I have no understanding of finance nor of technology; any momentary comprehension I have in either fields are but brief bright bursts of elucidation which rapidly dim into my normal quagmire of confusion on such matters…which means I am going to have to write this really quickly!
Paying with Bitcoin at Food 4 Thought
It was therefore probably utterly idiotic of me to attempt this article on the crypto-currency scene in Chiang Mai. But after interviewing Michel Bauwens last year and hearing him tell of how the elusive Satoshi Nakamoto had first publically posted the launch of his new crypto-currency, Bitcoin, on Bauwen’s p2pfoundation.org website in 2008, I was intrigued. And as more and more Facebook feeds inviting me to various crypto-meetups around town kept popping up, my curiosity was peaked enough to have me start to explore the scene, soon diving head first down the rabbit hole.
So it was that I found myself one evening walking into Cube 7 off Sirimankalajarn Road into a roomful of people [read: white men, 30s] I didn’t know.
“Global adoption”, “cold wallet,”, “fungibility”, “proof of stake”, “Lighting Network”, and all sorts of words and phrases I had never heard before were being flung around in far too familiar a fashion for comfort. But soon, I was being waved over by a bald-headed man with a friendly smile (white, 30s), “Come on in,” waved Boban Milošević who had invited me to the weekly Bitcoin Meetup he co-started in late 2016, just before the peak of the crypto-boom and -frenzy of the following year, which would see up to four meetups a week, each attended by up to 100 people. Today’s crowd was about half the size and meetings held less frequently.
Lightning Network launch at Food 4 Thought
Seeing my bewildered face, Milošević soon ushered me upstairs, along with a group of around eight, to a private room where we were joined by Stefan King, a Dutch crypto-enthusiast whom, along with Milošević, was giving a sort of Crypto for Dummies workshop for we crypto-neophytes. Sitting around the table was an odd crowd — a Venezuelan who had just flown in that day to thank a Chiang Mai-based crypto investment firm for helping him to make so much money, a French digital nomad on her way to Bali who wanted to start using Bitcoin for trade, some senior expat gentlemen who were looking for investment opportunities, a couple of young travellers seeming as though they were trying to stretch their baht through any means possible to fund their ongoing journeys, and me, I was furiously scribbling away every word in hopes of making sense of it all later.
“What is money?” asked King, as we all settled down. “Freedom”, “trade”, “security” were words thrown out by the group. After exhausting our limited financial vocabulary, King simplified it to, “store of value, medium of exchange and unit of account,” which seemed like a sensible answer to a question I found myself surprised I had never been asked before. For all my life money just is…or was, until now.
The next two hours saw an informative and lively discussion as to how crypto-currency works and I highly recommend this weekly Thursday session for anyone remotely curious. We have written about Bitcoin and crypto currency before and there are far better explanations out there than I could possibly write myself, so I shall assume that you (like me now!) understand the basics. What I was really looking for though, was who is doing what and what ideas and initiatives are floating around Chiang Mai. And for that, I was more interested in the beer-swigging crowd of non-crypto-virgins gathered downstairs. So, I made my excuses, headed into the crowd and began to introduce myself to people. Soon, I was inundated with an onslaught of opinions:
“There is so much innovation, it promises a better society,” said someone. I am afraid I couldn’t keep up with who said what.
“You can’t trust banks or government, we have seen this over and over again, this decentralised system is the only way WE can control OUR money.”
“People will invest in any currency, look at cigarettes in prison.”
“This is a game-changer. First there were shells, feathers and shiny objects, then coins, then notes, then the last big thing which was credit cards. Crypto-currency is like that. Huge.”
“The internet made communication efficient and this technology will do the same for transactions.”
“Inflation is taxation; it’s not morally right. With crypto no bank or government or broker can control or take advantage of us.”
“It’s a paradigm shift.”
It was, frankly, evangelical. The fervour of the crowd was palpable and one phrase I kept hearing over and over was ‘how to drive adoption’.
You see, as wonderful as Bitcoin and its crypto-mates are, at the end of the day it’s simply not being used enough. Even though the 2017 boom and crash hasn’t dampened the trading fever, after all with Bitcoin value swinging up and down by up to 10% a day, the currency is very attractive to traders. Crypto currency is also notoriously elitist with 97% of all Bitcoins, for instance, being held by only 4% of ‘addresses’ (people, groups, companies). Milošević, is quick to point out, however, that many of these ‘addresses’ are actually owned by crypto exchanges while many individuals create multiple addresses to spread their money out. But frankly, relatively few people use it for trade and transaction, those making the most money being miners and investors, both groups requiring initial capital. But as this is a multi-billion dollar industry, with vast sums of investment going into the development of its technology and with an entire ecosystem growing around it, it will never be more than a toy for developers and speculators unless they start getting us — the average luddite — to use it on a day to day basis — hence how to drive adoption.
I soon realised that I, and my fellow first-timers upstairs, were being wooed. They wanted to adopt me. Or me to adopt their technology…I couldn’t quite figure out the lingo.
