Circle Still Using Bitcoin ‘Behind the Scenes’

Bitcoiners were maddened when former Bitcoin Core developer Mike Hearn quit the cryptocurrency’s community. They alleged Mr. Hearn “rage quit” after he agreed to an interview with New York Times and penned a Medium post about why he was divesting from Bitcoin.

Also read: Bitstamp Tries the Crowdfunding Route at $60 Million Valuation

Circle Pivots in New Directions

Now, Circle Internet Financial has publicly bemoaned Bitcoin developers, placing blame on their shoulders for Circle’s lack of success in the space.

Mr. Hearn identified real problems within the Bitcoin ecosystem, touching on its lack of governance model and the infighting to which this has led. He moved onto greener pastures at R3. These same issues have bubbled to the surface yet again.

Circle, the payments startup which boasts founders from Wall Street, has now also “rage quit”, blaming the cryptocurrency’s developers for Circle’s suspension of bitcoin trades — while still using bitcoin internally!

The issue lies not with Bitcoin and its present iteration, although there are big issues to be sorted through and learned from, but with the fact that some bitcoin service providers are redundant. Circle, apparently, for one.

Bitcoin, a payment system, and token, needs not a third party provider to do what it already can do: transfer value. Users are doing this without problem for less expensive still than other providers. They might not be doing it at quite the scale as Circle, but they might be less monied users who thus benefit from the technology more than Wall Street alums.

The Blame Game

Circle not only was one of the best funded digital currency firms but represented one of the first Bitcoin organizations to boast Wall Street talent. The company announced the move away from Bitcoin on Wednesday, and Wall Street took the occasion to call it “the latest indication that the financial revolution that bitcoin’s early developers had hoped to spark isn’t playing out as planned.” A statement which, ironically, is merely the latest indication that WSJ understands jack about Bitcoin.

Bitcoin’s early developers thought it was a good idea, but good for financial domination is a line of reasoning that’s mostly relegated to the marketing materials of myriad third-party bitcoin services, many of which are bloated and redundant, as well as Reddit and other social forums where people chat…anonymously.

According to WSJ, Circle CEO Jeremy Allaire said, “bitcoin hasn’t evolved quickly enough to support everyday financial activities.” He levied complaints at Bitcoin’s developers.

“The story is one of essentially gridlock amongst core developers, while mainstream companies are using this technology,” Allaire said of Bitcoin. “We’ve been deeply frustrated with that lack of progress, and we want to move it forward.”

Allaire’s statement is essentially the same as blaming Bram Cohen for not perfecting BitTorrent for enterprise. Or Charlie Lee for not taking his job with Coinbase instead of developing Litecoin (or marketing it) to take the burden of micro-transactions of the bitcoin’s block size’s shoulders. Allaire’s main problem is that he oversaw Circle’s over-leveraging of itself in bitcoin.

Circle Will Still Utilize Bitcoin for Settlement

A cursory search on Google reveals no donations by Circle to Bitcoin developers, but $136 million being invested into Allaire’s startup by financial and tech powerhouses.

Notably, Circle suspended payments after the Internal Revenue Service sent a John Doe summons to Coinbase for two years of user records. Coinbase, not charged with doing anything wrong, scoffed at the request and posted on its blog it would fight the “government’s sweeping request.”

The headlines imply Circle is totally getting out of the Bitcoin industry. But, that’s misleading. Allaire says Circle remains committed to using blockchain for cross-border payments. The company plans to continue using bitcoin and other digital tokens internally, also, and Coinbase agreed to partner with Circle so the company’s customers can still buy and sell bitcoin.

Why not keep one foot in the Bitcoin industry? After all, WSJ writes, Circle’s bitcoin volume grew 50% a year. And the gains they made just by holding bitcoin since the the summer of 2015 alone? Nearly 300%.

What do you think about Circle changing its business model? Let us know in the comments below.

Images via Shutterstock, Circle Financial, and Fortune

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