Spain turns to Bitcoin, prompting incoherent discussion on Today

There are problems with the currency. But not those problems.

Wired's Ian Steadman reported yesterday about the surge in downloads of Bitcoin apps in Spain, noting that:

Three iOS apps – Bitcoin Gold, Bitcoin Ticker and Bitcoin App – each jumped up the App Store charts in Spain, all on the same day, as the news broke from Cyprus. Compare their download histories to those from a country like the UK and it's clear that the upward trend is more pronounced in the more at-risk nation. Bitcoin Gold's all-time high ranking of 83 in Spain came on 17 March; for Bitcoin Ticker, 68 on 17 March; Bitcoin App reached a high of 147 on 19 March. The highest rankings for those apps in the UK are lower – 293, 201 and 48 –and they were all records set months or even years ago.

That surge has been noticed by others, too – including Radio 4's Today Programme, which had a little interview with an economist about the fledgling currency. Sadly, they didn't really do themselves proud. A choice excerpt:

INTERVIEWER: A currency supply has to be limited, otherwise it can be devalued and copied. Who limits it? Who controls it, if there's no central bank?

INTERVIEWEE: Well, it's all controLled by users of the bitcoin community, and that's the reason why it has become so popular in recent years.

INTERVIEWER: What, they're all unbelievably virtuous, they all control it? What's the mechanism?

INTERVIEWEE: Any currency, and any asset class, is basically predicated on trust. We trust the central bank, we have full faith in credit, so we go into a shop and we trust that our £20 note is freely exchangeable for £20 of goods.

Now, heaven knows I'm not the biggest fan of the digital currency, but this is doing it an enormous disservice.

The reason why gets a bit technical, but if you want to know more about the currency, it's worth learning how it works. If not, skip the next five paragraphs.

The heart of bitcoin is based on something called public-key cryptography. This technique – used throughout the web, whenever security is needed – uses very large prime numbers to create a form of encryption where the key used to lock data is different from, but related to, the key used to unlock it. What that means is that you can send copies of the first key far and wide, and so long as you keep the second key hidden, other people can encrypt information which only you can then decrypt.

But there's a second thing the technology allows. If you use your private key to lock the data, then anyone can unlock it with your – and only your – public key. That lets you sign messages in a way which, so long as people are certain that it really is your public key they have, proves it was you who wrote it.

A bitcoin is, in its purest form, a list of past transactions signed with private keys and verified with public keys. So long as you keep your private key secret, it is impossible for other people to "spend" bitcoins which the network knows are held by you, because those transactions wouldn't be accepted.

It bitcoin were a centralised currency, that would be that. But it's decentralised, and that means that there's a second problem to overcome. I could send one bitcoin to Alice with her key added to the end, and the same bitcoin to Bob with his added on. Until the two of them spoke, they wouldn't know who had the "real" coin and who had the fake one.

The way bitcoin solves this is the really clever part of the whole thing. All transactions are broadcast throughout the network, and then certain computers – called "miners", analogously to gold – work to group them into a timestamped block every ten minutes. Multiple computers do this at once, because the calculations required to make a new block are, deliberately, very difficult. Honesty is therefore enforced by the fact that the easiest group to co-ordinate is the one telling the truth about which transactions came first.

OK, back to the non-tech stuff. How is this linked to inflation? Well, if your computer is the one which solves the puzzle and makes the block, you get some free bitcoins. Currently, it's 25 every block, but that number halves every four years until it drops to 0.00 in the year 2140.

And that's it. That's the only way new coins are created, and there's just over 1.25 million made each year. So there's nothing to do with "trust" in the whole system: low inflation is inherent to the entire idea. In fact, that's actually one of the things used to attack bitcoin; orthodox economics holds that a low level of inflation is good, because it encourages people to spend rather than horde. If there was a bitcoin economy the size of a nation, it would be in a permanent state of recession, and there would be no possiblity of monetary policy saving the day.

The worst thing is, the interviewee apparently knew this, because later on in the segment, he said:

They're so popular because they offer a little bit of something new, a little bit of security, an anti-inflation side of things, as well, because they've built something into the trading algorithm which means that it actually deflates over the cause of the lifetime.

Bitcoin might or might not work as a currency – you can tell what side I come on – but if Today is going to cover it, they ought to cover it well.

Of course, none of what Today actually discussed helps address the real question: are the panicky Spanish savers doing the smart thing by moving their money into bitcoin? (That's assuming they actually are; as Steadman points out, iOS is small fry in Spain, and three apps increasing their sales figures does not an exodus make.) It depends what they are fleeing.

If the fear is that the Spanish banks might implement a Cypriot-style deposit tax, then bitcoin would help. As a potentially anonymous currency, it's a tax avoider's – and tax evader's – dream, but only insofar as taking money out of the bank and keeping it in cash under the bed is. You can keep your money hidden from the tax man, but when you come to spend it, you're going to raise questions. In fact, the whole thing comes back full circle, because with Cyprus on lock-down, money laundering got a bit harder to do.

