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CoinSummit San Francisco, Day 2

CoinSummit is hosting a Bitcoin conference. Fast Company's Alice Truong will report live from the second day of the conference on Wednesday, March 26th.

Virtual currency Bitcoin has seen its share of ups and downs. After soaring past $1,000 a Bitcoin in the fall, the digital currency has dropped in value to less than $600--and its price keeps fluctuating.

Part of the reason for this fluctuation is that hackers are targeting Bitcoin exchanges, and their attacks have rattled consumer confidence. Japan-based Mt. Gox, which was the largest exchange until it declared bankruptcy in February, was brought to its knees after a heist involving 750,000 Bitcoins went unnoticed for years. 

All the while, a number of businesses have come to embrace the virtual currency, one of the most visible being, which recently saw $126,000 in Bitcoin sales in one day.

To help people better understand the virtual currency landscape, CoinSummit is hosting a Bitcoin conference at the Yerba Buena Center for the Arts in San Francisco, from which Fast Company's Alice Truong will post updates on Wednesday, March 26th. Stay tuned!

  • Day 2 of the CoinSummit kicks off with the panel Is Bitcoin a flash in the pan?
    From left: Andreas Antonopoulos, chief security officer of BlockchainJonathan Levin of Coinometrics; Susan Athey, a professor at Stanford; and moderator Nathaniel Popper from The New York Times

  • Panel 2: Bitcoin exchanges post Mt Gox-a new era
    From left: Jesse Powell, Payward founder and CEO; Bobby Lee, CEO of BTC China; moderator Steven Waterhouse of Pantera Capital Management

  • For a fireside chat moderated by Bloomberg's Brad Stone, right, Chamath Palihapitiya of the Social+Capital Partnership says he believes everyone should hold at least 1% of their assets in Bitcoin for investment purposes.

  • Remember when Warren Buffett told CNBC viewers to stay away from Bitcoin because the virtual currency lacks intrinsic value? Well, Blockchain's chief security officer Andreas Antonopoulos has this to say:

    "Dollars aren't backed by anything, and they don't have intrinsic value," Antonopoulos said from the second day of the CoinSummit conference in San Francisco. Instead, he said he considered the U.S. dollar a "Ponzi scheme fueled by the Fed--that's really risky. I'd rather put my money in Bitcoin instead."

    A crowd favorite at the virtual currency conference, Antonopoulos can at times come off as poetic when discussing Bitcoin. "Currency at its most basic level is a language that is used to communicate transfer of value," he says. "User adoption is what gives a currency value."

    Though regulation of the digital currency has been a popular topic among conference goers, he hasn't been shy about his views. 

    "We don't know what regulators will be asking for, but I know my answer: no."
  • Bobby Lee, CEO of the Bitcoin exchange BTC China, wants to clear up the confusion: "For those of you who think Bitcoin is illegal in China, you've got it totally wrong. Blame the media."

    Thus far, he says the country has classified Bitcoin as a virtual commodity, not as a currency. That means residents can buy and trade the digital currency, but don't expect any Bitcoin loans, insurance, or other types of financial products anytime soon.

    Lee says Bitcoin regulation isn't on the list of priorities for China this year, and that the country is "mentally deferring to the United States," looking to it for guidance as it determines how to broach this new form of currency.

    "Once the U.S. actually goes through with the process of stating how Bitcoin will be regulated in more clear terms, that's when many countries will follow," he says.

  • Next panel up on stage: Altcoins—a fad or here to stay? From left: Charlie Lee, creator of Litecoin; Paul Vernon, CEO of alternative currency exchange Cryptsy; Jackson Palmer, creator of Dogecoin; and moderator Michael Terpin of SocialRadius
  • Some retailers have reported seeing spikes in sales once they began accepting Bitcoin, but according to some exchanges, it appears most people are treating the virtual currency as an investment vehicle.

    For the digital currency exchange Krakentrading volume indicates more people are investing--rather than spending--their Bitcoins, says Jesse Powell, CEO and founder of Payward. The company announced Tuesday it has raised $5 million in a series A round for Kraken, which in addition to Bitcoin also trades alternative currencies Ripple, Litecoin, Namecoin, Dogecoin, and Ven.

    In China, it's a similar story. "Bitcoin as a payment mechanism has not taken off yet, so all the trading volume of Bitcoin--the vast majority is in investment and speculation," says Bobby Lee, CEO of the Bitcoin exchange BTC China.

    Creator of alternative currency Dogecoin, Jackson Palmer believes the success of virtual currencies is based on its use. "It's all about active use," he says. "The digital currency that's going to win is the one that's going to be used."

