If you need a machine and don’t buy it, then you will ultimately find that you have paid for it and don’t have it.
"I want to focus on one thing: the risks"
Last Tuesday I attended a Bitcoin meetup in London where Jeremy Allaire, the CEO of Circle, a pre-product Bitcoin-focused company which raised $9m from Accel and General Catalyst, gave a speech about his vision for the cryptocurrency. Surprisingly, he decided to focus on a single theme: the risks associated with it. Volatility, fraud and criminal activity. And, consequently, on the necessary regulations to be imposed by governments to protect consumers. It felt like a pivotal moment in the life of Bitcoin: the time when early adopters libertarians were being supplanted by experienced (Jeremy cofounded Brightcove previously), realistic, VC-backed executives who are entering the space to turn it from a hobbyist oddity into a mass-market business.
While both inevitable and beneficial to grow consumer adoption, this move didn’t delight everyone in the room. Some enthusiasts, originally drawn to Bitcoin by the promise of a decentralised pseudonymous currency designed to escape government control and meddling with the money supply, seemed to be silently wondering: “what’s the point of Bitcoin if we are recreating sudo-banks, as heavily regulated and subjects to the same attacks on our privacy as the incumbents?”.
The atmosphere tensed further when one local entrepreneur asked Jeremy what Circle would do if the SEC or the NSA were to ask them for access to their confidential customer information, and he replied straight away: “Of course we would provide it to them, it would be a criminal offence not to”.
Living the free market dream
He is obviously right but many early Bitcoin adopters may be forgiven to see this as a betrayal of their original dream. The opposition to fractional banking is one of the cornerstone of Bitcoin and the possibility to strip central banks from their control over the supply of money (and to indirectly bail out failed banks and bankers) naturally attracted libertarians in the early days. And they probably still form a large (and very vocal) part of the community.
To them, central regulation and consumer protection are counter-productive: the free market shall work efficiently to bankrupt bad services and select the best and most trustworthy companies without the need for a central and bureaucratic 3rd party protection, which necessarily comes at a crippling cost for the society as a whole (for instance, protecting consumer deposits in banks is a nice idea in theory, but creates a massive moral hazard whereas bankers and their lenders know they can take maximum risk because losses will be collectivised eventually).
In the same spirit, libertarians might argue that AML and KYC are only the byproducts of poorly designed regulations, which create a legion of “victimless crimes” (drugs, prostitution and gambling being the biggest one) that push otherwise well-functioning markets (a buyer wanting to exchange cash against weed with a seller, for example) into illegality, and therefore create a need for undue control and invasion of privacy. Similarly, the desire to evade tax might be imputed to overly complex and heavy tax laws. Adopting a money that can’t be centrally controlled and tracked could be an efficient way to force governments to eventually repel those illegitimate or inefficient laws, or so the thinking goes. Contrast that to Jeremy Allaire’s position and it becomes clear that a rift is appearing, splitting the Bitcoin community in two.
It’s painful to grow up
This situation is not surprising. As Marc Andreesen pointed out in his remarkable NYT Oped, Bitcoin’s development has actually been very similar to two other very disruptive technologies and platforms: the PC and the Internet, which also started as platforms for academics and hobbyists before entering the mainstream thanks to business-savvy executives who built easy access to attractive applications, and were ready to play nice with governments and regulators to protect their interests. That the same is happening with Bitcoin is merely an indication of its phenomenal success, and should be celebrated as such by the early adopters.
But the tension between the ongoing institutionalisation of Bitcoin and its fundamental disruptive nature will not disappear anytime soon, and its evolution will be fascinating to watch.
UPDATE: It looks like Kadhim Shubber from Coindesk had very similar impressions when listening to Jeremy, as he explains in an article published this morning.
We at Index are leading a $17.5m Series B round into London-based app developer SwiftKey (TouchType Ltd), makers of the best-selling Android app of 2012, the SwiftKey virtual keyboard. We first fell in love with the product, until we met with the team and were blown away by their unique ability to turn their amazing technology into a successful mass-market product.