Facing the tidal wave of amiable idealism washing over me with each interaction with these crypto-enthusiasts, I decided it was time to seek out one of the biggest social change theorist in town, and owner of the site from which we first heard the name Bitcoin, Michel Bauwens (who, impressively is currently a Green Party candidate for the European Union parliament). There are few clearer heads around town and I knew that he would be able to offer up some much needed clarity and objectivity on the subject.
As we sipped tea and scoffed scones at the Dhara Dhevi cake shop at Maya, he didn’t disappoint; “I have been an observer of peer to peer and commons-oriented technology since 2005, so it made sense to me immediately,” he said. “Crypto-currency has so much potential, but it doesn’t mean that this first attempt is the right one. Blockchain, the digital ledger of transactions which drives crypto-currencies such as Bitcoin, is useful, but its design is still very problematic. The good news is that some of the brightest minds are working on this and there are very interesting ideas emerging. Here in Chiang Mai especially, where there are over 25,000 subscribers to the local digital nomad page, Bitcoin is a large part of that. For many early speculators of the technology, their wages, or tokens, were essentially paid in advance, freeing them to follow their passion. As many of them tend to be idealistic, they have enough reserves to make better choices than what is currently out there. I see these people as a kind of ‘labour aristocracy’”.
Bitcoin ATM at Cube7
Bauwens goes on to touch on the many troubling areas surrounding crypto-currency, from its use of energy to its gross disparity. “Blockchain conforms to the political philosophy of anarcho-capitalism in that every individual is sovereign and free to create value, which is laudable. However, the same philosophy follows that you can’t really trust people; institutions, democracy, these are created for and by humans which, according to followers of this belief, can’t be trusted. The only way to create trust is to make a contract which is enforced by something you can trust, and in this case, it’s the algorithms of block chain — essentially machines. You can see this as cynical. To profit from Bitcoin you either have to be a trader or a miner. At this point trading is speculative and as we saw in the 2017 crash, very volatile, while mining requires large investments, as algorithms to unlock a Bitcoin become harder and harder to crack, a normal PC won’t do the job anymore and very expensive computers have to be used. By virtue of the design of the mechanism, it becomes a scarce commodity currency which means that its value depends on supply (cost of making it) and demand (people who buy it). This is an entirely capitalistic way of designing currency which leads to my question, ‘Does the world need more capitalism?’”
These questions are on the most part waved away by the converted, who say that there are enough great minds working on this technology to solve all such problems.
Another area of contention is the amount of energy crypto-currencies use — vast amounts, comparable to that which entire nations gobble up each year. To guarantee the security of transactions, the mining computers have to solve a very difficult cryptographic puzzle, which is used to seal the block of transactions. Being super difficult to calculate and solve this puzzle, it makes it exponentially more difficult for any bad actor in the network to tamper with transactions inside a sealed block and provide the solution to the new puzzle faster than the rest of the network. Obviously, to calculate solutions for those difficult puzzles requires vast amount of calculations and hence energy.
While this sounds extraordinarily inefficient, it is the essence of what makes this technology trustless. The participants in the network are not required to know each other in order to trust that the transactions are valid, because the trust is provided by that energy-guzzling mathematical consensus algorithm, called proof-of-work. It is that trustless feature of blockchain which makes this technology so attractive to so many…and so energy consuming.
“This is a competitive business, so miners are naturally moving to cheaper sources of energy such as hydro-electricity dams in Iceland or China,” explained King, adding, “Shut down all the banks and we will save a lot more energy this way.”
“70% of mining power is from renewable energy,” insisted Anja Schuetz, a self-styled Conscious Crypto Ambassador, who oscillates between Berlin and Chiang Mai.
Asking around the various meetups, I failed to find any miners of the currency, as they were mainly developers, traders or believers. So it was with great surprise that one of our staff told me that her uncle in Lamphun dabbled in mining.
A week later we drove into the polluted haze of Lamphun to meet W, 54, (he preferred to be anonymous for taxation reasons), a retired electrician. He was tinkering with some servers in his open-aired garage where we soon joined him.
“My teenage son introduced me to Bitcoin around 2011. I read up on it, began communicating with people around the world — I don’t speak English, so it was ‘copy, paste, translate; copy, paste, translate’ — and decided to invest in a 100,000 baht machine,” said W as we followed him around his garage. “I got my money back in three months. In 2017 I was making well over a million baht a month. I never invested in anything I couldn’t afford so when the crash came I didn’t suffer badly.”
Today, the machines were whirring quietly in his scruffy and dusty outdoor garage, with homemade cooling devices and solar panels to help reduce costs of running the many complicated machines and software.
“My solar panels cut my bills by around 30%, but I still pay around 25,000 baht per month,” said W, “With coins harder to mine and requiring more and more energy and bigger computers, it’s just not worth it anymore.”
W, however, is in it for the long haul because he is a believer. He talked of George Soros destroying the Thai currency in the 90s, of ‘them’ aka The West, invading our seas during the Indo-China War, of the 2008 crash.
“I don’t trust ‘them’. Most Thai groups I see are young traders in it for the money. But I fundamentally believe in this technology. We are always a few steps ahead of the government. They can’t make up their minds at all about what to do. At this point I pay taxes on what they see, but all I have to do is go to Laos and take my money out. The government is so busy setting frameworks they haven’t even begun to think about control and enforcement.”
