What do you think of Bitcoin?” is a question I get asked a LOT lately. As recently as this morning, on a call about a totally different topic, the conversation led to a discussion on Virtual Currency, which brought up Bitcoin. While it’s not a new phenomenon, Bitcoin’s role in today’s financial services industry has become pivotal for a number of reasons:
- Bitcoin is to virtual currency what TCP/IP was to networking. Before TCP/IP (the underlining network protocol for the internet) we had networks that couldn’t talk to each other. Once computers and networks were interconnected, the Internet arrived, applications scaled, usage soared. Bitcoin offers Virtual Currency interconnectivity.
- The world is ready for an e-currency. Globalization, online commerce, new technology – these are the conditions that make a world ripe for an e-currency. Crowd sourcing and “open systems” are the right ingredients for our first global e-currency.
- Regulators could try to stop it, but they are better off regulating it. Bitcoin can enable innovation and at the same time create a tool to fight money laundering. The regulatory uncertainty will be challenging but temporary.
- Bitcoin solves important problems like removing friction from online commerce, and enabling participation in mobile commerce by the underserved. 2 billion consumers are coming into the online commerce community in the next 5 years, and with it a large need for increased stability and trust in a currency.
There are downsides to a virtual currency, like instability, the potential for nefarious activity, and diminishing the role of the current banking system – but the world needs a change.
The next few years are about navigating uncertainty. Which players will be important? What is the business model? What will regulators do? The answers to these questions are uncertain and will be for the next few years. Those who want to be involved with Bitcoin now need to be prepared to navigate this uncertainty.
At a local meetup in Silicon Valley a few weeks ago I got the chance to experience the Bitcoin community in person. A diverse group of 400+ people from around the world who were excited, committed, and cooperating. These are the builders, and like the underserved, this group grows in size everyday.
There is a need, and I believe a small group of dedicated people can change the world.