I have being hearing people talking about Bitcoin recently, and as the designated ‘techie’ some people ask me what it is (the subtext being “should I buy some?”). I am always hesitant to say much in such situations (no one has ever made money listening to my financial advice!). For the interested, there are many good descriptions of the fundamental technology online (most of my knowledge comes from this Coursera Cryptocurrency course). I also mined some cryptocurrencies (results detailed in this blog post), but stopped very quickly after calculating the profit vs cost. I have never owned any Bitcoin, and have no immediate plans to change that.
Basically, I probably know enough to be dangerous, but falling victim to the Dunning-Kruger effect seems appropriate for Dunning-Krugerrands. Take everything written here with that in mind.
Firstly, most conversations on the utility or value of Bitcoin need to separate the cryptocurrency (Bitcoin) from the underlying technology (Blockchain). Blockchain seems like a very clever solution to the problem of distributed trust (i.e. a system where you do not need to trust anyone involved in the system but are still able to trust the system itself), produced by assuming that no one can control over 50% of the system. Bitcoin is the proof-of-concept application of Blockchain, with the added benefit that the value of the cryptocurrency encourages people to join the trust system (by mining) and thus decreases the likelihood of anyone controlling over 50% (also clever!).
As just a technology, the value of Blockchain depends on where it has been applied. Sometimes it will be useful, and sometimes not. At the moment it is the hot new technology and everyone seems to be using wherever they can. As I’ve seen with previously hot technologies, I suspect it will greatly overused in areas it is not applicable – beware! Still I can easily imagine places it would be helpful – it would be great for tracking ownerships of items/land in corrupt countries (although I suspect those are the last places that would adopt such a system for the same reason!).
Right now, there are five main reasons I don’t like Bitcoin. However, each of those reasons is surmountable with time and the advancement of technology. So while I think the Bitcoin is currently flawed and not worth the hype, I can believe that it has future potential (or more likely a successor cryptocurrency does). I’m sure all of these problems are being worked upon actively (and know of a few such efforts). A cryptocurrency that solves them all will probably be worthwhile.
- There is no use for the mining calculation, it just burns electricity (and a lot of it!). To be part of the Bitcoin system by mining means performing a useless computation just to act as “proof-of-work” and randomise who proposes the next block. It would be great if this calculation had inherent value (like for instance drug discovery). However, it is hard to find a useful calculation that has the required mathematical properties.
- Bitcoin has no intrinsic value, and therefore no floor price. Cryptocurrencies have no backing (other than perhaps Tether). There is nothing to say the price should not be 0 or millions. This makes it hard to act as a store of value – holding it is currently speculation. If it was widely used for purchases then that would be something, or if the mining calculation had value. For comparison, commodities (like gold) have value in the industrial uses of that commodity; national currencies have the backing of their government, and even if you don’t trust them, you can still pay your taxes in that currency.
- Bitcoin is deflationary due to a fixed total size. While the total amount of Bitcoin in circulation is currently growing, at a certain point in the future this will stop. The Bitcoin system has a maximum amount of coin built into it, and when reached no more will be added. A currency that doesn’t grow makes the economy based on that currency hard to grow. It encourages people not to spend it as it will likely be worth more in the future (thus deflationary).
- Slow transaction speed and thus high fees. Bitcoin can handle a maximum of 7 transactions per second – worldwide! Only 7 people can use Bitcoin in the same second! This is several orders of magnitude less than any serious online payment system or credit card. The low number of transactions means people have to pay fees to have miners to include their transactions at the front of the queue. Everyone else waits. As the demand for Bitcoin increases, so will the number of transactions and the size of the fees.
- Few to no legal protections. One of the touted benefits of Bitcoin is that is not controlled by anyone, and thus safe from government interference or devaluation. However, this also means it is not protected. Scams and thefts of Bitcoin or other cryptocurrencies are common with victims seeming to have little recourse. I don’t think the level of corruption in the countries I reside is a serious problem for their currencies (yet) and their central banks generally do more good than harm – so I am happy to provisionally trust my wealth to government currencies. I would struggle to say the same for any cryptocurrency.
The shortest job I ever had was just 8 weeks – half of which was serving out my notice period! It was my “summer job”, as it was just for June and July 2005. Once my RBS contract ended, a serious search for the next job began. There were a few bad interviews, an awful experience with a pushy dishonest recruitment agent, and a clearly best offer. Unfortunately it did not work out.
