Inside the intertwining and scandalous history of Bitcoin and the media
Future News 91
‘Read the headline as well as the copy’ is the age-old plea journalists make to readers, especially in our social media-driven, hyper-reactive age. There’s no such luck for the now former political editor of The Times Francis Elliott, the lead by-line behind one of the most famous headlines in the history of the internet: ‘Chancellor on brink of second bailout for banks’.
The story, co-reported with then economics editor Gary Duncan, was published on Saturday 3 January 2009 during the financial crisis. Gordon Brown was Prime Minister, fellow Scot Alistair Darling was Chancellor and New Labour co-founder Peter Mandelson was Business Secretary at the time. The trio, the article claimed, were mulling over whether to give British banks even more taxpayer money in bid to stop the financial system from toppling over.
It is in this context that the pseudonymous Satoshi Nakamoto imprinted the headline from the paper of record onto the so-called ‘genesis block’ of Bitcoin, which effectively launched the mining of the cryptocurrency and eventual trading of the peer-to-peer asset/currency (depending on who speak to) that we see today.
“The root problem with conventional currency is all the trust that's required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust,” Nakamoto wrote in February 2009.
“Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts. Their massive overhead costs make micropayments impossible.”
Ever since the idea of the decentralised, non-trust based electronic cash was formalised and published in a white paper in 2008, Bitcoin needed an audience to establish a network of global nodes and gain traction.
Nakamoto released it on open source software platform SourceForge and initially shared news of the alpha release (it’s still in the beta stage of development) among the cypherpunk community of libertarian-leaning California-based cryptographers and publicised the nascent project on technology forums, including one hosted by the P2P Foundation.
The late Hal Finney, the Bitcoin pioneer who gave a helping hand to Nakamoto, also mentioned the project on Twitter in January 2009, while a page was created on Wikipedia in March of that year for the cryptocurrency.
The page on the online encyclopaedia subsequently led to interest in the project beyond the technology community, with some discussion of Bitcoin on the Mises Institute forums due to its decentralised qualities. Or as one excited user put it: “So what we are dealing with is anarcho-capitalism and wildcat banking on a global scale. If not for my non-existent programming skills, I'd be forking a new project off Bitcoin right now.”
The real breakthrough in publicity was in July 2010. ‘News for nerds’ platform Slashdot covered the release of Version 0.3 of Bitcoin after a submission from the cryptocurrency’s supporters and a follow-up on HackerNews drew further interest. The most notable reader was Jed McCaleb, who created the ill-fated Bitcoin exchange Mt.Gox after learning about it on Slashdot.
Near the end of 2010 the community around the cryptocurrency was still small, but growing. When one supporter of the project suggested reaching out to Wikileaks to accept Bitcoin payments, the usually technically-focused Nakamoto shut the idea down, warning that the project needed to grow gradually and “the heat [Wikileaks] would bring would likely destroy us at this stage”.
Unfortunately for the Bitcoin founder, a PC World feature from Keir Thomas talked about the potential of Wikileaks using the digital currency after PayPal and other payment providers stopped transactions to the website. The traffic to Bitcoin’s own website boomed off the back of the article, but Nakamoto relayed his fears on 11 December 2010. “WikiLeaks has kicked the hornet's nest, and the swarm is headed towards us,” he warned. That would be the founder’s penultimate public post.
Gavin Andresen, Nakamoto’s right-hand-man, reluctantly became the project lead of Bitcoin on 19 December 2010 as the founder disappeared into the shadows. But just as the mysterious figurehead had vanished, excitement and momentum grew around the project. The Electronic Frontier Foundation, the digital rights group, started accepting donations in Bitcoin from January 2011, later u-turning on the policy in June 2011.
The move helped the digital currency reach parity with the dollar on 9 February 2011, generating more media and public interest. It would later hit $4 after a blog post from Venessa Miemis was featured on CNN. WIRED would give the project more publicity at the end of 2011, with a feature on the ‘rise and fall of bitcoin’.
The founders of Bitcoin Magazine (Vitalik Buterin and Mihai Alisie), arguably the first cryptocurrency trade publication, disagreed with any downfall narrative around Bitcoin and launched their outlet in May 2012. Buterin would later co-found cryptocurrency Ethereum and become a multi-millionaire, a far cry from writing articles for a blog at five Bitcoins a pop ($4 at the time).
CoinDesk, a rival to Bitcoin Magazine, was launched in May 2013. Around five months later scandal would surround the cryptocurrency once again. Ross Ulbricht was arrested by the FBI on 2 October for being the founder and owner of the Silk Road, an online black market where illegal drugs, among other things, were exchanged for Bitcoin.
