Interview with nanotube, founder of the Bitcoin-OTC, IRC’s Marketplace on Bitcoin, Multisigs and Security
The peer to peer (P2P), anonymous crypto currency with cash-like properties known as Bitcoin has quickly become a formidable payments medium in contemporary society. New products and services are born almost daily as these cash-like payments have created new ways to conduct business online. I had the opportunity to speak with Daniel Folkinshteyn, founder of the Bitcoin-OTC. Daniel, who many Bitcoiners know as nanotube, is always hard at work progressing the Bitcoin movement with an unrivaled expertise as one of the early adopters of Bitcoin. The first time I met nanotube was at the Bitcoin Conference in New York City, where he was one of the few Bitcoiners (aside from Gavin Andreson) who was met with a full applause from the audience. Needless to say, Daniel is a Bitcoin celebrity, and has the kindest personality to match his warm smile.
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When and how did you first get started with Bitcoins?
Well, I first read about them (Bitcoins) on Slashdot when (version) 0.3 was released, but I didn’t really dig into it. Then, some time later, I helped mizerydearia with the IRC bot he was running at the time, bitbot, and he wanted to send me some Bitcoins for helping him out. So, I installed the client and got my first btc from him.
How many Bitcoins did mizerydearia send you at the time?
Hehe, between 20 and 30. At the time, they were worth about 5 pennies each.
Nice! Were you very involved with other projects prior to the Bitcoin OTC?
Well, I was involved with supybot, hence how mizerydearia came across me in #supybot (Freenode). Additionally, I was and still am running a channel bot for #sourceforge. (The bot) was, and still is gribble, which required some modifications.
When did you create the Bitcoin OTC?
Well, according to ChanServ, it was registered on October 17, 2010 at 05:33:03. That was 1 year, 20 weeks, 3 days and 19:46:14 ago.
Nice, it’s been around for awhile!
Yes, time flies!
How did you come up with the idea for the Bitcoin OTC?
Back in the day, there was only one IRC channel used, #bitcoin-dev; so all the talk was in that single channel. At some point, it became too busy with all of the developers trying to dev, people trying to hang out, and people trying to trade. So I said, “hey, let’s setup a separate channel just for trading,” and, thus, (Bitcoin) OTC was born. Then, after a bit of coding, I also created the order book and the rating system. But, to start, it was just an IRC channel.
The Bitcoin OTC is flourishing today, but, were there any difficulties when building the Bitcoin OTC?
Well, it kind of built up slowly. I added gribble-plugins for the rating system and order book, and initially relied on user host masks. Then, I added in GPG authentication, in part, because a Freenode operator said, “dude, we’re tired of all your people asking for unaffiliated cloaks!”
Back in the days of 30usd/btc, the channel was up to 1200 (active) users. At some point, we started getting a lot of drive-by spammers, so I created the gatekeeper system where the channel was +i (invite only) and (only) authenticated users could invite themselves. Then, over time people kind of dropped off after the peak Bitcoin valuation. I think if we regress the Bitcoin-OTC channel user count on the Bitcoin price, we’ll have a pretty high R^2. We’ve also had our share of scammers, some of which induced improvements in the system.
Why do you think people use OTC versus the exchanges?
Well, a few reasons. For one, it’s more than an exchange; it’s a community. For two, a lot of people, like it or not, have paypal and moneypaks, which exchanges don’t accept. For three, depending on where you are it may be difficult to get money into exchanges. Some people want to stay “off the exchange radar,” especially with Mt. Gox doing the whole AML-KYC/we want your ID, address, and blood sample, and blah blah…. Some like the web of trust idea.
How important is the Bitcoin-OTC to the Bitcoin Economy?
Well, hard to say. Probably, if it disappeared tomorrow, things will just go on. On the plus side, all the data is publicly available as well as the code, so, it could just pop up again in another place at a moment’s notice. Bitcoin is overall large enough that if any single actor disappeared, it won’t cause much trouble, except for maybe Mt. Gox.
Oh, that’s impressive resilience. So in essence, would you consider the Bitcoin OTC a pure decentralized P2P exchange?
Well, it’s not decentralized because the ratings and order book are kind of stored in a single central place. But, it is “decentralizable” and completely open.
Where do you see Bitcoin in 5 Years?
Well, predicting the future is hard. Either, it will be dead, or it will be much more popular. It seems unlikely that it’ll remain at approximately the same penetration level.
What are your thoughts on the recent hacks?
Well, I guess it just goes to show you that you have to have multi-layer security, especially where Bitcoin is concerned. It also clarifies why Gavin is so intent on multisig transactions for security, because when everything is on one device, eventually stuff will go bork. At least when you have two or more devices needed to sign a transaction, the probability for losing your coins due to theft decreases exponentially.
Do you have any remarks or thoughts you would like to share in regard to Bitcoin or anything in general?
One, OTC, and bitcoin in general, highlights the need for trust between counter parties. It only takes a few bad apples to screw things up or increase costs for everyone.
Two, the Bitcoin system is kind of an unprecedented experiment in economic systems, with the algorithmic rate of money creation, decentralized accounting, and global reach. So, even if it fails, we can learn a lot from it and, maybe, build better next time.
Three, it shows that motivated people working together can create cool things. Though, a lot of FOSS projects show the same things, so I guess it’s just about the “Power of FOSS and Collaboration.”
Four, the ability of the internet to build and create communities of like-minded people around a cause is particularly salient in the case of Bitcoin. If you look at the kind of people attracted to Bitcoin, they tend to be small-government-libertarian-leaning, pro-personal-freedom, mostly rationalist, and mostly intelligent. So, one could live in some completely incompatible surroundings, but feel a part of the community of friendly peers with the help of the “virtual” internet community.
I guess that’s enough as far as thoughts go, hehe. I could mention things about dispelling myths and misconceptions about how the economy works, how the financial system works, the motivation it provides to people to learn about personal finance, finance in general, economics… the very interesting historical parallels between the development of the Bitcoin economy and the development of the systems surrounding the current economy. For example, after you lose your money due to a Bitcoin wallet collapse, you start appreciating FDIC insurance. After a bunch of bogus share listings where people get money and run on GLBSE, you start appreciating SEC regulations.
Thank you very much for taking the time out of your busy schedule for this interview.
Pleasure to be here, always glad to help out a friend.
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