TL;DR Circle’s announcement this week that it will no longer offer users the ability to buy and sell bitcoin is not what it seems on the surface. (Read more in THE TAKEAWAY below.)
Taming smart contracts. Nick Szabo, the man credited with inventing smart contracts, was keynote speaker at an event this week in New York. He talked about how smart contracts complement rather than substitute traditional contracts. They have different characteristics and open up different opportunities, allowing us to create new types of relationships and to re-think how business works. Read more.
Poetic protocol. We take a deeper look at PoET, a new consensus algorithm developed by Intel and incorporated into its open-source Sawtooth platform. Some industry veterans see it as a significant improvement over other protocols, and like the flexibility that Sawtooth offers. Others point out that PoET is not ideal for what is supposed to be a trust-less system, given that it is designed to work with Intel-manufactured technology. Read more.
Smart contract conditions. In drawing up contracts, lawyers often rely on term sheets. In smart contracts, what can software developers rely on? A “smart term sheet”, of course. Where contracts rely on lawyers’ judgement to enact implementation, smart contracts need more specifics. So “smart term sheets” need to go deeper into detail on information sources, contingencies, etc. Read more.
Ethereum moves on. With recent hard forks now digested, the ethereum community is turning its focus to Metropolis, the next stage of the platform’s development. Expected sometime in the first half of 2017, it should offer new features and improvements over the current version Homestead. There are likely to be some disappointments as well, as proof-of-stake and sharding implementation may be a way off still. Read more..
Smart assets. Blockchain startup Chain gave CoinDesk a sneak peek at Ivy, its proprietary smart contract language this week. Given that smart contracts are receiving a lot of attention recently, it enters an increasingly crowded and scrutinized field. But according to the company, Ivy differs from other languages in that it focuses on financial digital assets and smart property, which could open up interesting use cases. Read more.
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"Okay, so the problem this whole time was that Bitcoin’s anonymous creator neglected to ask financial institutions what they wanted? Bitcoin was created as an alternative to banks, not a solution for them." - Elaine Ou, 'What Happened to the Financial Blockchain Revolution?', in Bloomberg
THE TAKEAWAY
Circle announced this week that it is closing down its bitcoin exchange. The mainstream press interpreted this “surprising move” as a pivot away from bitcoin, and another nail in the cryptocurrency’s coffin.
The reaction is understandable, given Circle’s significance in the bitcoin space.
But it is wrong, on many levels:
1) It is not a surprise.
2) Nor is it a pivot.
3) It is not a rejection of bitcoin.
4) Nor is it bad news for the sector.
Let’s go through these points in order, and then take a look at the trend this news highlights.
The move is not unexpected: Circle has for some time been signalling its intention to focus on payments. When the company’s first consumer products were revealed in March 2014, the emphasis was already on “deposits and withdrawals”, rather than “buy and sell”. As early as May 2014, the company was downplaying bitcoin, calling itself “an Internet-based consumer finance company”.
For the same reason, it’s not a pivot. It is true that the company was “born” on bitcoin, but even at the time of its launch in October 2013, CEO and co-founder Jeremy Allaire recognized that standards would evolve and that bitcoin might not end up being the main digital currency. In other words, even at the beginning, Circle was cryptocurrency agnostic, only at the time bitcoin was the only significant one around. In November 2014, Allaire told CoinDesk that the focus was less about bitcoin than about how people use money. The latest news is merely the confirmation of a strategy initiated some time ago.
Circle has not “pulled the plug” on bitcoin, as many have reported. Users can still store it in their Circle account and send it to others. Bitcoin will continue to be a settlement token and Spark, the new protocol unveiled this week, is partly based on the bitcoin system. What Circle has done is communicate a conviction that bitcoin will not be a significant form of payment in the near future.
Looking at the bigger picture, Circle’s decision highlights a quiet but fundamental trend: the focus on applications rather than mechanics.
While bitcoin, ethereum, Corda and many other protocols continue to make noise, the real action is happening elsewhere.
Startups like Circle are putting blockchain efficiencies directly in users’ hands. The technology is important, but users are generally more interested in what the protocols can do. The why has a potentially greater impact than the how, and appealing applications (rather than technicalities) will give blockchains the mainstream acceptance they need to kickstart widespread implementation.
So the main news in this development isn’t that Circle is stopping a service that was never a main feature. It’s that functionalities have improved, and more people than ever will have access to what this progress can offer.
I’m coming around to the idea that we must be in the trough of disillusionment. This week the mainstream press was yet again peppered with downbeat articles on the blockchain “revolution”.
Wired added to the “bitcoin = disappointment” trend by pointing out that it wasn’t going to become a mainstream currency any time soon. Bloomberg extended that disappointment to the blockchain’s impact on financial services.
But there was some uplifting talk of the positive effect of potential applications: TechCrunch published an interesting explanation of how the blockchain could help with cybersecurity, from prevention of data theft to an entire re-working of the DNS system. The FT took a romp through the tactile world of blockchain’s impact on cotton, pigs and supermarkets.
Forbes reported on the Trustech conference, which looked at the blockchain’s likely impact on payment technology (not exactly new). And Institutional Investor seems convinced that 2017 will be the year that banks embrace the technology. I guess it depends what you mean by “embrace”…
We've been hard at work gathering industry thought leaders for a special holiday gift to our readers.
CoinDesk's 2nd annual Year In Review will provide a deep dive into the state of the blockchain industry at the turn of yet another pivotal year, all from the perspectives of leading thinkers, builders and influencers.
The first post will be released on Tuesday 13th of December, and the series will run until January. No teasers as to what or who we’ll be starting with, you’ll have to live with the suspense. 😉
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