If your fear instead is Spain exiting the euro and devaluing, then bitcoin is a slightly better choice – but again, only so good as holding your money in dollars in a safe. But the exchange rate matters here. If I'm right, it's actually considerably worse than holding dollars in a safe. The bubble will burst, the exchange rate will plummet, and your bitcoins, measured in a currency you can actually use to buy food in, will lose all their value.

If I'm wrong, and the 100 per cent month-on-month increase continues, or even just levels off, then moving all your money into it could leave you rich. Who knows? That's the gamble you're taking

But fundamentally, the reason for switching to bitcoin from any other currency is that you have lost trust in the very concept of governments looking after money. If you are sitting in the eurozone at the moment, that might be an understandable belief. But I still have very little hope that switching from a currency with bad monetary policy to a currency where monetary policy is deliberately impossible will help matters to any great deal.

Spaincoin! Bitspain? Spitcoin. Image: Wikimedia Commons/Alex Hern

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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The most terrifying thing about Donald Trump's speech? What he didn't say

No politician uses official speeches to put across their most controversial ideas. But Donald Trump's are not hard to find. 

As Donald Trump took the podium on a cold Washington day to deliver his inauguration speech, the world held its breath. Viewers hunched over televisions or internet streaming services watched Trump mouth “thank you” to the camera, no doubt wondering how he could possibly live up to his deranged late-night Twitter persona. In newsrooms across America, reporters unsure when they might next get access to a president who seems to delight in denying them the right to ask questions got ready to parse his words for any clue as to what was to come. Some, deciding they couldn’t bear to watch, studiously busied themselves with other things.

But when the moment came, Trump’s speech was uncharacteristically professional – at least compared to his previous performances. The fractured, repetitive grammar that marks many of his off-the-cuff statements was missing, and so, too, were most of his most controversial policy ideas.

Trump told the crowd that his presidency would “determine the course of America, and the world, for many, many years to come” before expressing his gratefulness to President Barack Obama and Michelle Obama for their “gracious aid” during the transition. “They have been magnificent," Trump said, before leading applause of thanks from the crowd.

If this opening was innocent enough, however, it all changed in the next breath. The new president moved quickly to the “historic movement”, “the likes of which the world has never seen before”, that elected him President. Following the small-state rhetoric of his campaign, Trump promised to take power from the “establishment” and restore it to the American people. “This moment," he told them, “Is your moment. It belongs to you.”

A good deal of the speech was given over to re-iterating his nationalist positions while also making repeated references to the key issues – “Islamic terrorism” and families – that remain points of commonality within the fractured Republican GOP.

The loss of business to overseas producers was blamed for “destroying our jobs”. “Protection," Trump said, “Will lead to great strength." He promised to end what he called the “American carnage” caused by drugs and crime.

“From this day forward," Trump said, “It’s going to be only America first."

There was plenty in the speech, then, that should worry viewers, particularly if you read Trump’s promises to make America “unstoppable” so it can “win” again in light of his recent tweets about China

But it was the things Trump didn't mention that should worry us most. Trump, we know, doesn’t use official channels to communicate his most troubling ideas. From bizarre television interviews to his upsetting and offensive rallies and, of course, the infamous tweets, the new President is inclined to fling his thoughts into the world as and when he sees fit, not on the occasions when he’s required to address the nation (see, also, his anodyne acceptance speech).

It’s important to remember that Trump’s administration wins when it makes itself seem as innocent as possible. During the speech, I was reminded of my colleague Helen Lewis’ recent thoughts on the “gaslighter-in-chief”, reflecting on Trump’s lying claim that he never mocked a disabled reporter. “Now we can see," she wrote, “A false narrative being built in real time, tweet by tweet."

Saying things that are untrue isn’t the only way of lying – it is also possible to lie by omission.

There has been much discussion as to whether Trump will soften after he becomes president. All the things this speech did not mention were designed to keep us guessing about many of the President’s most controversial promises.

Trump did not mention his proposed ban on Muslims entering the US, nor the wall he insists he will erect between America and Mexico (which he maintains the latter will pay for). He maintained a polite coolness towards the former President and avoiding any discussion of alleged cuts to anti-domestic violence programs and abortion regulations. Why? Trump wanted to leave viewers unsure as to whether he actually intends to carry through on his election rhetoric.

To understand what Trump is capable of, therefore, it is best not to look to his speeches on a global stage, but to the promises he makes to his allies. So when the President’s personal website still insists he will build a wall, end catch-and-release, suspend immigration from “terror-prone regions” “where adequate screening cannot occur”; when, despite saying he understands only 3 per cent of Planned Parenthood services relate to abortion and that “millions” of women are helped by their cancer screening, he plans to defund Planned Parenthood; when the president says he will remove gun-free zones around schools “on his first day” - believe him.  

Stephanie Boland is digital assistant at the New Statesman. She tweets at @stephanieboland