No longer cryptocurrency shy:
A personal reflection on my introduction to buying virtual currency
Welcome to the world of Bitcoin – where banks are undermined, governments are circumvented and currency goes online.
The brainchild of the mysterious genius Satoshi Nakamoto, Bitcoin is inherently anti-establishment, anti-system and anti-state (Tourianski 2014). Bitcoin is a decentralised, peer-to-peer virtual currency designed to function outside of regulatory systems and existing power structures (Bitcoin Group 2015, p.26). It's the grand new hope of the technological utopians and cyber-libertarian pundits who, in the Internet Revolution of the mid-1990s, promised us the death of the established order and the birth of a new self-governing virtual realm with vastly increased human freedom and empowerment (Kutiš 2014, p.218).
Yet since its inception in 2009, Bitcoin has cemented a reputation as a currency of volatility, insecurity and criminality (Casey & Vigna 2015). In the public discourse surrounding Bitcoin, there has been emphasis on its speculative nature, the associated risks and its alleged use in illegal activities, including its role in money laundering and illicit commerce (Hurlburt & Bojanova 2014, p.12). These numerous obstacles have hindered Bitcoin’s adoption as a legitimate, mainstream currency (Sonderegger 2015, p.185).
Despite its slow uptake among merchants and consumers, Bitcoin has a thriving market in China, which is home to 90 per cent of the world’s Bitcoin trades and 70 per cent of world mining production (Chen & Nakamura 2016). In May this year, Bitcoin prices reached a two-year high after Chinese buyers bought 1.6 million bitcoins, worth nearly US$850 million, in just one 24-hour period (Crouch 2016). This real-time map of global Bitcoin trading activity further illustrates China’s dominance.
Bitcoin’s growing popularity in China has been attributed to a slumbering stock market, heightened expectations of the yuan’s devaluation and the advantages the payment system offers in dodging Beijing’s anti-corruption drive (Ren 2016). At the same time, Chinese companies have leveraged their access to lax regulations, cheap labour and inexpensive electricity to outmanoeuvre their global peers in performing the complex calculations needed to verify Bitcoin transactions, a process referred to as 'Bitcoin mining’ (Chen & Nakamura 2016).
Shanghai-based exchange BTCC was China’s first bitcoin exchange and is now the longest-running and amongst the largest in the world by volume (BTCC 2016). This volume is mostly generated by Chinese customers since the exchange in the international arena is limited (BTCC only supports Chinese yuan). Nevertheless, BTCC does offer an international platform, allowing its global customers to deposit and withdraw Bitcoin and Litecoin, which is widely regarded as ‘the silver to Bitcoin’s gold’ (CoinDesk 2014).
As I am eager to understand the Bitcoin phenomenon first-hand, I decided to buy a bitcoin (well actually a portion of one) using an Australian exchange and then transfer it to a BTCC account. In the video below, I share my experience and briefly discuss some of the challenges encountered throughout the process. In the ensuing sections, I will reflect upon, analyse and interpret this experience within its broader sociocultural context using an autoethnographic research approach.
Autoethnography is a genre of writing and research that connects the personal (auto) to the cultural (ethnos), placing the self within a social context (Reed-Danahay 1997, p.145). Autoethnography involves the "turning of the ethnographic gaze inward on the self, while maintaining the outward gaze of ethnography, looking at the larger context wherein self experiences occur" (Denzin 1997, p.227). Thus, self is a subject to look into and a lens to look through to gain an understanding of a societal culture (Duckart 2005, cited in Chang 2008, p.43). Based on this notion, my experience of buying a bitcoin provides a useful lens to explore issues of trust in social institutions at large within today's “socio-economic crisis” (Khairuddin et al. 2016, p.2876).
According to Khairuddin et al. (2016, p.2876), the current economic climate characterised by global financial instability has led to a chronic distrust in institutions aimed to provide structure for the social order, in particular governmental and financial ones (Khairuddin et al. 2016, p.2876). This distrust in financial institutions is argued to be fuelling the growth of Bitcoin as an alternative currency, which provides users with a form of empowerment from monetary hegemony (Khairuddin et al. 2016, p.2876).
My personal experience with banks, however, is largely different to the public animosity reported in academic and grey literature. I have an innate trust in financial institutions that was enshrined from a young age when I opened my first bank account. Australia’s comparative stability through the GFC reinforced my trust and confidence in banks and affirmed the importance of government regulation and intervention in the financial system (West 2014). Due to these beliefs, upon purchasing a bitcoin on CoinTree, I felt relieved by the need to make a cash deposit at a Westpac branch. This mitigated my uncertainty towards the whole process as it involved a trusted intermediary and a cultural norm that I am deeply familiar with – going to the bank.
