All Posts in “Opinion”

Five Commandments For Those New To Bitcoin

Given the year Bitcoin has had, it’s no surprise there’s been a whole lot more interest since it first started. Eight years ago, no one even really knew what cryptocurrency was. You can’t avoid someone mentioning Bitcoin at the pub or dare we say it, your family’s annual Christmas BBQ.

So, if you’ve just decided to jump on the bitcoin bandwagon, welcome – it’s great you’ve finally seen the light. Now sit tight and pay attention before you pay to play.

‘Double GST’ No More

Many in the Australian digital currency ecosystem were pleasantly surprised when in this year’s Budget the Australian Treasurer announced an effective date for the removal of ‘double GST’ on digital currency transactions. Effective 1 July 2017, the purchase of digital currency will no longer be subject to Australian GST. In effect, this will result in digital currency being given the same GST treatment as money.

However, more importantly, this would make Australia only the second country (the first being Japan) in the world to make actual amendments to their tax laws to accommodate digital currencies.

The return of monetary politics

In March, the UK government formally announced plans to welcome and regulate digital currency activity in the UK. The promise of research funding, police training, and pragmatic regulation are welcome first steps, but to what end? The focus in this area tends to fall on questions of innovation, competition, crime, and jobs, but there may be something much broader at stake, namely the question of deciding what the money of tomorrow will look like.

Money at its core is a claim on resources, though we rarely see it in those terms. A pound coin or a twenty-pound note comes infused with notions of power, tradition, identity, and stability, and in the process its core function gets buried. Credit cards and bank accounts go some distance in stripping money back down to its bare functionality, but in a manner that complements rather than replaces existing ideas around money.

Community-issued digital currencies such as bitcoin are less accommodating, not least by their being ‘not backed by anything’. Each bitcoin is a numerical balance in a public ledger and nothing more: no gold reserve, no government pledge, no material referent of any kind, money flattened into a database.

The 2009 launch of bitcoin — an anonymous act of guerilla semiosis from one of the Internet’s darker corners — resulted in two interesting and opposing challenges to the imagination within its community of users. The first was that bitcoin itself was mystified, its digital tokens elevated with metaphors of gold, coinage, and mining, a public ledger praised as the biggest networking innovation since the Internet, and a compelling origin story with an enigmatic lead character. But in the process, for a substantial community of geeks and enthusiasts, ‘money’ more generally was de-mystified. The premise is simple: if money is just a database designed to manage claims on resources, surely there must be a smarter way to run that database? Suddenly every parameter is adjustable. That was not the case with precious metal or paper, the physicality of those forms of money making it easier to leave them unquestioned — this purple piece of paper is worth £20 the same way this pint of milk is worth 50p, nothing about either of these things prompts us to question the nature of value or ownership, it feels natural for something physical.

“…if money is just a database designed to manage claims on resources, surely there must be a smarter way to run that database?”

Once we are talking about tokens in a database the game changes entirely, because everything can be questioned. Consider the political tug-of-war that is the carbon credit system: How many carbon credits should we create? Who should get newly created credits? Should we let them expire? Or accumulate interest? Or maybe erode over time instead? Can a thing own a carbon credit? Once we make something materially fluid it becomes politically fluid as well.

Since Bretton Woods we have had a relatively rigid monetary order built on the US dollar as a global reserve currency, initially backed by gold, and later backed by little more than inertia. Over the last few decades the monetary space has largely been depoliticised — central banks have become largely autonomous, and governments have been stripped of their rights to influence money issuance or interest rates. Most of these changes were welcome, monetary policy remains arbitrary but at least decision making passed from election-focused politicians to a cadre of reassuringly boring technocrats.

The financial crisis prised the clamshell of monetary politics back open. There are two ways to increase the money supply: get banks to lend more (thus creating debt-based money) or issue new monetary tokens (aka ‘printing money’). As interest rates hit zero and post-crisis economies yearned for monetary stimulus, central banks found themselves contorting to do what was always presumed to be illegal — arbitrarily printing more money.

While the revival of central bank activism addresses the panicked and practical question — how can we stimulate the economy right now — the digital currency space has been gestating in the background, a political meditation on more fundamental questions around money, albeit now framed as a grand database that records our collective claims on resources.

When creating a claim on resources, who should initially get that claim? The monetarist consensus dictated that nobody had an unearned right to claim resources, and money created via the lending process should be sufficient. While largely successful, this also led to the systemically unstable link between money supply and debt levels. That bedrock of debt was a key ingredient in the financial crisis, and the quantitative easing which followed has left monetary consensus in tatters.

As a result, more heterodox solutions are rising to prominence. Neo-metallists (gold bugs) take the atavistic view that value is still something we dig out of the ground, while neo-chartalists (such as Positive Money) argue that money should be issued directly by an arm of the state. Both have seen a post-crisis resurgence. Meanwhile the bitcoin protocol awards newly created units of money to those who support its payment infrastructure, while other digital currencies have experimented with awarding newly created units to community members, a sponsoring organisation, renewable energy producers, or even forestry projects.