Ri3k was a reinsurance technology firm (it has since been acquired and no longer exists as an independent entity). It aimed to help bring insurance companies together to create reinsurance contracts and then manage the result. For the first few years of the company’s existence this meant working on intranets for big insurers and consulting on knowledge management. That funded stage 2 – the development of an automated marketplace for creating reinsurance contracts and storing them. These contracts would be extremely low volume (just a few hundred per year if we were successful), but very large ($100’s million each), and could be quite complex with a lot of back and forth negotiations including supporting documents/evidence. The system also had to be secure and secret, both for regulatory reasons and because reinsurance is a secretive industry.
I started as a Software Architect to design the new system – an initial 3 month contract leading to a permanent position if all went well. Another person came onboard at the same time as Project Manager (my organisational equal) to handle the development software team. There was an initial team of 3 coders to help out in the early stages, but this was expected to grow over time. The project was an interesting problem. Just the sort of thing I wanted to work on. Plus it was greenfield dev and someone else did the people management! The office location was a small recently refurbished office near Hatton Garden and we had good, modern equipment. The team seemed friendly and of decent talent. I have pleasant memories of groups of us going out to lunch together and sitting in the sun to eat.
So what went wrong?
It was management. I had two managers: one for people management; and, one for technical management. The people manager seemed like a nice guy – he interviewed me and got me excited about the job, but I had little to do with him after that. Unfortunately I did not get to meet my technical manager before starting as he was on holiday through the interview process. Especially unfortunate as we did not get on at all. He was near impossible to work with. He would change his mind daily on requirements, what was important, and priorities. When the current task was complete he would be upset that I had wasted my time on something so irrelevant. He complained I was making mistakes or forgetting things, but usually the examples he provided were directions directly from him.
Within a week I had started keeping copious notes on our meetings and conversations to ensure I wasn’t missing anything. I would double check my notes after writing them with this manager. Yet still he would tell me later that I had it all wrong and could do nothing right, even if it was something directly from my notes that he had confirmed. The new Project Manager (who was in many of the same meetings) agreed that I was not the problem, and that my technical manager was changing his mind constantly and blaming me for it. Then my manager started becoming harder to track down, becoming increasing absent. This had its benefits as it allowed to focus more on the work I thought needed to be done. Although there was also the negatives as when my manager returned he was even more insistent I was doing it all wrong. A couple of times I spoke to my people manager about the problem, but the response was always that he agreed that my technical manager was “difficult”, but good at his job and close to the CEO, thus I would just need to learn to work with him. The situation made me increasing miserable.
I handed in my resignation 19 working days after starting, and offered to leave immediately. This was rejected so I worked out 4 weeks notice, making 8 weeks total. It just wasn’t worth the pain of working with an obviously toxic personality. I believe I had made reasonable attempts at trying to make the situation work, but was met with unreasonable demands. I had notified management of the problems, but nothing seemed to be happening. Best just to leave and move on. It was not the easiest decision to make, as I had no job to go to next, but it worked out massively to my advantage.
The last four weeks there were mildly more pleasant. My technical manager was still often absent and regularly belittled me, but I cared less. On my last day I handed both my managers and the new Project Manager two documents (not to just my technical manager as I didn’t trust him). The first was a system design based on what I thought my technical manager said was required; the other was the system design as I thought it should be done. Then I walked out.
That winter the Project Manager contacted me. He said that there had been some changes at Ri3k. After I left, at first the project had stalled and could not get moving for several months. Then my old technical manager had resigned and not replaced (it was suggested he was forced out). Since then they had gone back to my old personal design document and started again from the beginning using it. He said it was going well so far, and they would really like it if I returned as Software Architect. I declined. Things were going well at my new job and I didn’t feel any need to go back to a place with bad memories. Still it was nice to have confirmation that it was my manager who was the problem and I did a good job, if only for a short time.
Some notes from my 8 weeks:
- This is the only contract I have had where there was serious difficult with the recruitment agent. It took several months after leaving and many pestering calls before I was completely paid for all the time I worked.
- The De Beers London office was just around the corner from ours. They had a heliport on top of the building and we could hear the CEO arrive and leave every day (normally 10-4, short day).
- For my first 2 days on the job there was only me and and receptionist in the office. Everyone else was off at a corporate paintball camp. I just spent those days reading documents.
