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April 10, 2013, 12:22:33 AM |
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TL;DR: the core bitcoin basics are strong and have great potential 8-10 years from now, but the current valuation is completely unjustified. I look forward to bitcoin 2.0.
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The current general opinion to justify the rise in value tends to always come back to "It has potential to replace transaction processors". Then the cc trx numbers worldwide are pulled, and here you go: BTC is now worth a gazillion gazillions in people's mind.
I don't deny that crypto currencies have the potential to co-exist, and potentially overtake traditional payment processing mechanism, at least online. Yes, in fact, I'm of the opinion there's a good chance that long term, they will, and that's why I got into BTC in the first place.
The best reasons I can think of are (in that order):
- merchants love the idea of trx that are irreversible
- small merchant have started adopting technology (square)
- they will love nil trx fees even more
- in turn they can offer goods at a lower price
- buyers will be happy to stay anonymous and will enjoy a simple method of online payment
4 month ago I would have said the bitcoin would be that currency. However, today, I'm now certain it won't be.
Here's why:
- major offline retailers - the ones that carry the mind share - are too laggy to implement BTC payments fast enough. I should know, I led various IT projects for major chains and trust me when I say these guys would take anywhere between 3 and 5 years to implement anything at all even if they started today. There's also very little will to do so until adoption has reach critical mass. See: NFC payments.
- most retailers are just getting to grip with loyalty solutions. The bitcoin's wonderful anonymity is going to poop all over their grand 'big data' plans. No way they will adopt it just yet.
- online merchants are more agile. I think an amazon would be amazing for bitcoin, and in fact might prop it up for quite a while. But unfortunately, even if amazon transacted 100% in BTC, it still wouldn't warrant the current sky-high valuation.
- the current ecosystem, (not the tech) is too fragile. Exchanges lag for entire minutes, that's if people can even log in. Even worse, there's no possible trade curb to implement as the system is decentralized. A minor panic is likely to send the whole thing tumbling down quickly. Inflated expectations about 'doubling up' every week create stress and worry even when the BTC stabilizes, increasing the potential for panic.
- the current hype is going to back fire. The MSM reaction won't be level headed, but instead complete 'told you so, it's scam, pyramid, terrorism, alert alert, bubble'. It's going to in fact damage the reputation of crypto currencies overall. Keep in mind most people do not understand bitcoin. Even the ones trading today (I met a few example at work today).
- The people pushing millions into this right now aren't the patient type, geek hopefuls longing for better days of free transactions. They want returns now. They don't understand the tech, and they probably don't understand how the tech can be monetized into services. The same thing happened during the dot.com boom - they buy anyway, but will get bored quickly.
Ironically none of this a bad thing, because any exposure that highlights the top key points will be a good thing for crypto currency long term. Personally I in fact look forward to 'the next one' and plan to build services on top of it.
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