I recently had the pleasure of interviewing Robert Kuhne, an analyst at Huobi, one of the resilient Chinese Bitcoin exchanges that is leading the Chinese Bitcoin movement. Robert and I talked about China, Bitcoin, and Chinese Bitcoin regulations. Here at Bitcorati, we are dedicated to bringing to light quality interviews with people like Robert from the Bitcoin businesses that you use, like Huobi. Nowadays, the majority of Bitcoin trading occurs on Chinese Bitcoin exchanges, largely because of the minimalist fee structure. It doesn’t matter if you are in the Czech Republic, Kenya, France, or China because the new international currency bitcoin is coming your way.
Bitcorati Interview with Robert Kuhne of Huobi
What has Huobi done recently that you are most proud of?
The past year has been very difficult for the bitcoin industry in many respects – we saw the disastrous collapse of MtGox, numerous other scams and thefts, an 80% price decline. I am proud that despite all of this adversity, Huobi has continued to grow its user base, expand its product offerings, and promote awareness and adoption of bitcoin in the general public. In the past year Huobi’s CEO Leon Li has been very active promoting bitcoin by speaking at several mainstream finance conferences in China and giving lectures to students and faculty at Qinghua University (the MIT of China).One recent thing that I am proud of is the new maker-taker fee structure we implemented for BitVC Futures. Under this system, maker orders are free, but in addition, maker orders are credited with 50% of the corresponding taker order fees. This kind of system is unprecedented. We started this program at the beginning of February and soon had a significant increase in market depth and trading volume, which provides a better trading experience for our users. Since it started, makers have earned more than 1,000 BTC.
We have a highly experienced and professional information security team, as security is absolutely essential to any bitcoin or financial services company. Bitcoin is an especially attractive target for criminals because transactions are irreversible and it can be anonymous if certain techniques are used. In the past year Huobi acquired Quickwallet, China’s first multi-signature bitcoin wallet. Quickwallet founder Zhang Jian, now Huobi’s VP of Technology, and his team used their expertise to help implement multi-sig technology into our offline cold wallet system. No more than 3% of funds are ever held in hot wallets; the rest is held in offline multi-signature wallets. Huobi’s website undergoes regular security testing by third-party experts and offers bounties for detecting any bugs or vulnerabilities.We are very happy to see the industry moving toward a uniform consensus of security best practices. The CryptoConsortium CryptoCurrency Security Standard seems very promising step in this direction. Strong industry security standards are absolutely essential for bitcoin to make further inroads with large institutions and the general public.
In the international bitcoin community, there are many active bitcoin traders and bitcoin miners, but they constitute a minority of the total; most are buy-and-hold long-term investors, technology aficionados, fintech entrepreneurs, supporters for ideological reasons, merchants who benefit from the reduced fees and publicity, and people for whom it is a more convenient and secure online payment method. In China, the vast majority of bitcoin use revolves around speculative trading and mining. Bitcoin use in commerce in China today is probably at the level it was in the United States in 2011 – extremely rare. Vocal support for bitcoin for ideological reasons and prognostications that bitcoin will lead to the downfall of the traditional financial system are virtually non-existent. Still, there are many talented people in China working at companies like Huobi or smaller start-ups to develop the technology and build user applications for bitcoin, and I have no doubt that there are several big long-term investors who do not want to draw any attention to themselves.
Chinese internet users cannot access Facebook, Twitter, YouTube, Google, The New York Times, Bloomberg and many other major international websites without a VPN. However, there are Chinese alternatives to all of these services, so the vast majority of Chinese netizens do not have a need or desire to use VPNs. And when people here do need a VPN, they are more likely to use one of the free, poor-quality VPN services that are available. Personally, I could not survive in China without a high-quality VPN service – I have paid bitcoin for Astrill VPN service the past two years, and I recommend it to anyone else in China who needs access to the real internet.
I will quote our CEO Leon Li from an earlier interview:Looking at the issue objectively, China actually has one of the more relaxed policies toward digital currency trading platforms. Although the government has introduced some constraints and limitations, overall, there is still enough room for these businesses to operate. The government has been concerned about the use of Bitcoin for money laundering and violating foreign exchange rules, but Huobi has taken steps to prevent these legal risks.
