Slate’s Aaron Mak on bitcoin, cryptocurrencies, and net neutrality.

Why You Might Not Want to Invest in Bitcoin Just Yet

Why You Might Not Want to Invest in Bitcoin Just Yet

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Jan. 10 2018 1:04 PM
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Why You Might Not Want to Invest in Bitcoin Just Yet

Slate writer Aaron Mak on the turbulent cryptocurrency market and the next steps for net neutrality.

A visual representation of the digital Cryptocurrency, Bitcoin
A visual representation of bitcoin on Oct. 23 in London.

Dan Kitwood/Getty Images

If you follow any technology news, you might have noticed a surge of headlines about bitcoin and blockchain and cryptocurrencies lately. In this S+ Extra podcast, which is exclusive to Slate Plus members, Chau Tu talks with Slate writer Aaron Mak about the turbulent cryptocurrency market, the next steps for net neutrality, and reporting on the tech beat.

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This transcript has been edited and condensed for clarity.

Chau Tu: There’s been a lot of news about bitcoin lately. Can you catch us up a little bit about what’s been going on?

Aaron Mak: Right. So, right now bitcoin is hitting a bit of a slump, I would say, compared to last year at least when we saw huge gains—it rose over 1,000 percent since January 2017. But now, we’re seeing that it’s slowing down a bit. There’s been some dips in actually all cryptocurrencies likely because of other regulators from foreign countries. South Korea, India—they’re all kind of hesitant about the whole cryptocurrency craze, so they’re considering a lot of regulations, which is likely depressing the price a bit. But, in the past when we’ve seen these dips, it’s always gone back up somewhat erratically. So, it’s too early to say whether or not it’s a long-term slump or not.

Yeah, and overall, are these cryptocurrencies trustworthy? What have you seen about this if it’s changing all over the world?

Yeah. I’m in no position to give any investing advice, but I would say I don’t think anyone has a really good take on where it’s going to go. All the experts are very much conflicting with one another. I would say if you are thinking about it, be very careful. I know people are taking out mortgages right now to buy cryptocurrencies, which is probably a terrible idea. Just use money that you can afford to lose if you want to invest in it. Yeah, it’s a very unpredictable world right now.

What’s the difference between all these cryptocurrencies? I mean I saw that the camera company Kodak is starting the KODAKcoin.

Right. So, there’s a lot of different ways in which cryptocurrencies can differ from one another. Some of it is just branding; Kodak is just putting their name on a cryptocurrency. They’re pretty easy to start up, but some of them actually have different underlying algorithms which they use to actually mine the cryptocurrencies. So, things like bitcoin use something called proof-of-work, which means a computer has to expend a lot of energy to solve these really complex mathematical models. Other cryptocurrencies use something called proof-of-space, which means that you’re using the memory, or the memory and processing power, in the computer to mine cryptocurrencies. There’s a lot of different ways in which these cryptocurrencies can differ from one another.

Why do you think it’s so popular right now?

I mean, I think from just that huge—that crazy week in 2017 where it was just rising and dropping so erratically, it was just kind of a whirlwind of media coverage and people were following it so closely because you saw people becoming billionaires off of it. I know the Winklevoss twins became billionaires just from investing like $11 million in bitcoin a few years back, and they suddenly became these huge figures again. It’s just kind of a rags-to-riches-to-rags-to-riches, up-and-down, up-and-down story that was attracting a lot of people, I think.

Yeah, has it become easier to use, you think?

Yeah. There have been a lot of platforms that have been launched to help people trade cryptocurrencies. I think there are people who trade in this kind of thing, or people who create platforms realize that there’s a market for this now. It’s probably trying to get more people into the game because, yeah, it has attracted so much attention.

Where do you see the future going? Do you think it’s going to keep going on this up and down?

Yeah, I think it’ll depend on the cryptocurrency itself. I actually think that some of them will do better than others, so you might see bitcoin doing poorly compared to another cryptocurrency like Ripple, or it might be the other way around. It kind of depends on how people are feeling about the different kinds of the cryptocurrencies, depending on the scalability and susceptibility to hacking and all that kind of thing. It’s hard to say for the cryptocurrency field in general what’s going to happen, but yeah, you might see that some of them will do really well and some of them don’t do as well.

Yeah, you just wrote about Ripple, tell us a little bit about that. That kind of came out of nowhere.

Yeah, so Ripple was actually, at least according to Quartz, the best performing cryptocurrency of 2017. The co-founder and chairman of it right now is richer than the founders of Google just because of the crazy jumps it had; it was worth less than 1 cent early last year and now it broke $3, so that’s a huge climb. It’s a currency that financial institutions are supposed to use to complete transactions with one another.

That’s pretty crazy. So was it just like word of mouth? Or what do you think made it so popular?

Yeah, with cryptocurrencies in general, it’s really hard to say what is causing the spike and what’s causing it to drop. It very well could be word of mouth. I mean, it got a lot of very favorable coverage towards the end of the year. That could possibly be it, but it’s hard to say, compared to stocks, what is causing something to rise or fall.

