Just how far has Bitcoin come in the past year? Mainstream media has been heralding virtual currencies as the next most important factor in the global financial and technological worlds, clearly giving the impression that it has shaken off its maverick image, and the associated risks.
When MtGox failed, it called into question the security of the Bitcoin storage ecosystem, spurred a plethora of venture capital backed initiatives to shore up the method by which Bitcoin is stored, with firms receiving vast investments from large, well known venture capital funds.
A remarkable occurrence then followed. Californian Bitcoin exchange Kraken announced that it has been selected to support the investigation of missing bitcoin and the distribution of remaining assets to the creditors. This decision comes after an extensive evaluation process where multiple companies were considered and thoroughly vetted.
That was in November last year. Just this month, Kraken was selected by MtGox bankruptcy trustee to offer a facility within which bankruptcy claims can be filed with relation to MtGox, in order that distributions could be received in Bitcoin via Kraken.
LeapRate spoke to Jesse Powell, CEO of Kraken, in order to gain his perspective on Bitcoin security and where the digital currency industry is going from here.
Bitcoin exchanges have gone full circle since last year, from the high risks posed by MtGox which was the focus of fringe investors and mavericks, to the fully regulated, VC backed, highly secure entities of today. What brought about such a rapid change?
How, in what sense, was MtGox the focus of fringe investors and mavericks? Which exchanges are fully regulated (licensed)? How would we know whether an exchange is highly secure? Bitstamp was just hacked and other exchanges have not performed audits. I don’t agree that there has been a rapid change.
Kraken’s initiatives to assist MtGox customers are interesting; can you give more insights on why you got involved and what Kraken’s role is?
We felt that the situation getting resolved professionally and quickly was important to the Bitcoin community, and important to outside observers in reestablishing trust.
The Bitcoinica bankruptcy is still ongoing and the trustee in that case had somehow managed to leave the Bitcoinica creditors’ bitcoin on MtGox for safe keeping. Now the Bitcoinica victims have lost their money twice. It’s clear that disaster can and will strike without an informed guide assisting in the process.
What are your views on Bitcoin exchanges that are bootstrapped operations compared to those with vast venture capital investments from large institutions behind them?
Bootstrapped firms are obviously at a great disadvantage. It’s very expensive building and running a secure, compliant bitcoin exchange. That said, some firms that have raised a lot of money are still operating illegally, and have been hacked.
Some firms that appear to have been bootstrapped, have had better success in the market than those that have received VC funding. As a consumer, I would take some comfort in knowing that my exchange has undergone some level of due diligence through a professional investor.
What do you consider to be the single most important technological breakthrough that turned Bitcoin around with regulatory and investor approval?
I don’t know of any enabling regulation that has emerged. Do you mean investor financing? I would love to see governments adopt the blockchain for tracking property ownership, eliminating the need for title insurance.
Is it viable for blockchain to become a mainstream part of the financial markets economy globally?
Will commodities and securities be traded on the blockchain?
Yes, I’m sure that will eventually happen.
Will bitcoin become a highly liquid global currency?
Yes, I believe that will happen as well.
Has Bitcoin transformed from the preserve of the mavericks and anarchists into a truly modern instrument with quality infrastructure that can really become a global commercial currency?
The potential to become a global commercial currency exists but it’s still very early days. Tools are being developed to make using Bitcoin easier, and we’re making progress, but we’ve still got a long road ahead of us before we see mass adoption.
What benefit will Kraken gain by taking on the distributions on behalf of MtGox?
If Kraken does a good job of it, we stand to gain the trust of the community and new clients.
Do you see this year as a period of rapid global expansion of Bitcoin into the mainstream, and how will Kraken be a major part of this?
No. I am not aware of any major initiatives that would take Bitcoin in to the mainstream this year. Kraken will continue to support the ecosystem by putting our clients first and providing the best exchange experience