Token allocation is not the only big question posed by virtual currency schemes: should a new money system be managed by a central authority or a dispersed community? The former promises efficiency, the latter resilience and transparency. Is money a public good, infrastructure, or a competitive service? Should transactions be free? Or reversible? And what kinds of messages or programmatic functions should we allow people to latch on to their money?

But the greatest debate around digital money hinges on its relationship to identity and access, how do we find the balance between transparency and privacy? We can imagine two extremes — a perfectly anonymous digital cash system (still a largely theoretical proposition) — or a hyper-transparent social currency where all transactions, participants, and infrastructure are in the public domain. The challenge, as with all the other big questions, is finding where in the spectrum in between we want to land.

This article was originally posted on on 25 March 2015.

The best bitcoin I’ve ever spent

I’ve bought a lot of stuff with bitcoin. Coffee, groceries, clothes… all very necessary but also quite ordinary. Last week, I signed up for a membership at Hubud, a co-working space in Bali and I paid for it with bitcoin. It was honestly the best bitcoin purchase I’ve ever made.

Why? The membership was priced in $USD, but since I was paying with bitcoin, I didn’t need to bother with the conversion fees. It was also instant, so my spot was confirmed immediately, instead of having to wait 3 days for my money to go through. It was also just awesome using bitcoin in an international transfer, because it worked so smoothly.

But the real reason was because I was just so productive at Hubud. Remote work is something I’ve never done before, so I was a little skeptical of how much work I’d get done, but it was worth it. I’m no digital nomad, and I was only there for a week but the change of scenery is refreshing from the big city life.

Several others from the CoinJar Team have visited Hubud before and here’s our top 8 reasons why you should too.

Bamboo is commonly used in Bali for its strength and sustainability as a building material. It’s a nice touch.
  1. No shoes
    Before you even step into the co-working space, you’re invited to leave your shoes at the door. Even though this may make you a little uncomfortable at first, it does lend to the comfortable, warm and welcoming vibe Hubud has.
  2. Better for your health
    Bali is hot and humid, and Hubud is an open-air working space. If you’re accustomed to climate controlled offices, prepare to sweat and embrace the natural fresh air. It’s a good reset for the body. And when you just can’t hack it, there’s an air-conditioned room.
  3. Convenience food
    There is a healthy organic cafe in Hubud with a salad bar, juices, smoothies, desserts and coffee. When it’s right next to you and so well-priced, healthy food choices are that much easier to make. Bali is known for its raw vegan and natural food offerings, and the cafe is Hubud is no exception. I highly recommend the two litre bottle of watermelon and lime juice and the coconut bliss balls.
  4. Insane global networking
    The people in Hubud are truly one of a kind. From Silicon Valley to Berlin, the members are all passionate professionals working on interesting projects. There are freelancers, entrepreneurs, career-shifters, startup owners, creative professionals, NGO workers, writers… It’s a networking haven, without the pretentiousness and awkward moments.
  5. The vibe
    Bali is a spiritual place, whether you’re at a tourist attraction, in a shop or at a co-working space. The vibe is calm, peaceful and other-worldly. It takes about a day or two to adjust to it, but it is seriously relaxing and quiet. And the view’s not too bad either.
  6. Visit monkeys during your lunch break
    I am not kidding, I didn’t believe it myself. Hubud is right next to the Sacred Monkey Forest Sanctuary, a big hit with tourists. If anyone pesters you about going overseas to work remote, you can tell them you’re going to Bali to hang out with a bunch of monkeys.
  7. Perspective
    It’s travel, work and play all in one trip. Enough said.
  8. Hubud accepts bitcoin
    And it makes a lot of sense for them. In fact, during my visit, I met several business owners in Bali who were looking into accepting bitcoin. When I asked Hubud’s co-founders Peter and Steve about why they accept bitcoin, their answer makes it very clear why.

“Our members operate and work transnationally and any way that they can pay for things easily and with low/no fees is huge for them and therefore us! One of our members, Gary, started the Bitcoin movement in Bali and we host Bitcoin Filter meet-up every Tuesday at Hubud.”

The need for bitcoin is most prevalent to me when I travel. The fees I pay for my traditional banking cards are exorbitant and I wish I didn’t have to rely on something that’s failed me so many times before. Especially for an island like Bali that attracts thousands of tourists a month, bitcoin just makes sense. Use cases like Hubud are prime examples of how powerful a global currency with instant and practically free transactions can be.

Still don’t get it? Read more on how bitcoin will change the unbanked economies, paying with bitcoin and accepting bitcoin as a business.

The outdoor seating area faces rice paddies

Article by Zhoe Low— Communications Strategist at CoinJar. Tweet her @zhoelow

Photos by Carol Da Riva available here under a Creative Commons Attribution 2.0.