I first wrote about Bitcoin almost a year ago. At the time, they were selling for $105 each. I didn’t buy any because they had just surged in value and it seemed like a bubble that would surely burst. Today, they’re selling for $664. So much for my ability to forecast the world’s first virtual currency.
There’s a lot that I like about Bitcoins. Their value is based on supply and demand, not government fiat. They’re anonymous like cash but they’re easier to manage and harder to lose. I thought maybe they were theft-proof but I was wrong about that.
On the other hand, there are a lot of things not to like about Bitcoin. Like the fact that so much of the infrastructure is run by shady characters and incompetent (or malevolent) twenty somethings. One of the leading Bitcoin users went by the name Dread Pirate Roberts before he got busted. Bitcoin exchanges – including the largest, Mt. Gox — have been plundered, apparently through sheer incompetence. Just the other day, the Financial Times reported on the first “unnatural death” associated with the Bitcoin universe.
Yet, the price holds steady and shows no signs of returning to where it was a year ago. To be fair, the price skyrocketed to $1,151 in December and has fallen back since – so it was a bit of a bubble. But I would still be happy if I had bought a few Bitcoins at the time I wrote my first article.
And now – apparently – the originator of Bitcoin has been identified. The original Bitcoin manifesto and block of code was published by someone using the name Satoshi Nakamoto. The world assumed that this was a pseudonym and spent many sleepless hours trying to figure out who the “real” author was. Who could write such compact, elegant, and brilliant code? Now Newsweek claims to have found the author. His name is Satoshi Nakamoto, a toy train enthusiast who lives near Los Angeles. (Late breaking news — maybe he’s not the real guy after all).
So, what’s next? Bitcoin has whetted our appetites for a currency that’s not controlled by governments or banks. We seem to like a currency that’s transparent and based on the laws of supply and demand rather than politics. Now if we could just get rid of the crooks and fools.
So where to turn? Perhaps Canada. In 2012, the Royal Canadian Mint announced the MintChip project – a digital
currency that’s not quite the same as Bitcoin but similar. MintChip got a lot of press when the Canadian government launched the MintChip challenge to create an ecosystem of MintChip apps. The publicity died out quickly but as recently as September 2013, Marc Brûlé, the head of the project, said MintChip is still moving forward and hinted at a MintChip 2.0.
For me, the big differences between Bitcoin and MintChip are that MintChip is run by grownups and backed by a credible government. It has many of the advantages of Bitcoin but few of the disadvantages. After all, we all trust Canada don’t we?
In truth, Bitcoin has little to do with currency, and everything to do with a protocol and trusted ledger. I suspect we may see multiple “digital currencies” just as we see multiple email systems. However, the concept of peer to peer transactions freed from the tolls of large intermediaries like Visa, Western Union, and First Data, is here to stay and will continue to grow. Any broad-based acceptance and resultant growth will require the introduction of regulation; steps opposed by the libertarian perspectives of folks like Dread Pirate Roberts. However, these early leaders are blazing new ground and destroying incumbent models. Travis, maybe it’s time for a piece on creative destruction.
Marc Andreesen on Bitcoin http://dealbook.nytimes.com/2014/01/21/why-bitcoin-matters/
Lightspeed Venture Partners on Bitcoin
Chris Dixon on Bitcoin
Thanks for the comment, John. As usual, it’s very insightful and I especially appreciate the links to additional reading. As it happens, I’m writing about your comments in the context of permissionless innovation. With your help, I;m now looking at Bitcoin more as a platform than as a solution.