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Bitcoin developer talks regulation, open source and the elusive Satoshi Nakamoto

James Niccolai | May 20, 2013
Jeff Garzik says the Bitcoin creator was a brilliant architect and economist but that his coding left a bit do be desired.

IDGNS: But they're trading in the meantime anyway?

JG: Some of the exchanges are going after only accredited investors, which is a legal slot you can fit into. [Accredited investors include registered investment companies and individuals whose net worth exceeds $1 million]. Other exchanges go for one or two states, they say we'll register with the feds, which is easy, and then get licenses in, say, California and New York and serve those customers.

IDGNS: Some people are put off Bitcoin by the price fluctuations, how do you see that playing out?

JG: It's definitely an issue, but to make a plug for my new employer, Bitpay lets people pay with bitcoins and then merchants receive U.S. dollars, so that removes the volatility for merchants. For individuals, I think it's going to be volatile for another year or two, simply because, mathematically, it's a thinly traded market.

IDGNS: Meaning there aren't enough bitcoins relative to the number of people wanting to trade them?

JG: Correct. If a hedge fund trader has a million dollars and wants to make a big Bitcoin buy, Bitcoin's going to go through the roof. If he sells the coins the next day, it goes through the floor. It behaves the same way as a Nasdaq penny stock, because there's a limited number of liquid tradeable bitcoins on the market.

IDGNS: Wasn't that avoidable? Why do we have this system where new bitcoins are released gradually over time?

JG: That's essentially modelled after natural resource extraction, gold mining and coal mining. Initially there's a whole lot, but every year you mine, there's less and less new gold introduced and the market slowly adjusts. If you released all 21 million bitcoins at once it would be even more volatile. It's an important part of the predictability of Bitcoin and where a lot of its value comes from.

IDGNS: The government has started to act, will it try to will regulate Bitcoin out of existence, at least in the U.S.?

JG: I don't think so. There are a lot of Bitcoin businesses springing up, as you can see around here, also the FinCEN guidance from a few months ago indicated they're treating it, as we predicted, as a private currency. Long before computers existed, private currencies existed and the laws around that are pretty well known.

IDGNS: As opposed to a national currency?

JG: Yes, it falls into the category of private currency, just as my bank could create its own currency if it wanted to, that's legal.

IDGNS: So it's illegal to destroy U.S. currency but it's not illegal to create your own?

JG: Exactly. There was a case with the Liberty Dollar, where a gentleman tried to make coins that actually looked like U.S. currency. The FBI and the federal government shut him down. But we're not pretending this is U.S. dollars, there's no confusion.


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