Bitcoin is still very much in its infancy. When most people think of Bitcoin today, they remember the salacious news stories of hackers making off with millions of dollars, or the hugely volatile currency that seems to have been created from nowhere. It’s not necessarily thought of as secure and so it’s quite understandable that many are skeptical and even critical of its future potential. However, what most miss in the discussion is just what Bitcoin really is at its core, which is the first true money humankind has ever invented — and one that is programmable, so it can be built into everything.
Why do I say this? Well, from the very beginning of time, humans have traded goods with one another, and have used money as proxies for these goods, as a simpler form of exchange. That money has taken the form of gold and silver, sea shells, promissory notes and state-issued legal currency, to name but a few. In all these cases the money has been forged, cheated, stolen and its value decimated by inflationary tactics. Kings did it to pay off war debt, people clipped bits of gold coins, weighing scales were tampered with, the Federal Reserve was invented to control it, etc. There is not a single instance — until Bitcoin — of a truly trustworthy form of money, one whose value was constrained not by the laws and weaknesses of man, but by the universal laws of mathematics.
So Bitcoin is really radical. It allows a secure system of exchanging value between people, and indeed machines, who have never met, that can be trusted, verified and never forged. Yes, we have heard of many instances of Bitcoin hackers and thieves, but these are not security issues with the core Bitcoin network per se, rather weakness in the storage of the keys used to secure a Bitcoin wallet. Just like a bank vault with the combination lock code taped to the front door not being secure; Bitcoin secured by keys left lying around where they are easily stolen are not safe from theft either.
So with Bitcoin, we have a secure, programmable form of money that can be used for global transactions, that cannot be forged, that is fully auditable, that is actually software that can be built into anything and everything. Once this is understood, once this is grasped, the magnitude of the possibilities it enables is truly staggering. That’s what has all these venture capitalists salivating and that’s what has thousands of the smartest programmers in the world working feverishly to unlock its potential. It’s a magnitude of change and possibly similar in scope and scale to the Internet itself, and it’s just the beginning.
Bitcoin has another interesting property that is worth mentioning. It’s a bearer instrument. That means, just like a dollar bill, the person that holds it and presents it as payment is the de-facto owner. Why is this an important property? Well, we live in a world where we are expected to disclose our identity and financial future to companies that are just not qualified to secure it, just to shop online or eat in a restaurant. We have all seen this recently with the hacking thefts at Home Depot, JPMorgan Chase and Target to name just a few. Credit card fraud and identity theft actually cost us more than $5 billion a year, and ruin many lives and dreams. Bitcoin solves this problem, once and for all, because using it, we, as consumers, do not have to risk our financial future when we do things like our Christmas shopping. Bitcoin payments are anonymous — at least as far as merchants are concerned. The data trail that Bitcoin leaves behind is indeed traceable using the blockchain, with the right tools. It can be used to fight crime and terrorism, it can be used to identify us, but importantly it cannot be used to steal our identity, or to steal our money, or to impact our credit rating. So it’s a much more palatable and secure approach to payments than credit cards can ever be.
So, when we ask what needs to happen for the mass adoption of Bitcoin to occur, the answer is just time. In time, the money the venture capitalists are investing and the code the developers are writing will bring forth systems and solutions to problems that are just not feasible or practical without Bitcoin. Just like the browser makes the Internet accessible to everyone, these systems and solutions will make Bitcoin accessible to everyone and will change the way we interact, trade, spend and receive money. Whether that’s peer-to-peer lending, peer-to-peer finance, distributed capital formation, secure voting, or solutions to transparency in finance and derivatives. The technology has so much potential, and it just cannot be un-invented. Its adoption really is inevitable.
Image Credit: CC by Zach Copley