One day we may see, for example, the marriages, birth and death registers all encoded into the Blockchain. These uses underscore the importance of remembering that Bitcoin is not money; it is software that can be put to many different uses, some of which superficially resemble money. I will speak more on how the State should react to to Bitcoin later.

Bitcoin is not a flash in the pan. It is a fundamental breakthrough in software; the solution to the “Double Spending Problem”. Saying that Bitcoin will be a flash in the pan is the modern equivalent of the infamous Professor Clifford Stoll saying in 1995 that the World Wide Web would come to nothing, “because you cant find anything on it”. I am telling you right now that developers working on Blockchain applications are going to surprise everyone with their new software products, and once Bitcoin, like the web, becomes a fact of life, all the statements saying that it is going to fail in some way will look quite absurd.

Already, articles from two years ago saying that Bitcoin is a “Ponzi Scheme” look ridiculous, and no serious journalist or person believes that. You need only look at the number of very large companies adding Bitcoin to their portfolio of payment methods to see that it is here to stay, just like the web.

Bitcoin is s sea change in how people account for goods with software. This breakthrough is going to radically, fundamentally, alter how people do things, and it is going to disrupt a wide range of businesses that rely on centralized authority for authentication and proof of ownership.

Which brings us neatly to Azteco, and the first use of the Blockchain; to mimic the properties of an ideal Austrian School styled money with a built in limited supply through Bitcoin.

Getting Bitcoin is currently very difficult. Because people have mischaracterized Bitcoin as money, a raft of false and bad assumptions have caused a few entrepreneurs to set up artificially high barriers of entry to buy it. We, understanding what Bitcoin is, treat Bitcoin by its nature.

Azteco makes getting Bitcoin easy. All you need to do is buy one of our vouchers that are identical in function to the pay and go top up vouchers O2, EE, Orange and T-Moble sell on every high street. Once you have a voucher, you redeem it at the Azteco website to any Bitcoin address you like. It can be your Bitcoin address, or a Bitcoin address of an online store, or a Bitcoin wallet on a mobile phone half way across the world. We redeem your voucher in seventy seconds or less to any address.

Azteco Bitcoin Voucher
I have some Azteco vouchers with me, and if you would like to try the system tonight I would be happy to show you how easy it is to get Bitcoin with our service.

I am now going to make some speculative predictions. Lets say that Bitcoin absorbs all of transaction business that is currently done on the web with Credit cards. This means that Bitcoin will have absorbed many billions of dollars via people exchanging their fiat currency through Azteco.

This means that Bitcoin is very undervalued at $600 per Bitcoin. Now lets take this a little further. People do not only use Bitcoin online, but they use it offline also. The amount of fiat money Bitcoin absorbs goes off the charts. Bitcoin payment processors and facilitators are some of the biggest businesses on earth.

This is not at all far fetched; already, the amount transacted in Bitcoin exceeds the amount of money Western Union processes.

Taking all of this into account, the business that use Bitcoin at the heart of their models need to incorporate somewhere. They are going to move to the jurisdiction that best suits their needs. Hong Kong has just announced that Bitcoin is not money, and that they will not be enacting any legislation that touches it, since it is no different to World of Warcraft credits.

Every Bitcoin entrepreneur is now seriously looking at incorporating in Hong Kong. And as far as they are concerned, the world in terms of internet access is perfectly level. It doesn’t matter where you incorporate; you can have full access to the worlds iPhone, iPad and desktop internet users no matter where you are incorporated.

For Britain, with its Silicon Roundabout tech scene the choice should be clear. A 150 year moratorium on any legislation that touches Bitcoin businesses. That means no regulation or special controls of any kind whatsoever. Bitcoin should not be regulated any more than Pokemon cards are regulated.

This is exactly what made Hong Kong the jewel that it is, and there is no reason why the new global Bitcoin economy should not be grounded in London.

A moratorium on Bitcoin legislation would cause the city of London to become “Bitcoin City”where trillions of dollars of transactions begin and end and are taxed. Remember, Bitcoin can flow between any device anywhere in the world to any merchant or person. In order for the fiat value of transactions to be taxed here, the companies managing the software must be based here.

It would be a great shame if the new tech revolution that is Bitcoin is seeded and grown elsewhere, and there are precedents for this. Skype was incorporate in Estonia, not the East End. All the big social media companies and search engine companies are in California, running on the rails of the web which is a British invention.

Britain will not get a second chance at this. It must be the most inviting jurisdiction in the world, or this country will miss another historic, once in a generation innovation wave.