- During my time here Google came out with their Maps web application – the first web app that could update content on a web page without requiring the whole page to be updated (you could drag the map area around and only the map itself would update). This was a big deal in web development and all the dev people gathered around to see how it was done. Once we had worked it out, my technical manager declared it easy, unimpressive and something he could do in a few hours. I saw at least a couple of people roll their eyes.
- While doing some prototyping I made my (so far) only contribution to an existing open source project, providing a bugfix to C-JDBC, a now inactive Java database clustering library (see the release notes for version 1.3.1).
So after four and a half years in Kuala Lumpur, we have returned to London. My first impression? It is cold here. It has been quite a shock to go from the tropics to a Northern European climate. Plus, it is summer! Winter is coming, and I am not looking forward to it.
Other than that London seems vaguely the same. It is still incredibly expensive. The media continues to be full of stories of either impending disaster or glorious future success – depending on the proprietor’s political leanings. When we left it was Austerity, now it is Brexit. The trains are still broken on an alarmingly regular basis for what seem like nonsense reasons. Companies say nice things and are polite in public, but obviously couldn’t care less when time to get things done. People are everywhere, everything seems crowded, everyone is super busy.
Forgotten when I left, but quickly remembered on return: terrorism motivated attacks are common enough to be largely ignored by the local populace. Seriously, I have never seen a Londoner concerned about the London terrorist incidents that dominate the international news when they occur. If you ever see a news item claiming that Londoners are feeling scared, worried or “under siege” then they are talking nonsense.
There have been a few small changes too. Contactless payments are ubiquitous. I tried to pay for my lunch with cash soon after arriving and got a very dirty look from the cashier as they made an exaggerated gesture to open the till. It is as if I was an old man counting out pennies, which I suppose I was from a customer throughput point of view. There is also a huge increase in the number of “gentleman’s barbers”. Male grooming is definitely more overt. Hipsters abound!
Overall, I can not claim to be happy to be back. That is despite finding a job very quickly in an interesting fintech AI startup. It has also been good to catch up with old friends. I will probably be required by work to stay in town over the coming months. However, I sincerely hope this will be my last ever London winter.
We are just back from a fortnight’s holiday in Japan, visiting Kyoto and Tokyo. It was definitely a worthwhile vacation, and an interesting country, although Tokyo is extremely large and crowded. Some thoughts:
- Tokyo and Japanese culture did not seem that strange. Perhaps because it has become globalised and so commonly seen. Tokyo just seemed like a city big enough that normally small sub-cultures could grow enough to become noticed and make a mark on the city.
- I love the idea of underground automatic bicycle parking
- There are ubiquitous (never vandalised) vending machines – so you can always get a drink (sometimes even beer!)
- Keiren races are well attended, but rarely watched (the crowd spent most of the time gambling).
- As an Australian/British person, having someone beckon you upstairs for a restaurant feels so very wrong and likely to be a scam, but apparently is nothing special in Japan
My best photos from the trip are in a short slideshow available here.
Another year, another annual report on my Funding Circle investments. Events since last time have greatly changed the UK small business environment (see Brexit) and Funding Circle have also modified their rules. As a result, it is likely this will be my last report. Before explaining why, let’s see how the investments performed.
Here are the returns for the last UK tax year:
After Fees: 7.3%
After Bad Debt & Recoveries: 7.0%
Pretty good again – 7% much better than a bank, and about half the 2016 return on the UK stockmarket. Apart from a problem one year with bad debt, the returns have been consistently decent and worthwhile.
So why could this be the end? It is becoming increasing hard to find suitable loans. This started with the issues raised in the last report, when the site removed the loan auction system and replaced it with a fixed return system. This means that loans fill up much faster – especially the less risky or smaller ones. Thus when I check the site there are substantially less loans available. For a while this was balanced by large real estate loans that tended to take a few days to fill, but now Funding Circle has decided to reduce their number as well. Perhaps this change is due to Brexit risks? I’m not sure, but it would certainly make sense to me. The risks of lending to UK business have certainly increased in the sense the future is more uncertain. Do I really want to lend to that small manufacturer for 60 months? I have found myself more hesitant to lend – my required standards have increased.
Over the last year the money left unlent in my Funding Circle account has steadily increased. Since such funds accrue no interest, as soon as they reach a significant level, they are moved out to my bank account. Then it starts to build up again. I just can not find enough loans to join. By the end of the tax year the account was a third lower than at the beginning. Again, it is already starting to rise after just a week and there is a very good chance I will have a negligible amount left in Funding Circle in another 12 months.