Bitcoin’s lack of protection with respect to monetary transfers, which I have grown accustomed to from traditional financial providers (including fraud protection, deposit insurance, dispute resolution and safeguards from theft) inhibits my development of trust towards the technology. This is supported by Raymaekers (2014, p.33), who reported that consumers are still apprehensive towards the unregulated nature of the Bitcoin ecosystem. In this way, while there may be a culture of distrust in banks, there is still little evidence of personal behaviour to suggest people are willing to move their money (Dietz 2014). This suggests that trust in banks is in fact astonishingly high (Dietz 2014).
Australia’s financial intelligence agency, AUSTRAC, recently announced that Australia is moving to become one of the first countries to regulate virtual currencies such as Bitcoin under its anti-money laundering and counter-terrorism financing laws (Topsfield 2016). It will be interesting to see whether the introduction of clear regulations will confer a degree of legitimacy and support for Bitcoin that, in the future, may encourage more people to leave banks.
Autoethnographers intentionally use personal experience to create nuanced, complex and comprehensive accounts of cultural norms, experiences and practices (Adams et al. 2015, p.33). Autoethnographers offer these "thick descriptions" in order to facilitate an understanding, and often a critique, of cultural life by encouraging readers to think about taken-for-granted norms, experiences and practices in new, unique, complicated and challenging ways (Adams et al. 2015, p.33).
My experience of buying a bitcoin provides an opportunity to examine cultural anxieties and apprehensions about the porousness and vulnerability of cyberspace and, in the process, challenge public assumptions of online risk.
Upon verifying a host of personal details and sending CoinTree a photo of myself, I felt concerned about my exposure to the risk of online identity theft and fraud. I was also uncertain about posting the video I made online as it reveals my personal Bitcoin address.
According to Beck et al. (2003, p.10), the Internet plays a significant role in the development of a 'global risk society’. Despite the unprecedented high levels of personal security that now exist in Western societies, there remains the underlying public concern, propagated by media reportage and adverse commentary, that our online identities, messages and personal information will be compromised by “those who operate in the dark recesses of the Internet” (Wall 2008, p.870).
The widespread privacy and security concerns over data linkage and the longer retention of names and addresses in the 2016 Census is testimony to the prevailing culture of fear about cybercrime. The four Distributed Denial of Service (DDoS) attacks which caused the online census system to shut down also induced a large degree of anxiety and panic amongst citizens as to whether the data they provided was safe (Cross 2016, p.3). This can be seen as constituting a public expression of ‘cyberpanic’ (Sandywell 2006, p.46).
Like moral panics more generally, cyberpanics are imaginary in their origins but very real in their consequences (Sandywell 2006, p.46). According to Jewkes and Yar (2011, pp.12-13), concerns about internet crime have cultivated a viral risk-consciousness that normalises the expectation of ubiquitous crime problems regardless of whether any actually exist, such as that we expect and anticipate crime as an inescapable feature of the online landscape. In this way, my scepticism towards using Bitcoin exchanges is tied to a more general concern over online vulnerability which is created and structurally reproduced by the mainstream media.
CoinTree’s lengthy identification process also challenged my understanding of Bitcoin as being an anonymous virtual currency. Martins and Yang (2011, p.350) argue that bitcoins can be traced from the original miner all the way to the current owner. In addition, Bitcoin transactions are recorded publicly in the “Blockchain”, a community validated secure virtual ledger which has ushered in a revolutionary way of establishing an immutable “digital truth” (Godsiff 2015, p.191). As a result, Bitcoin fails to offer even a modicum of the privacy provided by traditional payment systems (Ben-Sasson et al. 2014, p.459).
I was particularly suspicious of POLi Payments, which is a common online payment option offered by Australian Bitcoin exchanges. POLi, owned by the Australian Government's Australia Post, allows users to make one-off direct payments to merchants by logging into their internet banking (Strongman 2015). Fundamentally, their process is to obtain customer information (access numbers and passwords) and make the payment via their own systems (Strongman 2015). The apprehension I felt about POLi led me to reflect on my initial experience with PayPal, which I also once viewed with suspicion but now use without hesitation. According to Tsiakis and Sthephanides (2005, p.10), trust is an important antecedent for every electronic payment mechanism to be accepted and established as a common medium of financial transactions.
