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As is the case with many people in our industry, I’ve been giving  a lot of thought recently to Bitcoin.  When ever I run into something new, or puzzling, I try to find comparisons to help me understand it.  And comparisons abound in Bitlandia.  Many people compare it to the Internet, in terms of significance.  To cash, of course, in terms of its “I give it directly to you” attributes.  Some of my colleagues like the comparison to a bank’s ledgers.  And many compare it to gold, to tulips, etc.

But I think one of the more intriguing angles is to compare it to the introduction of the printing press.  (And no, I’m not talking about people printing money!) The printing press freed the written word from the control of the clergy, and let the masses have direct access to books, to the Bible, to politicians’ screeds. Bitcoin has the potential to free money from the control of bankers, central and otherwise.  I think that is staggering.  I’m not entirely sure it is a good thing: after all, in my heart I’m still a banker.  But if allowed to develop, it certainly would be a big thing.

Wences Casares said on WSJ Digits yesterday that he thought the value of one Bitcoin might reach a million (or a half million) dollars by the end of the decade.  I sure hope so: I own one.  I may just revise my retirement plan.

Let me know what you think.

 This post was written by Glenbrook’s Carol Coye Benson.

5 Responses to “Bitcoin is like…”

  1. Welly says:

    I fully agree with you, and want to highlight the importance of the ‘word’ that is written.

    The analogy between Bitcoin for payments and the printing press (or internet) for communications is great until conversion/translation from your preferred currency/language to the new one becomes an additional – perhaps unnecessary; even prohibitively expensive – step to adopting the new system.

    Although BTC payments via Bitcoin are faster than cheaper than USD payments over Fedwire, it requires every user to switch from USD to BTC. This would be like saying that sending messages over SMTP is faster and cheaper than sending messages via the postal service, except you have to switch from English to Esperanto.

    I am biased toward Ripple (I work for Ripple Labs), which enables faster and cheaper payments than any domestic or international payment network (even faster and cheaper than BTC over Bitcoin), and allows continued usage of whichever currency you prefer without having to convert into an intermediary digital currency.

    • Ashok Misra says:

      >Fedwire, it requires every user to switch from USD to BTC
      Hi Welly, If you think of Bitcoin as a protocol for transporting value, it does not require that switch. Value transfer to/from fiat can take place closer to the end points, while using the protocol could be used purely to transport value. I see http://techcrunch.com/2013/08/20/buttercoin/ built on this concept. It should not matter to buttercoin user what the fiat to BTC rate is so long as the transfer is reasonably instantaneous.

      >I am biased toward Ripple
      I have no bias since I work for myself :-) . You know I am a big believer in Ripple & crypto currencies. I just wanted to respectfully point out that the switch from fiat to BTC is perhaps not a requirement for use of the protocol. It is of course a requirement in order for bitcoin to be used as a currency.

      • Ashok – you make a really good point, and one that I think is not well understood. People focus on the obvious instability of Bitcoin as a currency; but that doesn’t mean it is necessarily risky to use it as a payments mechanism. Not only is it “reasonably instantaneous”, as you point out, but there are also service providers (for the receiver and the sender) who are willing to eliminate what little exchange risk there is in doing the instant end point conversion into/out of fiat currency.

        We’re doing some work with digital wallets in the developing world. People are using the term “digital liquidity” to refer to a state when someone would not “cash in/cash out”, instead keeping their (fiat) currency in their mobile wallet for future use. In time, a similar state of “Bitcoin digital liquidity” might happen (or might not!) in which receivers of Bitcoin keep it as Bitcoin, intending to use it for a later payment.

        Carol

  2. The value flucuations cause me to ask the question – Is it a currency for the future or a Ponzi scheme?

    • Ashok Misra says:

      @Carol,
      Thanks for your comments, I realize that I do not get notified on comments. Not sure if there is a way to get alerted.

      George,
      The value fluctuations stem from the fact that Bitcoin being a beta product is subject to heavy speculation.
      The view that Bitcoin is a Ponzi scheme is completely incorrect. In a Ponzi scheme investors in a dubious enterprise are guaranteed that they will profit. This is a zero sum deal and early investors are paid from the investments of subsequent investors. This works so long as new investors keep getting acquired. But obviously this does not scale and the music stops ultimately.
      Bitcoin makes no claim of any increase in value & there is no one to make that claim as it is a decentralized currency. Bitcoins are released into the market in a controlled and predictable manner unrelated to investment activity, thus Bitcoin does not fit the definition of a Ponzi scheme.

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