The Business Of Bitcoin: Entrepreneurs See Opportunities In Alternative Currencies

After some prominent press (and some prominent naysaying), Bitcoin has suffered a bit of a crash, falling from a high in the twenties to about of $3 USD today. Interestingly, however, the intensity with which users, experimenters, and entrepreneurs are still supporting what could best be termed a movement has not waned.

The money to be made in this space is in the creation of an intelligent interface for the Bitcoin system. In theory, bitcoin transactions should be completely instantaneous and anonymous. The system records each transaction publicly, ensuring bitcoins can’t be spent again and again, but to watch the records would tell you nothing about the people performing them. It’s this anonymity that allows for the existence of sites like the Silk Road, an online drug and “alternative products” store featuring everything a 15 year old anarchist or average hesher could want, literally sold out in the open (albeit completely anonymously).

However, it’s trivial for law enforcement to follow cash into the bitcoin maze and, presumably track the goods as they leave. This is both good and bad: bad because the bitcoin proponents see the eyes of government as tools of great evil and good because it ensures that business could (but may not) begin accepting bitcoin.

I explored a few of the possible implementations of bitcoin including Namecoin, a bitcoin-based DNS ownership system that ensures no single name authority can arbitrarily assign or reassign domains – a boon to folks like Mike Rowe. What I found, sadly, is that while the subculture of mining is fairly mature, the tools are opaque for a general user. That’s where entrepreneurs are stepping in.

How, then, can the average person begin accepting bitcoin? There are a number of interfaces including an open source app made by bitcoin supporters but folks like Safebit are also hard at work trying to streamline the process.

“It’s a very friendly wallet,so non-technology people will be able to use it themselves instead of having an hard time storing their bitcoin,” said Safebit co-founder Or Perelman.

These mostly assume that you are not doing your own bitcoin mining but instead want to offer your goods and services in exchange for BTC, a process that would be as familiar to the average merchant as the acceptance of Paypal. That bitcoin is not actually backed by tangible wealth is a concept that is sure to confound the adoption considerably. For example, LaCie’s Wuala currently accepts bitcoin for their services.

Another interesting – if derivative – implementation is something that is being called Bitcoin^2, a service that bases the value of bitcoins on “exchanges via the natural energy equivalent value – a variant of barter.” What this means is anyone’s guess although the creator is piggy-backing on the notoriety of the secretive founder of bitcoin, Satoshi Nakamoto in order to launch their B2B exchange. Without a central authority, the speed with which these offshoots bloom and wither will be considerably enhanced.

As it stands bitcoin is not dead. There are many concerns, the primary one explained by Ben Laurie in his paper, “Decentralised Currencies Are Probably Impossible (But Let’s At Least Make Them Efficient).” He wrote:

Both Bitcoin and my alternative proposal suffer from a problem for which there is no known solution: creating consensus in a group with open, changing membership. But at least my proposal fails in an energy efficient way, unlike Bitcoin.

However, if anything is easy on the Internet it’s the maintenance of an open, changing group. Bitcoin was always designed as a proof-of-concept rather than a real monetary exchange and that folks can take cash from it is a happy accident. The goal, then, is to make bitcoin as easy as transferring funds from bank to bank and account to account as well as educating the consumer about its benefits. In the end the naysayers may not be proven wrong but there is some societal value to an independent, open, and ostensibly secure value transfer system, for good or ill.