    Though China classifies Bitcoin as a virtual commodity and not as a currency, Lee says he sees a future where exchanges or third parties will offer margins trading, leverage trading, credit lines, options, futures, and other financial products built on Bitcoin. 

    Steven Waterhouse of Pantera Capital Management said the virtual currency will enter the financial mainstream once Bloomberg terminals begin integrating Bitcoin charts and data. "Once Bloomberg publishes prices on Bitcoin and other digital currencies, that will enable a whole new class of users to get involved," he said, urging conference goers to lobby their Bloomberg sales representatives. "They're very driven by their clients' demands."
  • Image via Know Your Meme
    Bitcoin has earned a reputation as the currency of choice for drug dealers, money launderers, and anarchists. But that's not the case across the board for all virtual currencies. Just look at Dogecoin. 

    Built atop the Doge meme, an expressive Shiba Inu with entertaining monologues, Dogecoin is a friendlier, fuzzier digital currency that women and millennials have come to embrace. 

    "We have a lot more women in Dogecoin" compared with Bitcoin's core demographic of men, Dogecoin's creator Jackson Palmer said at the CoinSummit conference. "We also have a younger and more social media-aware demographic as well."

    Palmer, who works full time as a marketer at Adobe, said the currency is attracting a different subset because of Dogecoin's adorable mascot. "50% or more [of Dogecoin users] have had no prior experience with cryptocurrency," he say, adding Dogecoin "is more approachable" because people recognize the meme from their Facebook and Twitter feeds.

  • Next panel: Bitcoin for the masses - how to get Bitcoin in the hands of millions of people

    From left: Brock Pierce of Clearstone Venture Partners, Zach Harvey of Lamassu, Alan Safahi of ZipZap, and moderator David Lee of SV Angel
  • Did anyone at #coinsummit make it rain yet ?
  • Bitcoin has certainly been the focus of CoinSummit, but people can't help but talk about Dogecoin, the virtual currency that's gained a following among women with its adorable meme mascot. Throughout the second day of this conference, panelists have mentioned Dogecoin a number of times in passing, and the digital currency became the highlight of a talk about altcoins.

    Adding to the discussion, Josh Mohland highlighted the progress of Dogetipbot, a tool he created that allows Reddit users to donate Dogecoins to their fellow comrades. (Dogetipbot came as a reaction to Bitcointip, which as its name suggests allows Reddit users to send tips in Bitcoins.)

    "For those of you who don't know, we let you throw change at people on the Internet," Mohland said as he presented his deck, which in true Doge fashion was done almost entirely in the font Comic Sans.

    Image: Josh Mohland 

    Though Bitcoin is the most popular digital currency, Reddit users have taken to Dogetipbot in far greater numbers than Bitcointip. The former has 49,150 users compared with 14,866 on Bitcointip.

    In three months alone, Mohland said the community has donated more than $68,000--more than the amount given via Bitcointip over a year.

    On average, Dogecoin tips are worth about a quarter, far smaller than the Bitcointip's $6.95 average. However, 262,138 Dogecoin tips have been left on the Web in three months, compared with 9,418 Bitcoin tips over a year.

    "We also have a business model, which surprises people," Mohland said. Though he didn't reveal many details about how he plans to monetize this endeavor, he said Dogetipbot will not take a cut from its tips. 

    He also has expansion plans for Dogetipbot. "We're only on Reddit at the moment, but that's changing very soon," he added.
  • Now discussing Bitcoin security standards in a post-Mt. Gox world.

    From left: Will O'Brien of BitGo, angel investor Trace Mayer, Anthony Di Lori of Kryptokit, and moderator Steve Waterhouse of Pantera Capital Management

  • "If you're looking for something to steal, bitcoin is a great prize, so it's attracting hackers." - Trace Mayer #coinsummit
  • Image: Lamassu 
    The majority of Americans still don't know
    what the heck Bitcoin is,
    but that could change if there are more ATMs that allow people to physically interact with their digital money.

    "I think the Bitcoin ATM deployment taking off right now could be an important feature in making Bitcoin more physical, more visible, more real to people," said Garrick Hileman, an economic historian at the London School of Economics, in a talk about the state of Bitcoin.

    The Bitcoin Machine, made by Portuguese company Lamassu, lets people convert cash in their local currencies into Bitcoin without having to deal with an online exchange. As it stands, Bitcoin "is difficult to use," said Lamassu CEO Zach Harvey. "That's why it's going to take a little bit longer for a random person off the street to use Bitcoin."

