How does Bitcoin threaten the global status quo?
“Bitcoin is the biggest invention since the internet,” Pamir
Gelenbe, Partner at Hummingbird Ventures, asserted in a chat last
Thursday.
To explore the future of this controversial
digital crypto-currency, Gelenbe is launching a one-day,
invitation-only conference in
London next week that will bring together leading members of
the Bitcoin community to discuss its viability and ability to
transform global finance as we know it. (Register here).
The panels will range from legal issues to investment opportunities, and even the possibility of whether Iceland should adopt Bitcoin as its national currency.
In other words, if you had a question that wasn’t answered by
watching footage of Bitcoin
2013, it can be answered in London on Monday, July
2nd.
“You have to experience it to know what it's about,” says Gelenbe.
“It’s going to grow very, very quickly.”
So what’s so disruptive about Bitcoin, again?
It allows users to transfer money easily and instantly,
for a fraction of current transfer fees. “Millions of people remain
unbanked because it’s too expensive,” says Gelenbe. The fact that
money takes so long to transfer and comes with hefty fees situates
our banking system “in the 19th century,” he
laments.
It allows for anonymous and untrackable transactions. This means that users can bypass government taxes, bank fees, telecom fees, and any potentially any duty leveraged by a regulatory body. Until Bitcoin comes under tighter regulation by governments; for now, it’s been required by the U.S. government to comply with anti-money laundering laws.
It could be very, very lucrative. Bitcoin is
created by a digital mining process that will release a total of 21
million bitcoins by 2040. Currently, there are around 11 million
bitcoins in circulation, valued at a total of around $1.1 billion,
which marks an
eight-fold rise in value since the beginning of the year.
For those chasing a quick win, the rewards may far outweigh the
risks. “Bitcoin will hit thousands of dollars per coin,” Erik
Voorhees, the founder of Coinapult (who will be at the conference)
told
The Daily Dot. “The number of industries, communities, habits,
traditions, and even interpersonal interactions that Bitcoin has
the potential to revolutionize is massive.”
And yet, anything this disruptive is also risky:
It’s volatile. While the price of a
bitcoin now hovers at around $100 on most online exchange platforms,
it’s swung from $30 to $266 over the past few months. “Volatility
will continue,” Gelenbe admits.
It’s not in widespread use. As it stands
now, Bitcoin is more of a commodity than a currency, as few online
or offline outlets actually accept it as valid payment (here’s a
list of
vendors who accept Bitcoin).
But, that’s changing; one man is selling
his house in Alberta, Canada, for bitcoins, and
one pub
in London now takes the digital currency.
It’s vulnerable to attack. Mt. Gox, the currency’s original and primary online exchange, which still handles over half of Bitcoin trading today, has survived a slew of DDoS attacks this year. Recently, hackers launched spoof sites to dupe traders into downloading malware that compromised their accounts.
It will come under scrutiny.
Proponents of Bitcoin say that because all anonymous
transactions are trackable, it’s difficult to launder money on the
platform.
And yet, as Timothy B. Lee (no, not Berners-Lee) at the Washington
Post
points out, that doesn’t mean that transactions are easily
traceable to human identities; governments still have a very
limited ability to enforce the law.
Governments, can, however, go after trading sites that are
centralized enough to be monitored. In 2009, the U.S. government
shut down e-Gold,
a currency that could be exchanged for gold over similar anonymous
transactions. Recently, it
shuttered $6 billion virtual currency exchange Liberty Reserve,
because it was “the bank of choice for the criminal
underworld.”
Mt. Gox is certainly at risk; one 2012
study found that at least 20% of daily Bitcoin transactions on
the exchange were spent on the black market.
Yet, Bitcoin users may be able to evade scrutiny by switching to
decentralized trading platforms like
Open Transactions, or Ripple (whose founder will also be at
the conference). When that happens, governments may have to resort
to
other tactics.
Bitcoin in emerging markets?
Kenya, with its widespread use of mobile money exchange platform
M-PESA, could be an ideal market for Bitcoin,
some argue. And yet existing players- both Safaricom, the
telecom company that runs M-PESA, and the Kenyan government, would
likely fight Bitcoin tooth and nail in order to not give up the
taxes they levy on M-PESA transactions, which account for 30% of
Kenya’s GDP.
In the Middle East, countries that
don’t approve of VOIP certainly aren’t going to welcome Bitcoin
use without hefty regulation.
Especially because Bitcoin could radically change the balance of
power in global politics should, say, Palestine adopt it as a
currency, as some have imagined, or if countries like Iran or Syria
use it to circumvent international sanctions.
However, Bitcoin’s political implications are not the focus of the conference in London, says Gelenbe. “We owe where we are with Bitcoin to Libertarian developers, but those days are over.”
For more on where Bitcoin is today, register for the conference on Monday, July 2nd, to meet the currency’s leading thinkers (full list here), who include:
- Patrick Murck of the Bitcoin Foundation, which standardizes and protects Bitcoin,
- Shakil Khan, the founder of Coindesk, the go-to news news source for the currency
- Nejc Kodric, CEO of BitStamp, the second largest Bitcoin trading platform (topped only by Mt. Gox)
- Vinny Lingham, the founder of Gyft, a mobile gift card wallet that just started allowing users to use Bitcoin
- Stefan Thomas, Senior Developer at Ripple, a peer-to-peer credit network that could either facilitate Bitcoin trading or become one of its most powerful rivals
- Luzius Meisser, founder of Bitcoin Fund, a regulated investment vehicle for bitcoin placements with offices in Malta, Singapore, and Russia.
Videos from the conference will be on the btclondon.com site shortly after the conference and we’ll bring you a wrap-up of the major conclusions.