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How Bitcoin can go mainstream

Brian S Hall | May 28, 2014
If Bitcoin is to succeed--if using the virtual currency is to be as hassle-free as handing over a portrait of a dead president in exchange for goods and services--it will require one thing: A consensual hallucination.

Bitcoin accepted here

The list of companies, non-profits, and political action committees that accept Bitcoin already totals in the thousands. Bitpay maintains a searchable database of outlets that accept Bitcoin, which includes the likes of Overstock.com, Virgin Galactic, OKCupid, Big Fish Games, the Chicago Sun-Times, Wordpress, and Tesla.

Admittedly, the current list of Bitcoin merchants seems tilted in favor of those with first-world needs. Bitcoin, however, knows no boundaries. Micropayments and money transfers, both of great importance in the developing world, can be expedited quickly, safely and at far less cost when using Bitcoin.

David Andolfatto, vice president and economist for the Federal Reserve Bank of St. Louis, agrees that Bitcoin offers a clear path to lower transaction costs, which is a particular benefit in developing economies. More important, Andolfatto, adds, Bitcoin provides a means for citizens to route around laws that require them to use their nation's (fiat) currency. In many countries, the national currency is often manipulated for short-term gain. These manipulations incite inflation and thus limit the individual's purchasing power.

"I'm not sure what would motivate widespread [Bitcoin] use here in the U.S. [although] I think its prospects for growth look quite good in the developing world, where rampant inflation is the rule rather than the exception," Andolfatto said.

In Bitcoin we trust?

For now, though, Bitcoin has some hurdles to overcome before it makes the leap to an accepted form of currency. Thefts are far too common. Regulation remains uncertain and security is lacking--both crucial elements for any new tech to go mainstream. Many larger merchants, such as Amazon and eBay, refuse to accept Bitcoin. Some governments, such as China, effectively ban its use. Many of the biggest tech companies and financial institutions on the planet have a vested interest in watching Bitcoin disappear.

And yet, there are reasons to be a believer in Bitcoin. More people are downloading Bitcoin wallets, multiple industry sources say. There is a thriving Bitcoin developer community. Exchanges are popping up and making it easier than ever to turn Bitcoins into dollars. Tens of millions of dollars are being invested in Bitcoin-related start-ups. There are even Bitcoin lobbyists. That's an ecosystem, and, yes, it does feel like it's the start of the web all over again.

Bitcoin is peer-to-peer. It is scalable. Bitcoin supports personal privacy and enables transactions at near-zero cost--not all of which need be strictly financial in nature. It decentralizes trust and limits financial threats from governments and middlemen. These should guarantee Bitcoin a bright future, despite the many obstacles before it.

 

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