Will Bitcoin Sink or Swim in 2014?
Unless you’ve been living under a rock for the last year, you’ll have heard of Bitcoin, the digital currency taking the world by storm.
I can’t think of a more disruptive technology in my lifetime – one that’s been discussed at the highest levels of US government, banned by some countries, shortlisted as “word of the year” by both Oxford and Collins, and sent politicians heads’ deep into the sand.
So what does 2014 hold for Bitcoin? I have no idea, but I’m willing to bet the next 12 months will prove decisive for the digital currency’s future.
First up, what exactly is Bitcoin? It’s the name of both the peer-to-peer payment network and the currency itself. According to Wikipedia:
“When paying with Bitcoin, no exchange of digital notes or tokens takes place between buyer and seller. Instead, the buyer requests an update to a public transaction log, the blockchain. This master list of all transactions shows who owns what bitcoins currently and in the past and is maintained by a decentralized network that verifies and timestamps payments. The operators of this network, known as “miners”, are rewarded with transaction fees and newly minted bit coins.”
In a world where digital payment systems such as PayPal became mainstream far quicker than I had expected, it seems logical that a digital currency would be the next step. So, what’s the problem?
The entire system is controlled by an algorithm, not by a Central Bank, and therefore out of control of any Government. A truly international currency presents problems for taxation, regulation, and a whole host of other factors that have Governments all over the world scratching around for a solution.
Bitcoins in Scandinavia
Bitcoins are not just a plaything of the tech savvy crowd in Palo Alto, London and Berlin. Take a look at some of the biggest news from the last few months here in Scandinavia:
- Stockholm welcomed its first Bitcoin ATM.
- Oslo resident Kristoffer Koch invested 150 NOK in Bitcoins back in 2009, only to forget about them. It’s unclear exactly how much they’re now worth, but he bought an apartment in Tøyen with just one-fifth of his investment.
- The Norwegian Tax Office took the interesting step of classifying Bitcoin as an asset, just a few months after economic powerhouses Germany and France leaned towards currency.
Klaus Bugge Lund, CEO of the Norwegian bitcoin exchange Justcoin AS, says:
“I am mostly fascinated by the underlying payment system that Bitcoin provides. The idea of a decentralized network to confirm transactions is appealing since it is not as vulnerable to political interference. Bitcoin as a currency is at the time subject to extreme speculation leading to a volatility making it unsuited as a currency. Once the infrastructure has been set up properly and the price growth stabilize we will hopefully see Bitcoin succeed both as a payment system and as a currency.”
“Half a year ago we would have to explain what Bitcoin was to most people we met. Today everyone has at least heard of Bitcoin. Although many people are still skeptical to the concept we think that the awareness itself is valuable for Bitcoin. The potential impact digital currencies has to our financial environment as we know it today makes people obligated to refrain from Bitcoin. If Bitcoin really does change money, it will not be the first time a disrupting concept meets resistance before eventually succeeding.”
The future of Bitcoin
Will Bitcoin thrive and force Governments to adapt, or will it go the way of Napster – a trailblazing disruptive technology that failed, but ultimately paved the way for Spotify, Netflix, et al.
What do you think?
Photo credit: Antana