Ukraine’s political problems and de-facto war with Russia hit the value of the national currency badly in 2014. But the hryvnia, so Ukraine’s national currency is called, wasn’t the worst currency of 2014, but only the second worst. The worst currency of 2014 was Bitcoin.
But the march of Bitcoin continues – the less Bitcoin is seen as a speculative currency, the easier is to realize the real unique advantages of Bitcoin and to spot potential killer apps, and the easier it will be for Bitcoin to gain momentum as a technology. That’s why we should forget Bitcoin price and bet on Bitcoin killer apps.
In fact, in 2014 Bitcoin was a very bad investment for speculators, but a very good investment for venture capitalists. They invest in cryptocurrency startups because they see that the volume of Bitcoin transactions and the adoption of Bitcoin by consumers and merchants alike are booming, with no sign of slowing down.
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The “speculation phase” of the Bitcoin economy has been terribly important because it has put Bitcoin on the map and generated a lot of press coverage. As a result, today we have a critical mass of Bitcoin users, and we see the beginning of the first “real phase” of the Bitcoin economy. That’s why we see more and more venture capital and corporate investments in cryptocurrencies.
Bitcoin is a very recent phenomenon, and it’s always difficult at the beginning to see clearly what new things are really good for. At the end of 2014 and waiting for 2015 to arrive in only a few hours, I think it’s now clear what Bitcoin is really good for. In fact, Bitcoin has one huge advantage over fiat currencies and two more controversial advantages.
The Real Bitcoin Killer App: Cheap Transactions
The huge advantage is that Bitcoin transactions are relatively cheap. Everyone who used to rely on PayPal (let alone bank wires and Western Union) to send money to other countries knows that Bitcoin is far cheaper than alternatives. I often need to send money abroad, and to me Circle has been a godsend – I encouraged my contacts to open Circle accounts and I am now saving a lot of money in transaction fees. At this moment, Circle is especially good for users in the U.S. and a few other Western countries, because money received via Circle can be cheaply transferred to a bank account in one click, but similar options are coming to other places as well. Circle is, I think, a real killer app with the potential to totally change how we transfer money, and eat the lunch of Western Union and legacy remittance services. If Circle went public, I would buy in the IPO without thinking twice.
Low transaction fees enable micropayments over the Internet, which didn’t see widespread adoption in the past because micropayments are too expensive with legacy payment systems. ChangeTip and other Bitcoin micropayment services are real killer apps, with a potential to totally revolutionize the way online content is funded and permit creative people everywhere to earn a living with their work, regardless of geographical location. Bitcoin is, as Peter Diamandis said recently, one of the technologies that are making national borders obsolete. If ChangeTip went public, I would buy in the IPO without thinking twice.
The low price of transactions is the top unique advantage of Bitcoin, and it’s already enabling killer apps. There are, in my opinion, other two unique and very important advantages of Bitcoin, but more controversial. One is that the cryptocurrency is not under the control of any central authority or nation state, but is controlled by its users. The other is that, if appropriate privacy measures are taken, Bitcoin transactions can be anonymous. Of course, decentralization and the option of anonymity are hated by the financial establishment and the authorities, but they are often important for users, and therefore have the potential to generate killer apps.
I don’t think the price of Bitcoin will rise to its previous highs anytime soon. If anything, I think the price of Bitcoin will continue to slowly go down in the foreseeable future. If I were an investor, I would forget Bitcoin as a currency speculation and try to invest in next-generation Bitcoin killer apps.
Disclaimer: This is my opinion, not necessarily shared by CCN.
Images from Western Union and Shutterstock.