CoinLab and Bitcoin

A friend sent me a link to a GeekWire article about Seattle Bitcoin startup CoinLab raising half a million dollars and asked "is that a good or bad thing?"

It's a good thing!

The long-term vision for the Bitcoin economy is a closed loop-- people earn and spend bitcoins, instead of exchanging bitcoins for some other currency.

Since most people get most of the earnings in the form of a salary, and since I think it will take a very long time (if ever!) before a typical company considers paying employees in Bitcoin, the 'earning' side of the equation worries me most.

That's why I created the Bitcoin Faucet, and that's why I like to see projects like ForBitcoin or FeedZeBirds that give people all of the world ways to earn a little coin. They give anybody with an internet connection and some extra time, anywhere in the world, a way to put their time to productive use.  That's a very good thing.

CoinLab's idea is to let game companies "earn profit from idle users with a custom-branded coin client." The users run a little program and are awarded with in-game items or power-ups. The game companies get dollars.  And CoinLab makes it all work by doing a bunch of behind-the-scenes infrastructure, exchanging the bitcoins that the users create for dollars.

I think CoinLab is being smart by not asking the game companies or users to deal with bitcoins, but instead having them deal with what they're already comfortable with (dollars and in-game commodities).

But eliminating the exchange and paying the gamers and/or the game developers directly in bitcoin would be more efficient, and is an obvious, easy-to-implement feature. Bit-Pay is doing something similar for merchants, depositing dollars or bitcoins or both in their accounts when they receive bitcoin payments.

I think the biggest market for a service like CoinLab will be younger gamers. If you're 15 years old and don't pay rent or electricity then leaving your computer running overnight to earn some in-game currency will be pretty darn appealing. If a whole generation of video-game-playing kids grows up with Bitcoin then the future for Bitcoin will be very bright.

Theoretically it even makes sense if you are paying for the electricity, because CoinLab is essentially outsourcing all of the billing and payment and collection infrastructure to the local electric company. And utility companies are pretty darn good at getting their customers to pay their bills; that translates into a more efficient payment system and lower costs for users.

But... but... what about the environment? What about all those gamers using all that extra electricity to create bitcoins?  THINK ABOUT THE POLAR BEARS!

Big-picture economics lesson: more efficient == better.  Better for people, better for the environment.

Think about the unseen-- if people are (indirectly) using electricity to pay for in-game items instead of using their credit-cards or buying 'game cards' in stores, where does the cost-savings coming from?

That's easy to think about for physical game cards-- there will be fewer produced, which means less plastic manufactured, fewer trucks shipping them from some factory to stores, and fewer car trips to the mall so teenagers can spend a little cash to get their Farmville fix.

It's harder to think about for credit cards, because the costs are really well-hidden. A lot of effort is put into collecting bad debts. I'm sure credit card companies and debt collection agencies spend a lot of money on electricity for their call centers, but most of the cost savings will be fewer people trying to get deadbeats to pay their bills.

That would be a good thing, too! Collecting debts doesn't make the world a better place, and the out-of-work debt collectors will find something more productive to do. Maybe they'll go work for the game company who has a little extra cash and can afford to pay for another customer support person. Maybe they'll go work in a Sierra Club call center, convincing gamers who have a little extra cash (because they paid $10 on their electricity bill for some game stuff instead of paying $10.05 to a credit card company) to contribute to programs that help polar bears...

The People, United, Will Never...

This year's slam-dunk, gonna-pass-with-an-overwhelming-voice-vote article on the Town Meeting warrant is Article 28: "Reversing Citizen's United v. Federal Election Commission."

I'm trying to decide whether or not it is worth my time or the risk of being a pariah to speak against it at Town Meeting. I don't like Town Meeting taking up national issues in the first place; I understand it is a grand tradition, but it seems to me if the people of Amherst feel strongly about a National issue then they should contact their congresscritters about it.

Or maybe if they don't agree with their congresscritter they should form an organization to pool their efforts and try to amplify their voice... like the Citizen's United organization.

I don't like Article 28 from it's very first sentence, which says:

Whereas: the First Amendment to the United States Constitution was designed to protect the free speech rights of people, not Corporations;

Since corporations didn't exist in the US as legal entities until 1811 that's true. Although I'm not sure that is relevant; the First Amendment doesn't give a lot of wiggle-room when it comes to free speech rights:

Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof; or abridging the freedom of speech...

Seems pretty clear to me; there's no exception for "... except if the speech happens to be a TV commercial about a political candidate, paid for by an organization instead of an individual, aired just before an election." There's no way to be sure, but I imagine if TVs had existed back in the 1700's our Founding Fathers would have been producing and distributing revolutionary videos in addition to pamphlets and broadsides. They might have even funded that activity using money from their businesses.

If you read the actual text of the Supreme Court decision (available online), they cite an interesting precedent for "Corporations do have a right to free speech" that I haven't seen mentioned at all-- NAACP v. Button, a 1961 civil rights case where the state of Virginia had passed laws making it hard for the NAACP to find disaffected people and file civil rights suits on their behalf. The NAACP is a corporation, not a person, so I suppose you could argue that the Supreme Court was wrong back then, too-- that the Virginia legislature aught to be able to do whatever it likes to the NAACP because corporations have no rights. Newspapers are corporations these days, too; maybe that means that other pesky part of the First Amendment about freedom of the press doesn't apply, either. Right?

I do agree with parts of Article 28; I think there is too much money in politics. But I don't think passing a constitutional amendment and then making it illegal for corporations and unions to make TV commercials or movies for or against candidates or issues that they care about would change that at all; they would just Find Another Way. If they can't fund a TV commercial, maybe they'll find a celebrity sympathetic to their cause and get that celebrity to promote the cause (and maybe the corporation will make an extra generous donation to that celebrity's favorite charity...).

I'd like to shrink government to lower the stakes; if there weren't millions of dollars in subsidies at stake I'm pretty sure the American Beet Grower's association wouldn't spend hundreds of thousands of dollars every year on lobbying. And if the Federal Government wasn't spending billions of dollars on education I'm pretty sure the teacher's union wouldn't spend tens of millions of dollars a year lobbying the Federal Government.  They'd spend all that money lobbying at the state and local level instead, which seems like the Left aught to support as a political version of "Buy Local."

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Update: passed after zero discussion and a unanimous voice vote.  I abstained.