In “Bitcoin or BitConcerned“, I discussed some concerns about the fast-rising currency site Bitcoin. I know that there have been several articles about people that have lived on Bitcoins … for a 24 hours, a week or longer. Giving (or attempting) to give the new initiative some credibility in real life. I assume that it is possible. However, here are some additional thoughts on this business model.
Trust
One of the people living on Bitcoin said “It’s hard to convince someone who has never heard of Bitcoin before to accept payment.” Now, as she conveyed, it is easy to walk away if someone did not accept that payment method. And it’s easy to do that. However, there are situations that consumers will face where “walking away” will not work (especially a landlord).
If people are cautious about the value of the dollar, oil and the financial markets … which are regulated … could they accept the volatility and secrecy of Bitcoins’ value?
Security
Electronic wallet security, especially in light of smartphone use, is a concern by both corporations, financial institutions and consumers. Most of the Bitcoin thefts are due to inadequate or mismanaged wallet security, estimated at $500M from 2009-2014.
Theft of content (media, currency, information, etc.) is probably the single-most difficult challenge associated with Internet commerce. A recent article discussed that Bitcoin wallets are being accessed and funds confiscated illegally. However, who is responsible for returning the funds stolen from the illegal act? Government agency? Your bank? Probably not. Now, circle back to the trust section.
Are there efforts to counteract this? Yes. Intercontinental Exchange (a unit of NYSE) has decided to invest in a new trading platform, Coinbase. Other investors are also lining up to experiment with crypto-currency trading (Wall Street Journal, 11 May 2015).
Competition
Hate to drop this on you. But one word. China. People’s Bank of China is issuing its own currency. Now that creates a plethora of thoughts and ideas, some beyond electronic currency. A recent article stated that the “top 4 Chinese Bitcoin pools control 30% of the Bitcoin network. Bitcoin China (BTCC) controls the Bitcoin market.
Summary
A recent study by a professor from Rutgers University has asserted that if someone has not used Bitcoins, they probably never will. Ultimately, it appears that a mixture of trust, security and some knowledge creates the lack of Bitcoins adoption. A correlation of multiple influences.
If new investors … which invest not only their money, technology knowledge and credibility … into the Bitcoin environment, then it’s possible. Let’s see in another year what happens. Stay tuned.