TechCrunch is currently hosting its Disrupt NY 2014 conference, spiced up with a hackathon and an interesting ‘battle’ between 30 startups. Of course, no disruptive tech event would be complete without digital currencies, so TechCrunch obliged.
Ripple’s Susan Athey and Blockchain’s Peter Smith took to the stage at the event to share their thoughts on cryptocurrencies and the current state of bitcoin.
Media obsession
Athey cautioned against the media’s incessant focus on the bitcoin exchange rate.
“I think the focus on the exchange rate is a little overrated. I mean it’s fun to watch the price move around, but if I wanted to send funds to you, say, in Japan, I only care about the bitcoin exchange rate for about 10 minutes,” she said. “The level of the exchange rate is really irrelevant for its use as a transaction medium.”
We have heard similar statements from bitcoin execs in the past, but the focus is slowly shifting toward matters generally considered more important, such as VC-funding of bitcoin companies and the real-life applications of cryptocurrencies and block-chain technology.
Athey pointed out that even gold has a premium on top of its intrinsic value. As bitcoin has no intrinsic value, it’s value is solely premium, she said, explaining:
She further said there were some deviations from historical trends, but it is possible to imperfectly predict the value based on the transaction volume.
Exchange warning
Asked to comment on the demise of Mt. Gox and its effect on bitcoin, Peter Smith said the overall impact will be relatively small.
However, he also used Mt. Gox as a cautionary tale, as an example of why bitcoin startups should not centralize their operation – namely their bitcoin storage. Smith said Blockchain never takes possession of the funds, always keeps its software open source and works to decentralize trust rather than centralize it.
Smith explained that centralized exchanges are vulnerable and that almost all services that have ‘centralized trust’ have suffered significant security breaches and incurred losses, adding:
Smith went on to criticize the basic concept of centralising trust.
“I don’t think that business models that take away the core value proposition of the bitcoin protocol are a good idea,” he said.
The bottom line is, Smith believes startups that centralize trust are doing it wrong.
Images via TechCrunch