It’s been four years since the launch of bitcoin and not a day goes by that crypto-currency is not mentioned in the tech press. The buzz has gone so mainstream that I regularly field questions about bitcoin from the most non-technical people in my life, many of whom heard about it on TV or read about it in mass media. Given this, it’s hard to imagine that just two years ago Eric Schmidt, who was at the time the CEO of Google (he is currently the Executive Chairman), was barely aware of bitcoin.
More fascinating than the rapid rise in bitcoin awareness, is the way in which Schmidt first discussed the virtual currency. The scene was a rural UK home where Schmidt conducted a “secret five hour meeting” with embattled Wikileaks creator Julian Assange, who was at the time under house arrest. The meeting, which took place on June 23, 2011, was convened at Schmidt’s requests with the goal of discussing ideas for his forthcoming book, “The New Digital Age.” Schmidt’s co-author, Jared Cohen, a former Secretary of State advisor to Hillary Clinton, was also in attendance.
The meeting covered a number of topics, but included a lengthy discussion about bitcoin, the use of which was then still confined mostly to what Assange describes as cypherpunks. Assange proves himself to be highly technical in the meeting, often seemingly dumbing down the conversation either for Schmidt and Cohen’s benefit (unlikely) or for the benefit of the “unknown audience” who would presumably hear the recording one day.
During the discussion, Assange demonstrated that he was an early believer in the promise of bitcoin, saying:
It has a few problems. But its innovations exceed its problems. Now there has been innovations along these lines in many different paths of digital currencies, anonymous, untraceable etc. People have been experimenting with over the past 20 years. The Bitcoin actually has the balance and incentives right, and that is why it is starting to take off.
He also seemingly predicted a rapid rise in bitcoin value due to an imbalance in supply and demand – something that has occurred in a big way over the last 12 months as bitcoin skyrocketed from $12 on January 1 to over $1,200 at its all-time high in November. Assange says:
Scarcity will go up as time goes by, and what does that mean for incentives in going into the Bitcoin system. That means that you should get into the Bitcoin system now. Early. You should be an early adopter. Because your Bitcoins are going to be worth a lot of money one day.
Over the last year, many of the cryptographic innovations achieved by the creators of bitcoin have been adopted by other altcoin systems, including using the protocol for purposes other than payments. Examples include Namecoin, which functions as a peer-to-peer domain name system (DNS) and BitChat which uses the protocol as a secure messaging client. Assange appears to have predicted such alternative use cases in 2011, saying:
Once you have a system of currency that is easy to use like that, then you can start to use it for things that you want to be scarce. What is the example of some things that we want to be scarce? Well, domain names. Names. We want names to be scarce. We want short names to be scarce, otherwise if they are not scarce, if it doesn’t take work to get them, as soon as you have a nice naming system, some arsehole is going to come along and register every short name themselves.
He continued by describing a form of censorship-resistant publishing that would be particularly valuable to organizations like Wikileaks.
So that, in theory, then permits human beings to build up an intellectual scaffold where every citation, every reference to some other part of human intellectual content, is precise, and can be discovered if it exists out there anywhere at all, and is not dependent on any particular organization. So as a way of publishing this seems to be the most censorship resistant manner of publishing possible, because it is not dependent on any particular mechanism of publishing.
Schmidt for his part seems to grok the value of bitcoin and its possibilities. That said, he wasn’t immediately convinced of its viability as a mainstream tool. Schmidt’s biggest concern relates to the potential vulnerability of bitcoin’s irrevocable key structure, otherwise known as public wallet addresses and private wallet keys. Schmidt asks Assange:
Are you worried.., basically this entire system depends on basically irrevocable key structures. Are you worried that the key structures would fall apart?
Assange’s acknowledges that this is an issue, saying:
Bitcoin has its own key structure and that’s an independent thing, there is all sorts of problems with it. Hackers can come in and steal keys etc. And the same problems that you have with cash. Armored vans are needed to protect the cash etc. And there are some enhancements you can use to try and remove the incentives one way or another…
The public key structure is a tremendous problem, so in the same way that domain name structures are a tremendous problem. The browser based public key system that we have for authenticating what websites you are going to, it is awful. It is truly awful. The number of people that have been licensed to mint keys is so tremendous.. there’s one got bankrupted and got bought up cheaply by Russian companies.
At this point the conversation changes gears to the impact of mobile phones and their power to change society. The meeting provides a fascinating glimpse into the minds of two men who, while dramatically different, share a similar intellectual curiosity around bitcoin and its potential impact on society.
The bitcoin ecosystem has come a long way since the summer of 2011, but many of the strengths and weaknesses of the protocol expressed by Assange and Schmidt remain the same today.
One of the most fascinating unanswered questions is whether Assange or the Wikileaks organization, both of which have faced dire financial straits in the last two years, followed Assange’s advice and bet big on bitcoin early. If so, it could end up being one of the best as yet untold stories in the short history of bitcoin.
[Image via WikiCommons]