After the fall off Bitcoin prices from its peak at $1,242 in 2013 to hitting below the $200- dollar mark in january 2015, sceptics were lining up to be the first so say; I told you so. Here is why those sceptics are dead wrong:
First of all, when discussing Bitcoin it is important to distinguish between Bitcoin as a currency, bitcoin as a payment service provider (PSP) and lastly the underlying technological platform, the Blockchain. From my perspective, the potential is all about the Blockchain. here are just a few announced from this week proving the potential of the Blockchain:
- Recently IBM and the Federal Reserve announced that they are building a Blockchain knock-off to create a digital fiat-currency.
- The startup 21 Inc. just raised $166 million in funding from the biggest names in venture capital to bring Bitcoin to the masses.
- Goldman Sachs published a report stating that Bitcoin will redefine the way we pay in the next decade.
At the same time, the number of bitcoin transactions processed through the Blockchain-protocol has experienced steady growth and sharing services like Lyft starts to accept Bitoins as payment as well as Paypal considering integrating Bitcoin as an option.
We also have massive amounts of funding being poured into Bitcoin. the total amount of venture capital raised for bitcoin-related companies is as of march 2015 $667 million, with over $200 million raised YTD in 2015.
These amounts are based on the belief that Blockchain has limitless potential in every industry that is facing digital disruption, and from my point of view that includes every industry out there. But is a complex subject and takes time to fully grasp its implications and potential.
For those interested in some further reading:
Bitcoin as a PSP like Ripple renders clearing obsolete and dramatically lowers the transaction cost for merchants. This makes Bitcoin an alluring option for profit-seeking merchants looking for cost effective solutions, a means to lowering the cost of transactions for remittance as well as serve as an enabler for online microtransactions below $1.
Bitcoin as a currency is of limited interest for me to discuss any further. But for those who are curious I’ll just stick to the facts. Bitcoin as opposed to fiat currencies has no central issuer, but is created through decentralized “mining” of new Bitcoins. Bitcoin as a currency has a number of similarities to gold, hence the term mining. Bitcoin has a finite amount of available Bitcoins at 21 million, and the amount of Bitcoin in circulation is expected to reach the maximum amount by 2140. In addition Bitcoin has a built-in deflation-mechanism, meaning that the amount of Bitcoins will decrease over time when e.g users lose their access to their bitcoins, since it is impossible to create more Bitcoins when the maximum amount is reached.
I am still learning about Bitcoin, and I reccomend checking out http://www.coindesk.com/ for more in-depth insight on Bitcoin and Blockchain.