Not because I missed the great run-up (though I did) and not because I fear that the bitcoin bubble will end badly (it will, but that’s not my problem). Rather, it is because I have been waiting for decades for someone to invent a purely digital currency, a currency for online purchases that wasn’t linked to a credit card. It The killer app that no one had ever discovered was this.
Thus When bitcoin first appeared, I hoped it would be. The One. In “Digital Gold,” his book about bitcoin’s origins, Nathaniel Popper Emails with quotes Satoshi Nakamoto, the cryptocurrency’s mysterious and possibly apocryphal inventor, “I’ve been working on a new electronic cash system that’s fully peer-to-peer, with no trusted third party.”
That’s how all the early bitcoin enthusiasts thought of it a currency, one that allowed consumers to buy things.
That’s how all the early bitcoin enthusiasts thought of it — a currency, one that allowed consumers to buy things while sidestepping both the banking system and national governments. What However, the bitcoin bubble has shown that bitcoin is yet another ecurrency failure. But I’m getting ahead of myself.
When I met a brilliant mathematician and cryptographer named “Alfred”, I was first introduced to digital currency. David ChaumElectronic cash, also known as e-cash, was invented by. It did exactly what bitcoin purports to do — allow people to use virtual money, stored on their computer, to make purchases and send money to other people.
Chaum He was way ahead his time. He His company DigiCash was founded five years before either the creation or acquisition of either. NetscapeThe browser was popularized by, Amazon. By 1998 DigiCash was declared bankrupt.
What Then came the short-lived “information wants to be free” era. NapsterThe 1999 startup of, used peer to peer technology to allow music lovers to illegally download songs. Newspapers didn’t have paywalls, and many people came to assume that news shouldn’t cost anything. I saw my own children downloading music and even movies, and when I would tell them they were violating the law, they would tell me I didn’t understand how the world worked in the internet age.
As E-commerce was born, but credit cards were the only way to pay.
As E-commerce was born, but credit cards were the only way to pay. It It was a real commercial friction point. Every time you wanted something to be purchased, you had your credit card information and your billing address. And, if necessary, your shipping address. And Once you have done that, hackers would have access to your information. Electronic Both of these problems could have been solved with currency. If my children had access to a digital currency — maybe their allowance! — Napster Could have made deals with record companies and charged for songs. They I would happily pay. And E-cash would have made it almost frictionless to do internet commerce. By 2000, the chief executive officer of an internet bank was speaking. “We’ve reached the point where the internet economy needs e-cash.”
It Never happened. InsteadEntrepreneurs and companies devised a number of workarounds. Some were better than others. The Most well-known is PayPal, which basically accessed your bank account or credit card account to make payments or send money. Apple And Amazon It is much easier to purchase things. Washington Post Subscribe, I hit the “Amazon Pay” button and it’s done. Even Even so, it is still a time-consuming task to fill out credit card information online when we want something.
MeanwhileEvery effort to create an electronic currency was unsuccessful. One I remember was called Qpass And another called WebPay. In In the early 2000s, egold was seen as a possible solution. But it was used primarily for criminal purposes. In 2008, its founder pleaded guilty money laundering.
According to the website 99bitcoins.comThere are 89 companies that claim to accept bitcoin as currency, including Subway, the Massachusetts Institute This is Technology bookstore, and Museum You can find the Coastal Bend In Victoria, Texas. But I can’t imagine anyone actually using it to pay for something. Who Would you use bitcoin to make a purchase if it could go up $500 in the next 10 mins? And Who would accept bitcoin when it could fall by $500 in 10 minutes?
Whatever Bitcoin was originally intended to be a speculation asset. “There is simply no way to predict what it will be worth,” Pete Kight, “fintech” (Financial technology) Investor who founded Checkfree 1981 That Its fatal flaw is that it is an electronic currency.
OrIt is, in fact, one of them. The Another flaw is the very thing that many of its adherents love about it: It operates separately from the government’s fiat currency. “I call it the tyranny of brilliance,” Kight. “When you work in fintech, you often see engineering genius get out of synch with what works in the real world.”
In He said that bitcoin was an example of this: “There is this thing called the Federal Reserve. Its first job is to protect the financial system of the United States. For a cryptocurrency to be successful, it has to work out with the Fed how it won’t undermine the banking system.”
I can only imagine that bitcoin will continue trading after the bubble bursts. Maybe A few other cryptocurrencies will follow similar paths, though most will disappear into nothingness. It can be seen as reflecting the larger economy in some manner, rising in certain environments and plummeting in others. In In the best case scenario, bitcoin could be considered the digital equivalent to gold.
There’s nothing wrong with that. But we’ll have to wait a little longer for an electronic currency that works.