    Given the nature of these ATMs, the company designed its machines for people interacting with Bitcoin for the first time. "We try to make the machine as shiny and sexy as possible, so people ask, 'What is this?'" said Harvey.

    That being said, deploying these machines has proven to be difficult in the U.S.--not the case in the rest of the world. Lamassu has shipped ATMs to five continents, and its biggest market is Canada, though it's seeing growth in Australia, Europe, and Asia. "The only market we treat differently is the U.S. market, and we want to be extra careful," Harvey said. "Everywhere else in the world, it's open. You can buy the machine, and we send it to you.

    Regulation and paperwork has slowed Lamassu's adoption in the U.S. As a result, some machines in the U.S. that were ordered half a year ago still aren't operationally ready, he said. Furthermore, one American customer who ordered 10 machines after trying one out is facing delays. "You've got to go through so many extra hoops and pay a lot more for legal counsel," he said.

  • Last panel of the conference: What are the barriers for merchant and consumer adoption of Bitcoin? From left: Tom Longson of Gogocoin, Vinny Lingham of Gyft, and moderator Luke Sully of PricewaterhouseCoopers 

    Overstock is the exception.
    Most merchants are still wary of accepting Bitcoin.

    "Most retailers don't care," said Vinny Lingham, CEO and founder of Gyft, an online gift card service. "The volume is just not big enough."

    This statement echoes earlier sentiments made by the leaders of virtual currency exchanges Kraken and BTC China about how Bitcoin is primarily bought and sold for investment and speculative purposes--not for everyday transactions.

    Linghan said media reports fheighten fears of the currency's fluctuations. For "people trying to use Bitcoin in their daily transactions--if they can get their hands on it--the volatility is a problem."

    However, he isn't in a rush to push Bitcoin to the mainstream. Instead, he hopes more investors hold onto Bitcoins long term to stabilize its price.

  • Garrick Hileman, an economic historian at the London School of Economics

    In his talk giving an overview of the state of Bitcoin, Garrick Hileman, an economic historian at the London School of Economics said Bitcoin has experienced the largest annual asset price appreciation in history, skyrocketing 56 times its value throughout 2013 and 84,066% over two years.

    Referencing the State of Bitcoin report from CoinDesk, where he is a writer, he said the U.S. is responsible for two-thirds of all Bitcoin investments, and about two-thirds of Bitcoin companies are based outside the country. All in all, the market cap for Bitcoin-related companies is $314 billion.

    Thus far into 2014, VC money invested in Bitcoin companies have totaled $18 million. At that rate, he said the investment dollars will reach $112 million this year. In comparison, $77.5 million was invested in Bitcoin companies last year.

    As much as Bitcoin enthusiasts like to blame the media for its price fluctations, charts from CoinDesk show there is a strong relationship between the two. (You're welcome, and sorry.)

  • It's been a packed day at CoinSummit. To wrap up the conference, I decided to round up some of my favorite quotes from today's panels.
    • Arguably one of the best jokes about Bitcoin (ever?) came from angel investor Trace Mayer: "You know what a Dorian is? It's an unconfirmed Satoshi," he said, poking fun of Newsweek's cover story about Bitcoin's supposed creator. For those wondering, a Satoshi is 0.00000001 Bitcoin, the smallest unit that can be sent.
    • As context for Mt. Gox's security lapse, BitGo CEO Will O'Brien reminded the audience of its humble roots. "Let's remember that Mt. Gox stands for Magic the Gathering Online Exchange."
    • In a fiery remark, Blockchain's chief security officer Andreas Antonopoulos called the U.S. dollar a "Ponzi scheme fueled by the Fed--that's really risky," he said. "I'd rather put my money in Bitcoin instead."
    • But there's no downplaying Bitcoin's security risk. "If you're looking for something to steal, bitcoin is a great prize, so it's attracting hackers," said angel investor Trace Mayer.
    • Charlie Lee, who created the alternative currency Litecoin ("the silver to Bitcoin's gold"), laid out the loose relationships between some of these virtual coins: "If you think about it, Bitcoin is the dad, Litecoin is the mom, and Dogecoin is the dog of the family."
    • For Jackson Palmer, who created Dogecoin, "one Doge equals one Doge." He said "our goal isn't to drive $1,000 [a Dogecoin], it's to encourage active use."
    • Palmer also prided himself in Dogecoin's unusual base. "We have a lot more women in Dogecoin [compared with Bitcoin]--yay. We also have a younger and more social media-aware demographic as well," he said. "When we hosted the Dogeparty in New York City, there was actually a bunch of younger kids there. ... We had a dance off. It was awesome."
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