My thoughts on Bitcoin – part 1
Interest in bitcoin is at an all time high, with stories of people throwing away £4 milllion on hard disks, to it topping $1000 per bitcoin (up from $100 earlier this year), reaching parity with gold (for about an hour), crashing 30% in a day and media interviews like: ‘The Winklevoss twins talk bitcoin’ bringing it to mainstream attention.
A few people have asked so here are my thoughts on bitcoin.
I’m not going to write an explanation of bitcoin <– I’d suggest this one from coindesk if you’re looking for that.
Read that, then come back.
We’re in the early adopter phase where bitcoin is volatile, risky, hard to use, buy and trade but what follows is very exciting.
I don’t see bitcoin as just a new currency, an investment opportunity* or the route to some sort of worldwide financial anarchy – I see it as an interesting evolution in financial technology as both a currency and a method for transferring money.
Explained to a friend: Bitcoin is to money, like the internet was to… publishing, music… well everything. It's very clever digital cash.
— Luke (@alukeonlife) November 27, 2013
There are regulatory issues to overcome as well as important questions of definition: will governments view it as currency, vouchers (as HMRC did until recently) or something else?
I also think of it in a similar way to my early thoughts on twitter (short format, easily shareable content was the trend, twitter was the main player that could have been superseded) – Bitcoin itself might be a fad, that is replaced by another form of virtual currency but there are lots of reasons that a digital cash system of some kind without ties to a specific country and allowing for easy, near instant transfer is inevitable.
Being open source, bitcoin has already branched off into lots of other variants (also known as altcoins) – I’m sure this isn’t its finally form – right now it’s just too complicated to reach critical mass of use in the population.
I can see a couple of likely scenarios:
1) Bitcoin crosses a critical mass of acceptance (some would say it has, I don’t think so, yet) and become the de-facto internet currency, largely thanks to a company that emerges as the public brand of the currency (like eBay is to online auctions, YouTube is to video…) driving it fully into the mainstream – looking at some of the investments going into bitcoin related companies and funds, I don’t think I’m alone in that thought.
2) A large (publicly well known) company will launch an alt-coin that has the credibility bitcoin lacks, ticks all the legal and regulatory boxes but still operates in a way that maintains the transactional benefits of bitcoin as digital cash. It’ll be a bastardisation of bitcoin that the early adopters won’t like, perhaps lacking the mining element somehow but maintaining a public like ledger in the same way bitcoin does.
Whatever happens, I think we’re at the start of something big right now. A movement has started that will change the way we think about money, banking and much more – I can’t wait to see what happens next!
As ever your thoughts are more than welcome in the comments below.
*as an investment opportunity, buying bitcoins is a gamble – for that reason I’ve only bought using money I can afford to lose and it’s almost at the trigger price where I’ll sell some so my risk is zero – I’m a big believer in ‘put your money where your mouth is’.
Full disclosure: I do own some Bitcoin.. and some cash… probably a few euros… oh and a dollar bill I had left over from Vegas.