Bitcoin and Cryptocurrencies – Fad or Future?
In 2009, the first real digital currency was created. Bitcoin was built by a pseudonymous developer (or team) called Satoshi Nakamoto, based upon the idea of a decentralised, peer-to-peer setup which relies on cryptography to protect and manage the currency’s use. Since then, several other cryptocurrencies have emerged, but Bitcoin remains the most prevalent and popular. Does Bitcoin have a future in the real world or is it just a passing fad?
Since its inception, Bitcoin’s use for illegal dealings has come under a great deal of scrutiny, especially when the Silk Road online black market was closed in 2013 and 144,000 Bitcoins were seized by the FBI (with a value of US$28.5 million at the time). The currency remains strongly associated with illicit activity, because of its anonymity and existence outside of any form of government control.
Despite the criminal association, popular perception is changing, with the volatile nature of the currency’s value leading to a great deal of interest from speculators. This, in turn, has given Bitcoin wider acceptance as a legitimate form of payment in online stores. As the currency grows in popularity and stability, public support for it grows.
On the down-side, the currency suffers from some important drawbacks, such as inexperienced users losing their money by forgetting their wallet password, theft of bitcoins and the lack of any form of chargeback functionality or consumer protection.
Some countries, such as China, have outlawed currency conversions from Bitcoin to the real world. But many governments realise that it is almost impossible to stop a distributed, peer-to-peer model and aim instead to educate and put sensible controls in place. The popularity of cryptocurrencies is proved by the existence of Litecoin, Peercoin, Ripple, Namecoin, Dogecoin and others.
The real question, though, is whether Bitcoin has a place in the world as a legitimate currency, despite its problems. The best way to provide insight into this question is by comparing Bitcoin to the new “currency” of the last century: credit cards, debit cards and charge cards.
When these cards first appeared, the public had difficulty accepting them because the support systems were fraught with problems. A stolen card could be used in a store and, by the time the paperwork was processed, the thief was long gone. Customers could abuse their spending limits, especially in boom times when providers were less careful about offering credit. Cards could be damaged, lost, stolen or faked.
Over time, the problems were solved – frequently by advances in technology such as switching from paper records to instant electronic communication, and from signatures to embedded chips with PIN codes. The same goes for Bitcoin: the problems it has will be worked out over time and compromises or fixes will be put in place to make the system workable.
To be blunt, what has been invented cannot be un-invented. As long as a single copy of the required data is stored somewhere in the world, Bitcoin will continue to exist. It may be supplanted by a better system or a more popular cryptocurrency in the long term, but the ideal of a usable, worldwide currency which is free from control by any government has been brought to fruition and is not likely to wither and die.