The “mind-reading” keyboard
As the video shows, SwiftKey is like T9 on steroids: it both suggests words as you type and corrects your sentences. Its specificity, and what makes its prediction so good, is that it’s not limited to a general library of languages, but can also personalise your own library, modelled from your email, texts, Facebook and Twitter conversations (if you opt-in to grant it access when you sign up). The engine constantly improves by learning as you type, both the words you use, but also the way you position your fingers on the keyboard.
So while it doesn’t technically read the user’s mind, the suggestion engine is so sophisticated and becomes so personal over time, that some people, including Wired’s reviewer Nathan Olivarez-Gilles, find it “so good at predicting what you type, it borders on creepy”. This is typically how disruptive technology manifests itself: people are so shocked when they first use it that they can’t quite believe it is real and it actually works. They tend to suspect some elaborate trick. As the popular quote puts it, this is when “technology becomes indistinguishable from magic”.
Remember the first time you used Shazam? Google Earth? Skype? The first iPod/iPhone/iPad? Didn’t you have that very distinct “WOW, how is that even possible” moment? This is precisely what SwiftKey provokes after a few days of use, and this is the story told by the 200,000 people who rated the app 4.7 stars on average on the Google Play Store, and by the likes of Samsung, who selected SwiftKey’s technology to power the keyboard of their blockbuster phone, the Galaxy S4.
Your own language, on each of your devices, forever
Besides the magical technology, the other reason people feel so strongly about SwiftKey is that the keyboard is such a core element of our interaction with mobile devices. This is probably the most intimate app there is. Once it’s installed, every single piece of communication, search or expression goes through it. Over 1.5 trillion characters have been typed through it to date.
This is also one of the most useful app. Collectively, SwiftKey users have already saved half a trillion keystrokes. In the same way that Dropbox made people’s lives easier overnight, by sorting once and for all the issue of syncing files across multiple devices and multiple users, SwiftKey has transformed the way people can communicate and express themselves, making it radically more efficient and personal. It allows us to type more, faster and with a more accurate and richer language.
Also, with the cloud-enabled version now public, it is easy to imagine a future where everyone could carry his/her individual library of language to every intelligent device (mobile phone and tablet today, but why not computers, wearables, cars, etc. tomorrow), simply by installing his/her SwiftKey and letting it synchronise all the personal data.
Riding the Android wave
Android is well positioned to become the dominant OS powering this wide variety of mobile devices. Over half of smartphones and two thirds of tablets shipped in Q2 2013 were Android-powered and the gap with the competition is widening. We at Index have been lucky to witness this exponential growth through our investments in several mobile startups - not least Lookout, an Android-first mobile security company which has grown to over 40 million users in less than 5 years - and have made it a key investment theme.
We have also had the chance to see how well popular mobile apps could monetize, and how quickly they could become very large businesses: Supercell and King.com, to name two, have shown just how lucrative an engaged mobile audience can be. There are several compelling ways SwiftKey could further monetize.
A team of alchemists, who can turn raw technology into a universal product
It is hard to think of a single exceptional product which hasn’t been developed by an exceptional team, and SwiftKey is no outlier. Given how impressive the app was, we had high hopes when we kick-started the conversation with Jon and Ben, respectively CEO and CTO of the company, both first-time entrepreneurs and Cambridge graduates. And it didn’t take long to realise that what we were seeing on the app store was only the tip of the iceberg, and that they had the potential to achieve even bigger things.
Right in the center of London, but relatively below the radar of most of the tech press and community, the two of them have spent the past four years assembling one of the most impressive group of tech talent of any European startup today: out of their 100 employees, 65 are engineers, many of whom are leaders in Natural Language Processing and Machine Learning, and 17 of their team have doctorates. One in four staff studied at Cambridge. But even more remarkable than their academic credentials is their ability to turn them into such a widely popular application.
Few teams possess the combination of theoretical knowledge, design understanding and marketing skills required to turn raw technology into successful mass-market products - and they are the very people we at Index strive to have a chance to work with. Hence why we are so excited to now be part of the SwiftKey story: we believe that the keyboard app is only the first step towards a simpler, faster and more personal interaction with mobile devices, and we believe that this team is one of the best positioned to make it happen. Because they possess this special gift of turning technology into magic.