The following year in February 2014 Mt.Gox, which was sold by McCaleb to Japan-based Mark Karpelès in 2011, declared bankruptcy. Bitcoin was in the media again for all the wrong reasons and was establishing (rightly or wrongly) a bad, almost toxic, reputation. With regulatory concerns rife, the digital currency dropped to an 11-month low of $290 in October 2014.
The cryptocurrency bobbled along both in price and interest for the next couple of years. In January 2016, CoinDesk was acquired by Barry Silbert’s Digital Currency Group and in 2017 it all kicked off again, with the Bitcoin price surging through all-time highs – $2,000, $7,000 and eventually $19,783. The currency would retreat again over the next year, finishing off 2018 near $3,300.
By then, Bitcoin was well-established in the media, with a trade press and events industry of its own and major financial publications, including The Wall Street Journal, Bloomberg and the FT, reporting on its developments.
And then there was the start of the pandemic, with the price of Bitcoin jumping above $10,000 in July 2020. There was something different in the media ecosystem this time, though, since the digital currency now had its own multimedia community. YouTube channels, including BitBoy and Coin Telegraph, began regularly posting daily videos about Bitcoin, cryptocurrency and interviewed the so-called ‘thought-leaders’ in the space, attracting hundreds of thousands of views.
Reddit also proved to be a fertile ground for the Bitcoin experiment. When FN reached out to the 1.6m-strong cryptocurrency subreddit, one moderator said he didn’t consume news outlets to get his information and instead used Twitter, “some chat platforms'' and the discussion website.
Talking of Twitter, the platform has played its own unique role in the recent rise of Bitcoin, with CEO and co-founder Jack Dorsey publicly backing the digital currency and using his other company, Square, to invest $50m in it.
Then there is SpaceX and Tesla CEO Elon Musk, who has endorsed meme-coin Dogecoin on the platform. And in a regulatory filing from the company, Tesla revealed that it had invested $1.5bn (10% of its corporate treasury) in Bitcoin. All this hype has led to endless media coverage and an all-time high of $48,000. But despite the financial record, interest in Bitcoin is still substantially off the highs it saw in December 2017.
For Ian Allison, who started covering enterprise blockchain during the last Bitcoin boom and now concentrates more on cryptocurrencies for CoinDesk, the competition is getting tougher and tougher as more institutional investors and established financial firms get into the space. “There are big stories under the surface,” he told FN. “But cryptocurrency is no longer a little thing...my stories [typically] have three sources, it’s properly underground.”
A recent example of this is Allison’s June 2020 story that PayPal would roll-out direct sales of cryptocurrencies to its 325m users. The company confirmed it four months later in an October press release, moving the price of Bitcoin. “CoinDesk has a mission to break these stories before the likes Bloomberg, Reuters and Wall Street Journal,” Allison said.
The “meat and potatoes” of his reporting, as he puts it, is working on embargoed releases and interviews. “What I really try to do is do as many interviews as possible and get tips,” Allison explained. “Then it’s my job to figure out where I can get more sourcing.”
Beyond the technical more B2B side of the coverage, Allison also said CoinDesk, which has just launched a TV offering, tries to write “lapel-grabbing” stories for retail investors and “exploratory audiences”, who may be brand new to cryptocurrency. An example being the SEO-friendly ‘Why is Bitcoin going up and will it crash soon?’.
And with more interest and knowledge about cryptocurrency comes more scrutiny. There are, by way of example, serious environmental concerns about an industry which relies on warehouses full of mining rigs (highly specialised computers) and the mass amounts of energy they need.
In developed regions, such as North America, this is less of an issue since miners can use electricity generated by renewable energy sources (typically hydro). But China, in contrast, is still heavily reliant on coal-fired power stations (the Digiconomist provides a good breakdown here). Reuters, among other outlets, focused on this narrative after Tesla’s investment in Bitcoin.
However, the problem is far from new and it’s something that Finney identified right at the start of the project. “Thinking about how to reduce CO2 emissions from a widespread Bitcoin implementation,” he posted on Twitter in January 2009. And Nakamoto defended the practice in August 2010:
“It's the same situation as gold and gold mining. The marginal cost of gold mining tends to stay near the price of gold. Gold mining is a waste, but that waste is far less than the utility of having gold available as a medium of exchange.
“I think the case will be the same for Bitcoin. The utility of the exchanges made possible by Bitcoin will far exceed the cost of electricity used. Therefore, not having Bitcoin would be the net waste.”
This was more than a decade ago. Now, at more than 123 terawatt-hours per year, the Bitcoin network is using more energy than the UAE or the Netherlands, according to The University of Cambridge. Another boom, another scandal?
Full disclosure: I have exposure to cryptocurrency and none of the above should be considered as investment advice. Do your own research. Cheers.
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