Autoethnography is conceptualised as an iterative and continuously evolving process of data collection, analysis and interpretation (Ellis 2004, p.119). Through this cyclical procedure, the researcher becomes more sensitised to cultural nuances (Minowa et al. 2010, p.681). In keeping with this practice, I aim to understand how my initial thoughts, perceptions, interpretations and reactions towards Bitcoin, recorded in this Storify story and blog post, has informed my experience.
Upon buying a bitcoin on CoinTree, I wondered where in the world it was being mined. This led me to enquire with CoinTree's online customer support team who stated, "No bitcoin companies in Australia mine any bitcoins in Australia, because power cost is too high. We get the bitcoins from overseas." Due to the impressions of Bitcoin mining that I gained from watching the documentary Life Inside a Secret Chinese Bitcoin Mine (2015), I envisioned my bitcoin being mined in a dystopic, dilapidated, unprofessional and desolate building in a remote region of China. While the documentary footage of the Chinese Bitcoin mine initially made me feel sceptical towards buying bitcoins, the modern websites and impressive security measures of both CoinTree and BTCC eased my apprehension.
At first, I struggled to accept that virtual currencies such as Bitcoin can be used to purchase actual goods and services. This was still the case after buying my first bitcoin, as I was left pondering the question, 'What do I do now?’ According to Coinmap.org, there is only one business in Wollongong that accepts bitcoins – All Residential Real Estate. I am confused as to why bitcoin would be used for such a sizeable transaction as payment for properties, particularly due to the volatile nature of its price. This has led me to wonder whether it is a business strategy used to attract Chinese buyers looking to invest in the local property market. This is yet another cultural assumption.
As I am unable to find any local places to spend my bitcoin, the process of buying a bitcoin resembles my past experience using virtual currencies in Habbo Hotel – both which were momentarily fun/interesting but ultimately frivolous (at least with Habbo Hotel I received my money’s worth – a VIP membership badge!).
In my first autoethnographic account, I was surprised to learn that the Chinese government has not prohibited its citizens buying and trading Bitcoin. However, the Chinese government has banned its banks from handling transactions involving the virtual currency since December 2013 (BBC News 2013). As such, Bitcoin remains on shaky regulatory ground in China.
Given the country’s precarious stance on Bitcoin, I perceived registering an account on BTCC as risky. The fact that my money is now hosted in China, a country that is predictably unpredictable in its dealings with the outside world, does not inspire confidence. As Carney (2013) elucidates,
“A bet on Bitcoin is increasingly a bet on the predictability of the Chinese government and its highly unstable economy. It is a bet that the Chinese economy will perform poorly, capital controls will continue and Beijing will remain tolerant of Bitcoin. In other words, it’s a sucker’s bet.”
My scepticism about registering with BTCC is also derived from my fear of being under Chinese supervision. According to Jiang (2012, p.12), China is often demonised by the Western media for its tight surveillance mechanisms and Internet censorship practices which contradict Western notions of freedom and liberalism. This reflects the discourse of Orientalism in which the West reinforces its sense of superiority by providing “evidence” of the inferiority of the Other (Lary 2006, p.4). In reality, however, Western countries are also entwined in government mass surveillance. For example, a document released by Edward Snowden in 2015 revealed that Australian intelligence services have been using the US government’s PRISM spying program to directly access the servers of Google, Apple, Facebook and other big US companies (O'Neill 2015).
I have used autoethnography as the method for this project to reflexively and critically investigate how my personal experience of buying a bitcoin connects to wider social and cultural meanings. My methodological process is more akin to Anderson's (2006, p.385) analytic autoethnography in which self-narratives are used to develop and refine generalised theoretical understandings of broader social phenomena, than to the evocative or emotional autoethnographic method championed by Ellis and Bochner (2000).
Ellis and Bochner (2006, p.440) argue "If you turn a story told into a story analysed…you sacrifice the story at the altar of traditional sociological rigor". However, rather than compromising my story’s power to evoke, the inclusion of formal analysis has shed light on the key issues and concerns associated with Bitcoin. This provokes readers to think more deeply about their own attitudes, preferences and perceptions regarding Bitcoin and virtual currencies more broadly.
While I do not feel inclined to purchase more bitcoin any time soon, I believe that we are on the cusp of a major financial technology revolution which will see this democratised virtual currency play a significant role in the future. Whether this will be as a competitor to the likes of Visa or PayPal, or through the mainstream adoption of the Blockchain technologies underpinning Bitcoin, I cannot say. However, should Bitcoin one day emerge as a sustainable and meaningful addition to the global economy, then China's dominance of the global Bitcoin market has it well placed to leverage significant power and influence.
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