Tell someone you’ve invested in the stock market and you’re likely to land up in a detailed conversation about preferred shares and movements, with an unspoken acceptance and mutual respect. Say the same about Bitcoin and you’re bound to have some raised eyebrows and suffer through either an awkward silence or a barrage of criticism. These interactions can be discouraging for a Bitcoin investor – especially one new to the market – and could leave you feeling unsettled about your choice.
As an early adopter, I’ve heard just about every doubt and argument.
Unenlightened people are quick to jump to the opinion that Bitcoin is merely another bubble - much like the dotcom boom (and subsequent bust) of the early 90’s. And in many cases Bitcoin, as a technology, can be compared to the Internet. If you consider how the Internet evolved the way that the we could communicate and transmit information and data quicker and cheaper than any established methods could offer, Bitcoin has done the same for money. Bitcoin has enabled a method of financial transaction that’s cheaper, faster and more convenient than the traditional system can ever offer us. Not to mention more non-discriminatory with regards to who can use it. So, it’s natural that it would be compared to the Internet. As a technology, this is fair, but as an investment, it’s a flawed comparison.
In the heyday of dotcom, businesses promising to revolutionise their particular industries sprouted up quicker than weeds. e-Anything and .com shares became valuable simply because they were online offerings. Investors and venture capitalists were successfully wooed. Stocks prices soared and investment poured in.
And then the bubble burst.
Many companies tanked, taking investors money down with them. But here’s the issue: The Internet itself didn’t fail. The businesses building their commercial offering on the foundation of the Internet did.
The critical difference is that Bitcoin isn’t simply an application. It’s a protocol. It’s the money protocol of the Internet, and the only protocol that has an active price feed. By investing in bitcoin - the currency - you’re simultaneously investing in Bitcoin - the network and protocol. This isn’t an option that was ever available to the dotcom boomers and a distinctive difference when it comes to investment.
Bitcoin made its mass media breakthrough when it was revealed as the currency of choice for the now notorious Silk Road website, a peer-to-peer trading site where you could purchase anything from a goldfish to an ounce of cocaine. All transactions were completed in Bitcoin, providing an anonymity for buyers and sellers alike. This provided ample fodder for sensationalist headlines by publishers, positioning Bitcoin as the currency of criminals. And they’ve not let up since.
With publishers being the loudspeakers of governments and corporates threatened most by Bitcoin moving mainstream, it’s unsurprising they take this stance and continue to attempt to shine a spotlight on events or people who’ve chosen to use Bitcoin for unscrupulous purposes. As if illegal activities aren’t being conducted in fiat currency or by those operating within the traditional financial system!
Bitcoin stories with a positive message - those of upliftment and economic emancipation as a result of bitcoin - don’t bode well for the corporate agenda. But they’re out there and thanks to sources of independent news, free of corporate censorship - who more regularly bring us stories of the positive impact of Bitcoin.
Stories like a South African school that has electricity to power their operations, thanks to donations via a Bitcoin driven pre-paid electricity meter. Or how charities and relief programmes are able to accept bitcoin donations and mobilise quicker than ever before to assist those in need. Or how Bitcoin has liberated rural organic farmers in Argentina, allowing them to circumvent costly financial institutions such as banks and PayPal by accepting bitcoin payments for goods, expanding their reach and maximising their profit considerably. Or how Indian migrants are able to send money back to their families with bitcoin, eliminating the exorbitant fees charged by traditional remittance providers, leaving more income available for essential purchases of food, shelter and education. Or how Greeks (and any other citizens at threat of currency controls) used Bitcoin as a means to protect their money during recent politically fuelled economic turmoil, when banks restricted access to funds or simply helped themselves to balances over a certain amount.
These stories are merely a few examples of how bitcoin can be used to bring economic inclusion and monetary aid to those previously discriminated against, or restricted by the traditional financial ecosystem. Bitcoin is a permissionless network, opening access to borderless ‘banking’ to the 2 billion unbanked adults, located in areas where proof of address, identity or socio-economic standing counts against them.
For those already entrenched in the existing financial network, Bitcoin offers an alternative way to manage your money, where you have absolute power of your finances. There’s no central organisation with commercial intention charging you to interact with your money, no ‘ruling party’ who can lay claim to your funds and no-one but you with the ultimate control of your money.
Is Bitcoin recognised as legal tender? No.
Is Bitcoin regulated? At a network level - no.
We are however, seeing good progress on this front in terms of the companies entrusted with individual’s bitcoins, such as exchanges, financial houses and market advisories. Regional court rulings continue to set precedents on whether bitcoin should be considered as a currency or commodity, and this ongoing legal interest will soon find it’s way to bitcoin service providers.
I must digress for a moment.
Regulation of Bitcoin as a network isn’t possible, nor is it a concept I support. The point of Bitcoin is to provide a financial system free of centralised bodies. What I do advocate though, is regulation of the organisations - such as Bitstocks - that store or handle bitcoin on behalf of customers. I believe that we should all be operating within parameters that hold us accountable for the security and safety of our clients’ bitcoin. This would flush unethical providers from the industry and leave only those committed to transparency and service, which would be a big boost for bitcoin morale.
But back to bitcoin not being real money.
The lack of clarity on what is considered real money isn’t a new concept. Historically, there’s always been initial opposition for contemporary forms of money. When we came off the gold standard and introduced paper notes and minted coins, scepticism was abound. When plastic cards were established as an alternative to cash in hand, doubt ran rife of overwhelming adoption. And now, as the limitations of credit and debit cards in our online age become apparent, and we initiate digital forms of currency such as bitcoin, we once again face criticism and resistance.
People like to stick to what they know. We’re notoriously slow to change entrenched behaviours and attitudes. But we also long for simplicity and convenience, most especially when it comes to our finances. Just about everything we do these days is fuelled by digital technology, and it makes sense that digital money is simply the next step in our online evolution.
If we consider that money is, at it’s core, a medium for exchange, then yes, bitcoin is money.
Are you able to pop to the local corner shop and pick up your daily milk and bread using bitcoin as payment? Probably not.
Not yet, anyway.
Bitcoin adoption is on the increase, and as been so - exponentially - for a number of years. The number of merchants and individuals using bitcoin as a means to pay for goods and services continues to swell, with micro-business and mega corporations, such as Microsoft and Dell, leading the way. This makes bitcoin money as it’s already widely used as a medium of exchange, on a global scale. With customer and merchant appetite growing daily, it’s simply a matter of time before bitcoin will have to be formally recognised for what it is.
A reliable means of exchange. Ergo, money!
Do I think that the doubts around Bitcoin investment will fade in the near future? No. After all, it’s never a good idea to invest (in anything!) without thorough examination. Perhaps with more exposure and education, and deeper moves towards mainstream the questions will change in nature. But for now, I welcome the criticisms. They’re an opportunity to understand people’s concerns and misunderstandings and offer our findings and opinion on why this technology is one of the greatest investment options of our time.