Currency of the future?

Published December 23, 2013
Some of Bitcoin enthusiast Mike Caldwell's coins in this photo illustration at his office in Sandy, Utah, September 17, 2013. — Reuters Photo
Some of Bitcoin enthusiast Mike Caldwell's coins in this photo illustration at his office in Sandy, Utah, September 17, 2013. — Reuters Photo

The word “disruption” has garnered a lot of attention in the past few years. Challenging the traditions of each industry, startups such as Uber, AirBnB, Kickstarter, Square and Gilt have not only successfully caused temporary disruption, but brought about irreversible change in each of their respective industries; change which spills over to other business models and initiates movement where there was previously stagnation.

The disruption model has persisted and consistently gained momentum because it clearly works despite being unconventional. All the companies mentioned above are profitable enterprises that are creating employment, paying taxes and benefiting the localities they operate in. The digital movement has clearly changed not only how we communicate, but how we organise ourselves. An enterprise which challenges the status quo, and benefits the end users – the more the better – would theoretically experience higher adoption rates.

That’s all fine and dandy for organisations working for-profit, with end-to-end control, but how does it apply to disruptive technologies which don’t operate for-profit, since they are inherently harder to control and predict? How do you disrupt currency moving mechanisms? How do you disrupt currency itself? How do you shake the very economic system upon which most societies are modelled?

Enter Bitcoin. Initially conceptualised as an open source, decentralised, unregulated digital currency by its cryptic founder(s) Satoshi Nakamoto, Bitcoin’s adoption has been erratic as its operations remain arcane. Since its introduction, it has attracted the interest of speculators who trade it as an investment. The interest is well warranted as evidenced by an article recently published on Mashable: Angel List Founder Naval Ravikant is on record saying "What Wall Street does can be done in Bitcoin.”

Twin brothers Cameron and Tyler Winklevoss, made famous by The Social Network, have been ardent supporters of the virtual currency, and at one point claimed to own one per cent of all Bitcoins in circulation. Earlier this year the value of all Bitcoins in circulation exceeded one billion US dollars. Now, the market capitalisation is at least double that amount on any given day.

There have been many prominent problems interspersed with a few notable triumphs. Bitcoin has been no stranger to thefts, hacks and security concerns, along with other problems that plague nascent ecosystems. References have been made to Ponzi schemes and exchanges such as BitFloor have closed abruptly.

Bitcoin has also been attacked in the media by politicians for being a harbinger of criminal activity; accusations which seemed to be validated when 29-year-old Ross William Ulbricht was arrested for being the mastermind behind Silk Road, an online marketplace – dealing exclusively in Bitcoins – which allowed users to purchase drugs, guns, fake identities and all types of illegal goods. It has since been shuttered by the Federal Bureau of Investigation (FBI). Following his arrest, the value of Bitcoin plummeted by 25 per cent, only to recoup its losses within days. Despite the daily fluctuations in its value, today a Bitcoin Exchange shows the currency trading at an average of 263 US dollars.

The volatility in price and usage is to be expected given its age and its chaotic infancy. As high profile events diminish and the currency starts to normalise, usage should increase, especially in the absence of any significant competition. The implications of such are startling and profound, even.

For instance, illicit trade exists in the real world today, and has done so for centuries. The ‘dark web’ only facilitates it by amplifying its ability to organise and communicate. Should we as innovators, consumers and a society, focus on exploring the possibilities or impose our real-world laws on a system still in the process of developing? As the Winklevoss twins hypothesized, can Bitcoin be useful in mitigating the economic situation in Cyprus and Spain? Or should Ulbright’s illegal venture discredit it forever?

The question is not what it was intended to be, but rather what it can be. Can Bitcoin or some derivative of it become the de facto standard of a digital world? It may sound silly to think that today but would iTunes exist today without Napster and Kazaa? Would Borders - a large chain of bookstores - and Circuit City exist today if didn’t?

Any new technology goes through a lifecycle and to underestimate any is foolish. Criteria, such as user adoption, viability and sustainability, all have to be met. Arguably, if barriers in the acquisition of Bitcoins were reduced, it would promote its adoption amongst businesses (Push) and subsequently consumers (Pull). Primary indicators are good nonetheless, especially in the Push sector. An overwhelming amount of economic growth has stemmed from Silicon Valley after the ’08 collapse, which might be viewed as a watershed moment in the history of global business after a couple of years. Y Combinator has accepted more than one Bitcoin startup in its incubator. They’re not the only ones.

In the Pull sector, amongst high profile businesses, started accepting payments using Bitcoin as did the Chinese behemoth Baidu. There are dozens of trade organisations using the currency as a medium of exchange. A quick look at a trade wiki lists scores of businesses spanning a very diverse spectrum of commerce. Another common thread running through many is the emphasis on anonymity; a sentiment which has grown recently and bodes well for Bitcoin, given the correlation.

This isn’t speculation; Privacy awareness has spiked sharply and both market capitalization and consumer usage of Bitcoin are increasing. Privacy violation leaks by Edward Snowden have given mass validation to what a contained digital subculture has been stating for years; that our personal data isn’t secure at all and those with power will abuse it. Since extortionists argue that privacy isn’t clearly defined in the digital context, and that ‘threat of security’ supersedes its preservation, I’ll end with a succinct, eloquent statement provided by Richard Hunter which encapsulates the need for its protection: “Privacy is power. Without it, the individual has none. Period.”

The Sites

Bitcoin expansion moves to Spain

Investments blow up

Privacy is power


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