The bitcoin world this week learned its absentee father might be Craig Wright, an Australian entrepreneur with nice suits and well-combed hair who claims he invented the digital currency.
Wright’s appearance complicates an already vicious custody battle. His claimed brainchild bitcoin – long billed as the future ofdemocratized, digital money – is at the center of an ideological conflict over how to develop the technologies behind the system.
The value of a bitcoin has fluctuated wildly since 2009 but now hovers between $400 and $450. To spend it, users buy bitcoin and transact using a third-party app such as Coinbase. Rather than a central authority validating transactions, all transfers are recorded on a public ledger. It can be used to pay for coffee, dinner or software from online stores as well as some real-world shops.
Fans of bitcoin say the system, which tends to be a pet project of encryption wonks, could eventually rival Visa. Yet transactions are already taking longer to clear – sometimes more than 40 minutes, which is a long time if you’re in a grocery store waiting for your payment to process. And without agreement on how to resolve the problems, it might soon become hard for anyone to use the service. So what’s causing the problem?
Nerds are calling each other “nerds” behind each other’s backs. It’s a “big communications breakdown”, according to Eric Lombrozo, chief technology officer of the bitcoin transaction firm Ciphrex. On the other side of the fence, Peter Smith, whose firm Blockchain tries to help people pay with bitcoin at places like local coffee shops, says “religion does perhaps explain it well”.
Bitcoin made simple
It’s unclear if Wright declaring himself to be bitcoin’s mythical creator, Satoshi Nakamoto, will help resolve that process. Wright is on the side of people like Blockchain’s Smith, a former financial services consultant whose firm raised more than $30m in venture capital, has offices in London and New York, and counts Virgin’s Sir Richard Branson as an investor.
Smith won’t give his age, though his biography suggests he is in his early or mid-30s. He’s youthful, and his voice occasionally cracks when explaining the intricacies of virtual currency. On his Twitter page he describes himself as a “capitalist, explorer and coder”.
Naturally, Smith wants bitcoin to grow quickly – preferably very quickly, handling lots of transactions at the same time so it’s faster and more convenient for users to spend money, and so that his investors make a bigger, faster return on their investment.
Along with other bitcoin companies, Smith is trying to improve the process to handle more consecutive transactions to reduce delays and boost volume. This isn’t as simple as flipping a switch. Unlike Visa, bitcoin doesn’t have a central clearinghouse to process all transactions. Instead, each purchase and transfer is verified by one of thousands of computers on a volunteer network and bundled into a digital “block”. Each block of transactions is then recorded on a central ledger called the blockchain – the inspiration for the name of Smith’s firm.