DIGITAL CURRENCIES ACCEPTED HERE proclaims the plaque at my local froyo place, emblazoned with the Bitcoin logo: but when I ask how I would pay with Bitcoin, the Australian woman behind the counter shrugs and says, “I think we have a tablet somewhere with instructions on the back? …Nobody’s ever tried to pay me with it.”
Meanwhile, over on CNN, Morgan Spurlock tried to live for a week on Bitcoin, and learns that “while java can be tough to get, drugs, guns, various documents or even a hit man are available to those with the bitcoin.”
Do I sound dismissive? I don’t mean to be. Bitcoin is a big deal. As Michael Casey and Paul Vigna put it, it “is much more than a currency. It is a radically new, decentralized system for managing the way societies exchange value.” It has more than its share of doubters, but to quote Larry Summers: “It seems to me that the people who confidently reject all the innovation here [in new payment and monetary systems] are on the wrong side of history.”
And there’s no denying that cryptocurrencies inspire remarkable passion in people. Bitcoin doesn’t have hobbyists; it has believers and evangelists. Last month I flew in, and flew, the Bitcoin Jet (yes, that’s me in the picture), courtesy of Mark “Fidel” Hale, an engineer who sold a startup to Intuit, used the proceeds to acquire a jet and paint it with the Bitcoin logo, and now — with the aid of “Sticky,” a fellow Bitcoin evangelist, former Thunderbird pilot, and current Southwest captain and precision pilot on California’s Patriots Jet Team — takes it to air shows around America, getting the good Bitcoin word out to hundreds of thousands.
That’s dedication. And people like Hale and Sticky aren’t delusional starry-eyed fantasists; they’re hard-headed pragmatists (pragmatism is endemic among both engineers and pilots, for obvious reasons) who genuinely believe that Bitcoin is the next big revolutionary thing. Go to Bitcoin conferences and you’ll find a similar confidence that the attendees are in on the ground floor of something truly huge, before most of the rest of the world even knows it exists. Bitcoin is frequently compared to the Internet in 1995, and not without reason…
…but the inconvenient reality is that, for the most part, it’s more like a 1995 in which email is still slower and balkier than the post office. Decentralized programmable money may have huge theoretical advantages over our planet’s interlocking Rube Goldberg financial systems, just as renewable power has huge advantages over oil — but renewables don’t just compete with oil; they also compete with the trillions of dollars we’ve poured into oil infrastructure over the last century.
There are a few scenarios where Bitcoin is genuinely transformative today. It has zero competition when it comes to sending money directly to another person, anywhere in the world, with no intermediary organizations at all. Hence the Silk Road and its progeny. Similarly, it’s great for sending money from country to country, as long as you don’t mind extreme volatility.
But to most people, who generally don’t have to deal with merchant accounts and interbank transfers and wire deadlines, who just use their credit and ATM cards and don’t think about how much they’re being gouged by fees and exchange rates, today’s centralized financial systems are generally good enough. What’s more, one massive advantage of centralized systems is that they give you someone to complain to, and/or someone with the authority to reverse charges if that becomes necessary. When a Bitcoin transaction is complete, it is over. That scares a lot of people.
So is Bitcoin doomed to become a niche curiosity, used for remittances and international purchases by the bold, and for illicit goods by the wary? (Large niches, granted, but niches nonetheless.) How and when could it actually enter the day-to-day life of anything more than a small minority of people? What is the Bitcoin killer app?
I don’t know — yet — but I suspect it will emerge from arguably the most remarkable thing about Bitcoin: it’s not just electronic money, it’s programmable money. (Every Bitcoin transaction is actually a fragment of code written in Bitcoin’s scripting language.) It’s a chicken-and-egg problem, though; how will programmable money matter if almost no one is using it outside of a few very clearly delineated use cases?
And so I go back to the very first time I wrote about Bitcoin, almost four years ago, when I argued:
In the developed world, Bitcoin is a non-starter. At best it might eke out an existence as a distributed local currency for hardcore libertarians. …But the developing world is another matter
Like most engineers I got a lot more optimistic about Bitcoin once I understood how technically remarkable it is. In emerging markets, especially those wracked by high inflation, troubled banks, and/or corruption, Bitcoin doesn’t just look interesting; aside from its volatility, it looks like a whole new and far superior ball game. (Many such places have also been where tech infrastructure is weakest, but soon even the poor world will have near-universal smartphone deployment.)
If and when Bitcoin (or a sidechain successor) succeeds, it will (probably) do so by first supplanting existing financial systems where they’re weakest. So keep a wise eye out for financial crises around the world, and for Bitcoin growth and innovations where things seem worst. It may seem grim and disconcertingly cyberpunk for so remarkable an innovation to grow in shadows and troubled lands, to feast on crime and disaster; but that seems to be the world we live in now.