You were also following this story of net neutrality and so the Federal Communications Commission voted to end neutrality last month. So, what happens now? Do you know what the next steps are?

There’s a number of different ways with which supporters of net neutrality are trying to overturn or block that decision. So, if you look at Congress right now, they are trying to pass an act that would effectively stop the FCC from implementing this new change. That will be voted by the Senate and the House. There are also a number of lawsuits by different states and activist groups which are arguing that the commenting period for the debate that the FCC held was corrupted because there were a lot of fake comments, and it looks like bots or some other malicious actors were overrunning the process. So, that could be a way to re-evaluate the whole decision. You also see lobbyist groups—at least one lobbyist group, the internet association for the big tech companies like Google, Amazon—they’re stepping in to offer legal help there as well. It’s going to be a pretty interesting fight, I think, in the upcoming years.

Were you surprised that the FCC voted it down?

I think people were predicting that for a while just because of the political balance of the FCC at the moment. I think what was really shocking was the commenting process at least compared to last year, or past iterations of the debate. That wasn’t really an issue, so it was kind of surprising to see that pop up this time.

You mean just because so many people were commenting this time around?

Yeah, there were a ton more, at least a ton more comments on those boards. Whether or not it was people is up to debate or investigation because a lot of the comments came from people who had either passed away or didn’t exist. So it’s unclear who was behind that whole thing.

Wow, yeah, that’s pretty crazy. That’s really weird.

Yeah, it is very weird.

So, we shouldn’t necessarily expect that net neutrality is going to just instantly happen over the internet then?

Right. It’s going to take a while for anything to get implemented. Actually, there are a few more steps that the FCC needs to take before people can even sue them because it won’t go into effect for a while. I think everyone’s kind of just waiting for the next step.

So between Silicon Valley and the internet and things like the cryptocurrencies, the tech beat is pretty expansive these days. What do you think has been the most surprising thing that you’ve learned since reporting on tech?

Just the crazy power that some of these companies have, like Amazon or Google, just in their data collecting operations and how much cities are trying to vie for their support and moving headquarters to certain locations, is just kind of insane. I didn’t realize how powerful they were until I started this beat. So, yeah, there’s definitely I think a lot of room for a lot of watchdog journalism just to make sure that everything is kosher and going according to what will help the customers and the nation and so on.

What do you think has been the most difficult thing about reporting on this beat?

There’s just so much technical knowledge and it’s really easy to get caught in the weeds with this sort of stuff. I personally don’t have a computer science or engineering background—in some ways that does help because I don’t assume knowledge that readers don’t have because I don’t have that knowledge in the first place. But then again, I have to learn everything kind of quickly and without that background knowledge, it can be kind of hard to try to figure out what exactly is going on and then explain it to readers.

When you’re reporting on Silicon Valley and those companies, do you find that they’re usually pretty open?

It’s definitely different from any source I’ve talked to before. They tend not to like to comment on the record when you’re talking to them on the phone; they would rather send you a statement and attribute it to a spokesperson. They don’t like to give names, so even compared to the local political candidates, they’re very, very careful with what they say and they prefer writing everything out which has been very different, definitely.

I wonder what that’s like a reflection of. Whether it’s just the community there or if it’s younger people or what?

I think it also must be that they have enormous resources for PR. They can afford to be very, very careful because they have so many people working on it. They can expend that kind of energy to make sure that everything is just meticulous and accounted for.

The money is power, if anything.

Right. Exactly.

Is there anything that you think that’s sort of under-reported right now in the tech industry?

I guess the hacks. That kind of thing is becoming one of those things you hear about a new hack every day. Like some major company like Uber or Whole Foods or someone else had a bunch of their customers’ data leaked and it’s becoming the kind of thing where it just seems like it happens very, very often, so it’s pretty easy just to discount like oh, this has happened again.

But, it’s pretty serious when you have either credit card information or even just your name and email, that’s pretty annoying to have out there. It’s hard to keep up with every single hack and see like, “OK, what was lost, what should I be checking for to see if I’m affected by this?” At least for the average reader, I can’t imagine them trying to keep up with everything and to make sure that they’re protected.

Yeah, that’s true. I feel like I’ve definitely heard about all these hacks of these companies and it’s almost like you don’t know how to follow up as a consumer necessarily to find out what to do, right?

Exactly, and these companies don’t exactly make it easy to check up to see if you’re covered or not.

Do you feel that you’ve become skeptical of technology or do you feel like you still like lots of cool gadgets and things like that?

Yeah, I mean I definitely think that there’s a lot of possibilities for technology. I don’t think that the tech boom is bad at its core. I think you just need to be careful because it’s expanding so quickly that there are so many new technologies and so many different regulatory concerns to think about that it’s hard to keep pace with everything that’s going on, it’s a challenge. But I don’t think that means that the boom in general is bad. It just means that we have to be very diligent about what’s going on.