Coin Congress Day 2: Bitcoin Industry Bullish in Face of Obstacles

The second day of Coin Congress in San Francisco focused less on recent US regulatory developments, instead placing a heightened emphasis on the promise of bitcoin's underlying technology.

Held at the Union Square Hilton this week, the event featured a variety of speakers and panels. Experts offered unique perspectives on the bitcoin and cryptocurrency economy, and with their remarks succeeded at framing the industry as a fast-developing space worthy of its early accolades.

Despite the promise and excitement surrounding the industry, however, event commentators were keen to point out the obstacles that bitcoin needs to overcome in order to bring its full capabilities to market.

The mainstream portrayal of bitcoin in the media appears to be one issue, according to Michael Terpin, who founded the PR service Marketwired in the early 1990s. He says negative headlines sell, and that bitcoin is paying a heavy price because of this.

Terpin said:

"The media is like a sponge, waiting for the loudest click-bait to happen."

Perception and adoption

Discussion on the perception of bitcoin continued through the day, with one specific panel addressing the issue directly. There, George Gilder, an author, investor and moderator of the perception panel, called cryptocurrency, "a new category of information on the Internet that fulfills the real promise of the Internet".

Due to this type of praise, speakers were emboldened about the currency and its prospects.

Tim Parsa, CEO of BitReserve, said:

"Anything you fight, you make stronger."

Bradley Rotter, co-chair of hardware startup Rivetz, echoed this positive sentiment, saying that digital currencies were inevitable with the advent of the web.

"Does the internet deserve its own currency? Of course it does," Rotter noted.

Lee Fox, founder of Peerspring, said that demographic shifts will foster distributed systems adoption no matter what. She said she sees this in a younger generations that is, "already circumventing what was once centralized".

Venture capitalists still positive

The Coin Congress venture capital panel offered similarly positive opinions on the long-term opportunities that bitcoin presents, as commentators were optimistic bitcoin could overcome its perception issues.

The VCs were perhaps unsurprisingly bullish on investing in bitcoin businesses.

Bart Stephens, managing partner of Stephens Investment Management, said there is "massive opportunity to connect the financial world to bitcoin".

Waterhouse said:

"[The] IP address is not a consumer technology. The question is whether [bitcoin] is a consumer technology or an infrastructure technology. It’s likely an infrastructure technology."

RRE Ventures' James Robinson, offered a different assessment, saying that he believes consumers will continue to choose banks over BTC.

Robinson added:

"You may not like [banks], but you know that your money will be there tomorrow."

Jonathan Teo, managing director of Binary Capital, said that the amount of VC flowing into bitcoin companies is only going to increase, a promising statement for entrepreneurs, as many were in attendance at the conference for industry networking and knowledge sharing.

“There will be a lot more venture dollars flowing into the digital currency space,” Teo said.

Mergers and acquisitions

Despite optimism from VCs, even this segment of the industry faces pressing issues.

For example, there have not been any significant financial exits in the bitcoin space to date. William Quigley, managing director of Clearstone Venture Partners, presented on the possibilities of merger and acquisition (M&A) activity in bitcoin, basing his assessments on historical observations from the early Internet days.

"[That] bubble really was about 18 months," he said.

Quigley told the Coin Congress audience that he expects a similar situation to unfold in the digital currency space, adding:

"With respect to bitcoin, I see lots of acquisitions happening quickly."

Quigley estimated that there are about 700- 800 bitcoin startups in total right now, and with only 100 venture-backed companies that go public every year, mergers and acquisitions (M&A) might be the way many bitcoin-related ventures will likely see a financial exit.

"A lot companies are going to be acquired," he said.

However, bitcoin-related companies with the potential to be purchased for $1bn or more will need to be what Quigley called an "operating business" – not just an idea or play on bitcoin, but something with substantial customer numbers.

And in order to get to that level, VC money will be needed to deal with regulatory matters.

Quigley said:

"Compliance cannot be ignored, especially in the United States. This is why bitcoin startups will have to raise capital."

Technology advancing

Technology was yet another major theme, with speakers touching on the latest developments in the space.

Bitcoin entrepreneur and former Tradehill co-founder Ryan Singer encouraged developers to use technologies such as multisig in order to avoid actually hosting cryptocurrency for users.

"I think it’s getting more uncomfortable," to hold other people’s coins, he said. Because of new regulation possibly on the horizon, hosting features like wallets might end up being prohibitively expensive for a startup.

"If you hold other people’s money, you are going to have to bond and insure it," Singer said.

Multisig technology like the sort BitGo offers requires several keys in to manage bitcoin funds, reducing possible risks associated with controlling funds the way that many hosted wallets currently do.

Singer noted:

"It is possible to do full transactions without being in the business of holding bitcoin."

Another idea along these lines was presented called Rivetz, a hardware technology for financial independence outside of the existing banking system.

"I want to build [bitcoin functionality] into the device I have at the time," said Rivetz CEO Stephen Sprague during his talk titled 'Building a Hardware Wallet into the Device You Have'.

The startup is building a digital currency storage system that harnesses existing technological capabilities inside consumer electronics devices such as a PCs, phones and tablets.

Images via CoinDesk