Schuetz is also a believer and has a healthy list of paid subscribers to her email tutorials, most of whom are women.
“While it is intimidating walking into a room full of men, however friendly,” said Anja, “women can appreciate the equal intention and open decentralisation of blockchain technology. It is all about inclusion, financial empowerment, lack of hierarchy. It’s a circle…it’s women.”
Yet current statistics belie that faith. The majority of Bitcoin users are male (95%), 32 years old/libertarian/anarcho-capitalist (44%), according to p2pfoundation. Schuetz admits that the technical language is off-putting to many women but wants more women to enter the arena to help change the landscape.
“For many here it is about blockchain technology, but for me it’s about decentralisation.”
Schuetz’s voice, however, is drowned amongst the tech-talk at Food4Thought Restaurant, where we meet one Monday evening at a more advanced crypto meetup.
There is a buzz in the air and I am told that the Lightning Network — spoken in an almost reverential tone — will be launched for the first time in South East Asia today, “This is history in the making,” I hear someone say.
Nearly one hundred people (white, 30s) are gathered for a presentation to launch the network which will facilitate an infinite number of transactions…in preparation, I assume, of when more people are adopted. I speak to Charles Turner, the restaurant owner who appears to be the de facto host of the crypto community here in Chiang Mai.
“We started this restaurant to be thoughtful about food and to create a space for intellectual stimulation for the community,” said an affable Turner. “When we started attracting the crypto crowd it was intimidating at first, for the staff as well as myself. But look at that room, look at it. People’s here brains blow my mind, it’s like Silicon Valley was dropped into my restaurant. And nearly everyone is paying in crypto. It’s so easy, just use the phone to scan in your QR code,” going on to say that there is a 10% discount for crypto.
Following a loud cheer, I look up and see everyone in the room clapping each other on the back and congratulating the speakers who had just presented their Lightning Network. By the looks of the crowd this was a big deal and not having understood a word of what was said I thought it best to leave with my dignity intact.
But who are all these developers and what are they developing? I met up with C, a few days after his presentation at Food4Thought, to find out. According to Milošević and Turner, his was one of the much-lauded great minds I had to speak to.
Wishing to remain anonymous, C says that he too was ideologically driven towards the technology after the 2008 crash. “The first stage was the gold rush. After that crashed in 2017, we are now in the tech stage. At the height of the bubble, the technology didn’t work for everyone, so we are improving it. And by we,” he explained, “it is all the developers working on different areas of the bitcoin ecosystem, a system which requires consensus, but which can be adapted so that it is constantly improving, hopefully eventually solving all the issues you and many have raised. We are preparing for a world where banks are out of the equation and where lending, custody of funds, transactions and payments will be out of government and private company hands. This technology has huge potential. There are people here developing systems where we can incentivise farmers, for instance. If you can peg pollution levels to price of tokens, then when pollution levels fall the token values rise, it would be in the interest of farmers to invest in tokens rather than to burn fields. Lightning Network is also trying to reduce the inefficient consensus mechanism which will help greatly with transacting as well as energy consumption. There are people developing multi-signature wallets as well, so if you die your coins aren’t lost. Then there are those using the technology in environmental conservation. Basically the technology is being pushed and propelled in all directions for every potential.”
I met one such person recently who was doing just that. Matt Rickard told me that he is using the blockchain consensus technology to verify projects that are outsourced as tasks via mobile devices. They are working with Freeland.org to help protect Thailand’s tiger populations by empowering community members and forestry rangers with Task tech to track movements of tigers and to spot warning signs of poaching activity. Take a picture of a tiger footprint, get it verified, et voila! you can maybe get rewarded with a 500 baht credit on Line App.
There is also mega investment being made into the technology right here in Chiang Mai. On prime real estate in the heart of Nimman, Yellow Incubator where Stephan King works, is building a Googlesque office — with a tube slide and all — from where it aims to invest in crypto startups in hopes of discovering that elusive ‘unicorn’ (a startup worth over a billion dollars). Money doesn’t seem to be a concern here as Yellow offers all the tools and sexy environment for bright minds to come up with a genius concept (of which Yellow will take a healthy percentage, naturally).
As expected, Bauwens offers a word of caution. “These startups are based on exit bets. Maybe one in 500 will be a unicorn. So they invest in you and in three years you have to either have something to sell in the market or you are destroyed. Huge amounts of wasted human resources draining away from all the good things we can do.”
But it seems as though no amount of cautioning is stopping the wild ride that so many are freewheeling on. Most of the people I met over the past weeks were genuine technological evangelicals who truly believed that what they are involved in is for the greater good, and many are working at full steam to streamline, diversify, safeguard and push the block chain technology to the next level in hopes of a better world: one with less government oversight, one with more individual financial freedom, one where technology can be used for the greater good, one which offers more financial security, even one which uses less energy.
As Food4Thought’s Turner said with a cheeky grin, “When I post our meetups on Facebook, I have to choose what type of event it is. I always choose religious.”