Bitcoin raises its profile but investors demand more

Impatient backers want virtual currency to grow into viable payment network

Jon Matonis: [Running the foundation is like] “going downhill in a go-cart trying to keep the wheels on.” Photograph: Chris Ratcliffe/Bloomberg

Jon Matonis: [Running the foundation is like] “going downhill in a go-cart trying to keep the wheels on.” Photograph: Chris Ratcliffe/Bloomberg

Mon, Aug 4, 2014, 01:20

The Bitcoin Foundation’s executive director, Jon Matonis, travels the world to promote the virtual currency as a replacement for traditional money. Some of his members want him to focus on a less lofty goal: helping them make lots of old-fashioned cash.

Matonis, a longtime advocate of what he calls “non- political money”, has built the group into a kind of a bitcoin governing body. Last week, he unveiled a website aimed at raising the virtual currency’s public profile. Some foundation members are dismayed by Matonis’ leadership and grander plans.

Investors from Silicon Valley, in particular, would like the group to focus on more technical matters, particularly fortifying the underlying bitcoin software so it can grow into a viable, large-scale payment network.

Running the foundation is like “going downhill in a go- cart trying to keep the wheels on,” Matonis said. “There are different constituencies going in different directions.”

Venture capitalists and entrepreneurs, lured by the technology’s promise, have ploughed time and money into bitcoin businesses – and they’re demanding software upgrades to develop the digital currency’s commercial potential.

“The impact of the bitcoin protocol is economic,” Jeremy Allaire, chief executive of Circle Internet Financial, a bitcoin start-up. “These are higher stakes than with other open-source software.”

The organisation, established in 2012 and modelled on the Linux Foundation, the open-source operating system created in the early 1990s, has tried to mix stewardship of the code with political advocacy.

Digital assets

Unlike Linux, bitcoin rapidly became a channel for billions of dollars in transactions, making security and capacity bottom-line issues for entrepreneurs.

Matonis said that pressure to invest more in bitcoin’s computer code reflects a “fight over who controls the policy dialogue”, and whether the group will continue to fund lobbying. “Tech investors want to make sure that all the resources in the world are there on the tech side,” he said.

Bitcoins are part of a software system that transfers digital assets from owner to owner without using a third party. Start-ups are seeking to use the innovation to disrupt the existing payment system dominated by firms such as JPMorgan Chase, Visa and Western Union.

The core software managed by the foundation contains instructions that let computers communicate with one another to verify transactions on bitcoin’s public ledger, called the blockchain.

Another program enables users to conduct those transactions. Software upgrades are made through an informal system of mostly part- time developers who communicate in internet chat rooms.

Gavin Andresen, the foundation’s chief scientist, was until May the only paid coder working on bitcoin. Online discussions sometimes devolve into virtual shouting matches, according to Andresen.

This year, the bitcoin network processed between $20 million and $580 million per day in transactions, according to the data aggregated on blockchain.info.

“This is not sustainable,” said Mike Hearn, one of bitcoin’s core developers. “You can’t have an infrastructure held together by chewing gum and sticky tape and people who work evenings and weekends.”

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