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How does Bitcoin threaten the global status quo?
“Bitcoin is the biggest invention since the internet,” Pamir Gelenbe, Partner at Hummingbird Ventures, asserted in a chat last Thursday.
To explore the future of this controversial digital crypto-currency, Gelenbe is launching a one-day, invitation-only conference in London next week that will bring together leading members of the Bitcoin community to discuss its viability and ability to transform global finance as we know it. (Register here).
The panels will range from legal issues to investment opportunities, and even the possibility of whether Iceland should adopt Bitcoin as its national currency.
In other words, if you had a question that wasn’t answered by watching footage of Bitcoin 2013, it can be answered in London on Monday, July 2nd.
“You have to experience it to know what it's about,” says Gelenbe. “It’s going to grow very, very quickly.”
So what’s so disruptive about Bitcoin, again?
It allows users to transfer money easily and instantly, for a fraction of current transfer fees. “Millions of people remain unbanked because it’s too expensive,” says Gelenbe. The fact that money takes so long to transfer and comes with hefty fees situates our banking system “in the 19th century,” he laments.
It allows for anonymous and untrackable transactions. This means that users can bypass government taxes, bank fees, telecom fees, and any potentially any duty leveraged by a regulatory body. Until Bitcoin comes under tighter regulation by governments; for now, it’s been required by the U.S. government to comply with anti-money laundering laws.
It could be very, very lucrative. Bitcoin is created by a digital mining process that will release a total of 21 million bitcoins by 2040. Currently, there are around 11 million bitcoins in circulation, valued at a total of around $1.1 billion, which marks an eight-fold rise in value since the beginning of the year.
For those chasing a quick win, the rewards may far outweigh the risks. “Bitcoin will hit thousands of dollars per coin,” Erik Voorhees, the founder of Coinapult (who will be at the conference) told The Daily Dot. “The number of industries, communities, habits, traditions, and even interpersonal interactions that Bitcoin has the potential to revolutionize is massive.”
And yet, anything this disruptive is also risky:
It’s volatile. While the price of a bitcoin now hovers at around $100 on most online exchange platforms, it’s swung from $30 to $266 over the past few months. “Volatility will continue,” Gelenbe admits.
It’s not in widespread use. As it stands now, Bitcoin is more of a commodity than a currency, as few online or offline outlets actually accept it as valid payment (here’s a list of vendors who accept Bitcoin).
But, that’s changing; one man is selling his house in Alberta, Canada, for bitcoins, and one pub in London now takes the digital currency.
It’s vulnerable to attack. Mt. Gox, the currency’s original and primary online exchange, which still handles over half of Bitcoin trading today, has survived a slew of DDoS attacks this year. Recently, hackers launched spoof sites to dupe traders into downloading malware that compromised their accounts.
It will come under scrutiny. Proponents of Bitcoin say that because all anonymous transactions are trackable, it’s difficult to launder money on the platform.
And yet, as Timothy B. Lee (no, not Berners-Lee) at the Washington Post points out, that doesn’t mean that transactions are easily traceable to human identities; governments still have a very limited ability to enforce the law.
Governments, can, however, go after trading sites that are centralized enough to be monitored. In 2009, the U.S. government shut down e-Gold, a currency that could be exchanged for gold over similar anonymous transactions. Recently, it shuttered $6 billion virtual currency exchange Liberty Reserve, because it was “the bank of choice for the criminal underworld.”
Mt. Gox is certainly at risk; one 2012 study found that at least 20% of daily Bitcoin transactions on the exchange were spent on the black market.
Yet, Bitcoin users may be able to evade scrutiny by switching to decentralized trading platforms like Open Transactions, or Ripple (whose founder will also be at the conference). When that happens, governments may have to resort to other tactics.
Bitcoin in emerging markets?
Kenya, with its widespread use of mobile money exchange platform M-PESA, could be an ideal market for Bitcoin, some argue. And yet existing players- both Safaricom, the telecom company that runs M-PESA, and the Kenyan government, would likely fight Bitcoin tooth and nail in order to not give up the taxes they levy on M-PESA transactions, which account for 30% of Kenya’s GDP.
In the Middle East, countries that don’t approve of VOIP certainly aren’t going to welcome Bitcoin use without hefty regulation.
Especially because Bitcoin could radically change the balance of power in global politics should, say, Palestine adopt it as a currency, as some have imagined, or if countries like Iran or Syria use it to circumvent international sanctions.
However, Bitcoin’s political implications are not the focus of the conference in London, says Gelenbe. “We owe where we are with Bitcoin to Libertarian developers, but those days are over.”
- Patrick Murck of the Bitcoin Foundation, which standardizes and protects Bitcoin,
- Shakil Khan, the founder of Coindesk, the go-to news news source for the currency
- Nejc Kodric, CEO of BitStamp, the second largest Bitcoin trading platform (topped only by Mt. Gox)
- Vinny Lingham, the founder of Gyft, a mobile gift card wallet that just started allowing users to use Bitcoin
- Stefan Thomas, Senior Developer at Ripple, a peer-to-peer credit network that could either facilitate Bitcoin trading or become one of its most powerful rivals
- Luzius Meisser, founder of Bitcoin Fund, a regulated investment vehicle for bitcoin placements with offices in Malta, Singapore, and Russia.
Videos from the conference will be on the btclondon.com site shortly after the conference and we’ll bring you a wrap-up of the major conclusions.
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