Saturday, September 10, 2011

After the bitcoin bubble

So now here we are. Bitcoin after trading below one US dollar for two years is now trading at $5. This rise in the price of bicoin is outstanding. It sure was a rocky road to get to this point.

Much of this rocky road has been due to extreme volatility of bitcoin. This year we have seen the price go up beyond $30 and be somewhat stable at $10 before this most recent drop to $5. Because of this crazy volatility of bitcoin, people may not know what to think or expect. This should not be surprising the future has been unknown for as long as there has been a future.

The question then becomes, what next? I don't think the answer can be known for sure. One could speculate that there are two major factors that will determine this answer. Security of bitcoins, and actual bitcoin to product exchange.

The topic of security has become more important as the price of bitcoin rises. As bitcoin comes into its own, we have read about more security worries. There was news of a virus that would allow theft of bitcoins. There was a significant hack at mtgox. There was an exchange that shut down under strange circumstances. All of these events attack trust in the idea of bitcoin. It should be mentioned that a lot of these security issues have been addressed and appropriate security measures have been taken. I view this as a growing pain, as there is more value to steal more resources will be devoted to stealing. New exclusive bitcoin businesses may be viewed with suspicion. Demonstrated earning of trust is the only cure for this.

I view bitcoin as already successful, as it has helped people trade over the internet. However, if bitcoin is to become a successful competitor to government currencies then it would have to be used on a wide scale, for many products and services. Bitcoin.org keeps a wiki page that is updated with new products and services that are exchanged for bitcoin. This list has been growing steadily all year. An underutilized aspect of bitcoin is employment. Bitcoin is ideal for paying people to do small jobs that can be done remotely. The labor for bitcoin market has been growing, but there is still some growing to do.

3 comments:

jzarecta said...

Is pretty hard to make bitcoin mainstream and build a whole economic ecosystem in just a few months. Really bitcoin start getting widely popular this year, and I think we can still call it a Beta. But in a year or two we will really know if this economy will surge. BitCoin has something going for it, being open source, we can assure that it will be around for many years to come, whenever yours trully loose faith there will still be people using it, just like many open source things like SVG, Microformats; gpg digital signatures,OpenID and many other standards and conventions that hasn't taking a 100% mainstream but at least there is a healthy community supporting them.

BladeMcCool said...

Things take time yarb. It is so true about openid still gaining ground slowly, tho even now i suspect most people have never heard of openid. i'm happy to be able to use it to authenticate to post this comment though :) and with bitcoin a similar % of people have never heard of it even. that'll slowly change as more folks who believe in bitcoin start promoting it within their social circles (albeit, trying to explain how it works over and over and become tedious!!)

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