Thursday, August 21, 2014

Bitcoin Adoption and the Path Forward

The world of Bitcoin and alternative cryptocurrencies are shaking up finance, payment services and State institutions around the globe. As a small, but growing community, cryptocurrency advocates recognize the value that this new decentralized, trustless system brings to the table. We can see the community that backs cryptocurrencies putting their real money where their mouth is, such as with the recent Ethereum sale of Ether, raising a minimum of 27 thousand bitcoin or 12+ million USD. This new type of crowdfunding and community support is what backs the crypto community like no other and as time proceeds, it is guaranteed that advocates will find themselves as the new leaders in a world of true freedom and autonomy from our current monopolized and bureaucratic scheme of State infringement. Bitcoin adoption and cryptocurrency advancement will depend upon we the people to push this new technology forward. As with the Internet, early skeptics barraged the concept of email and online shopping as something that only a few people would partake in. Marc Andreessen, American entrepreneur, investor, and software engineer, notes in an interview with Vox.com, that skeptics of crypto today put the same criticism against it as they did with the Internet. Andreessen states that these common criticisms against bitcoin adoption are,
  • It's for nerds. "Fine, you nerds can do what you want but normal people are never going to use this thing."
  • It's completely decentralized, which means you can't trust it. No business is ever going to do anything on it because businesses won't work on an untrusted environment. There won't ever be any e-commerce.
  • There will never be any internet payments. No one will put their credit card on the internet.
  • It's an open-source kind of thing so there will be no Internet companies.
  • It's got all these technical deficiencies. It's slow. It's unreliable. It doesn't work right. When you do a search, sometimes you get an answer back and sometimes you don't. Sometimes when you dial in you get a busy signal.
  • What happen if your ISP goes out of business? Then you can't get back online.
  • Once you get on the internet, even assuming you get on the internet, there's nothing to do. There's no content. Time magazine isn't online, the New York Times isn't online. It's just a bunch of nerd stuff. (Andreessen, Vox.com)1
As clearly displayed by Andreessen, these criticisms have been evaporated almost completely since Bitcoin hit the scene in 2009. Initially, all one could do was trade BTC back and forth, with little else available for the "nerds" to do. However, faster than the Internet, bitcoin adoption has soared ahead, giving legitimacy to the "magical online currency" despite all the trials and tribulations. However, that does not mean we are out of the woods yet. As of late, the price of bitcoin and cryptocurrencies have been tumbling, although not much indication gives reason to the average person as to why such a fall is occurring. With companies such as Dell.com, Overstock.com, Expedia.com, Newegg.com, Dish.com, Wikipedia.org, OKCupid.com, reddit.com and many more, the adoption rate is certainly picking up, but one must question what "picking up bitcoin" really means. Sadly, only a few of these companies and others are actually keeping bitcoin itself or a portion of it in true holdings, while the majority are simply converting out to fiat. As reddit user junkit33 notes,
The way merchants have adopted bitcoin is doing nothing but driving the price down. They're all immediately cashing out, so at best, it's net neutral for the bitcoin price. Realistically, some percentage of buyers are using bitcoin they already owned, so it's a net sell, and thus a decrease. None of these merchants really care about bitcoin, they just want to win the money of people who are eager to buy things with bitcoin.(junkit33, reddit.com/r/bitcoin)2
Expanding upon this point, we as a community need to push on merchants to truly embrace the crypto sphere for the benefits it offers. Having merchants adopt a platform of instant fiat conversion does not take crypto seriously and only aims to grab market share from BTC consumers, without supporting the system it purports to stand behind. Moreover, merchants need to show BTC users incentives by offering discounts and benefits on purchases, rather than simply allowing for bitcoin to be used. Incentives will drive consumer adoption, but without benefits, users see no real tangible difference in BTC and may in fact be at a loss due to lack of protection, fees from purchasing bitcoin and other variables. Some of the benefits merchant must understand for their own good are:
  • You can make and receive payments using the Bitcoin network with almost no fees. In most cases, fees are not strictly required but they are recommended for faster confirmation of your transaction.
  • Any business that accepts credit cards or PayPal knows the problem of payments that are later reversed. Chargeback frauds result in limited market reach and increased prices, which in turn penalizes customers. Bitcoin payments are irreversible and secure, meaning that the cost of fraud is no longer pushed onto the shoulders of the merchants.
  • Bitcoins can be transferred from Africa to Canada in 10 minutes. In fact, bitcoins never have any real physical location, so it is possible to transfer as many of them anywhere with no limits, delays, or excessive fees. There are no intermediate banks to make you wait three business days.
  • Bitcoin is an emerging market of new customers who are searching for ways to spend their bitcoins. Accepting them is a good way to get new customers and give your business some new visibility. Accepting a new payment method has often shown to be a clever practice for online businesses.
  • Many organizations are required to produce accounting documents about their activity. Using Bitcoin allows you to offer the highest level of transparency since you can provide information your members can use to verify your balances and transactions. Non-profit organizations can also allow the public to see how much they receive in donations. (Bitcoin.org)3
Finally, we also must consider the fact that at this rate, 3,600 new coins are being introduced into the Bitcoin network everyday, meaning 1.5-3 million dollars worth of new coins are possibly being sold off. As these new coins come in, miners very well may try to offload them onto exchanges to pay for electricity and new mining rigs. While the price had been stable up until this point, meaning that new coins were being met with fresh money, the recent drop may show lack of engagement or fear from new regulations. Jeremy Allaire, CEO of Circle.com states,
...BitLicense is likely to have the opposite impact—radically limiting those who can participate in this industry, pushing firms offshore and into sometimes shadier jurisdictions. Furthermore, as currently written, it would be technically impossible to comply with the BitLicense proposal. Without some material changes, Circle will have no choice but to block New York customers from accessing our services.(Jeremy Allaire, Circle.com)4
With such intrusions by the State and bureaucrats worldwide, the community of crypto needs to take a stand and support efforts that bring Bitcoin and other cryptocurrencies back to their initial goal of freedom from coercive, monopolized State enforcement of our most vital lifeline in the economy: money. Please check out some of these projects below to help restore freedom to the people and bring money back to its rightful owners:
Bitcoin
Dark Wallet
Mycelium Entropy
OpenBazaar
Tor
CoinDesk
Liberty.me
FreedomainRadio
1: http://www.vox.com/2014/6/30/5839436/marc-andreessen-on-bitcoin
2: http://www.reddit.com/r/Bitcoin/comments/2dvlq3/lets_have_a_serious_discussion_as_to_wtf_is/cjti4g2
3: https://bitcoin.org/en/bitcoin-for-businesses
4: https://www.circle.com/2014/08/13/thoughts-new-york-bitlicense-proposal/
Harrison Fischberg is a Bitcoin entrepreneur, writer and enthusiast.

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