The regulatory climate will certainly change in the coming years, and there will be significant differences between jurisdictions. Some regulators will go too far, thus chasing bitcoin businesses away to more accommodating jurisdictions. Ben Lawsky’s New York BitLicense may be an example of an oppressive regulatory regime that will stifle innovation and ensure that New York does not become a major bitcoin center. The effect remains to be seen. Jurisdictions that regulate more reasonably or not at all will attract bitcoin entrepreneurs and investment.As for China, the government here neither endorses nor prohibits bitcoin. The only official government policy regarding bitcoin is that traditional banks and financial institutions are not allowed to deal with bitcoin directly. Private ownership and trading of bitcoin is legal. I am certainly not qualified to make predictions about the future direction of Chinese government policy toward bitcoin; I consider Zhang Weiwu to be the leading expert on this topic. He gave a great talk at a recent bitcoin conference in New Zealand and has written several excellent essays. He says that while bitcoin is still small, the Chinese government will not take any action. Its general tendency is to be cautious and take a “wait and see” approach. They are conservative, but at the same time they are prudent enough not to foolishly crush a potentially lucrative industry.
Yes, there are different use cases and benefits to be derived from bitcoin depending on individual circumstances, but the vast majority of humanity stands to benefit, except perhaps those who are currently profiting as parasitic middlemen, financial oligarchs, or politicians. The average person in a poor country probably does not have the extra money to speculate on bitcoin’s future price appreciation or invest in bitcoin mining, but could benefit tremendously from low-cost or free international remittances and being able to buy and sell products and services online (which they otherwise couldn’t do because they don’t have credit cards and bank accounts). Bitcoin also provides an excellent solution for people living in places like Venezuela or Ukraine that are suffering from terrible currency inflation. Most of the bitcoin critics in the more technologically advanced countries totally ignore the benefits that it offers to poor people around the world.
“Bitcoin is the financial singularity.”In addition to being a passionate bitcoin enthusiast, I am also a strong believer in the idea of the technological singularity (as an aspiration for humanity, not necessarily an inevitability). That quote comes from the popular singularity blogger/interviewer Nikola Danaylov.I was also delighted to read that Peter Diamandis, a brilliant entrepreneur and leading advocate of the singularity, named bitcoin one of his top tech picks for 2015.There are a number of eloquent and insightful bitcoin advocates who consistently produce quotable content. Andreas Antonopolous, Roger Ver, Erik Voorhees, and Jeffrey Tucker are a few who come to mind. I also enjoy the writings of Daniel Krawisz of the Satoshi Nakamoto Institute and Nozomi Hayse, who has written one of the best essays on bitcoin.
The world has not been changed by bitcoin. Yet. Until now, it has impacted the lives and dreams of a few thousand people, but the radical transformation that it could bring about is still in its embryonic stage.
There is a wide range opinions on the degree to which bitcoin will change the world. Some believe that bitcoin is a clever innovation which will be adopted by banks and governments to bring about some improvements in efficiency and security, but that nothing fundamental about the way the economy and society functions will change. These are generally the people who say “Bitcoin is a terrible currency but we love the blockchain.” On the other end of the spectrum are those who believe that the creation of bitcoin was the beginning of a process which will result in the complete dissolution of nation-states and parasitic financial institutions.I think if bitcoin’s only impact on the world is that it becomes a useful tool for the incumbent financial system, it will have been a failure. Personally, I am much more optimistic. I believe bitcoin is a revolutionary technology, comparable in importance to Gutenberg’s printing press and the internet. History consistently shows that when new technologies emerge which are an order of magnitude better than the old way of doing things, the new technologies inevitably triumph and make the old obsolete. In the digital age, bitcoin is superior to fiat currency and gold in every important aspect. I do not believe that banks and governments will disappear, but I do believe that the existence of bitcoin will reduce their power, which will greatly improve the prospects of peace and prosperity in the world.