After spending all weekend absorbed in obscure forum postings about cryptography and digital signatures, and feeling a bit like the Javier Bardem character from the latest Bond film, I bought some Bitcoin on Monday and tweeted to my readers that I was excited to support such a technology and would continue to do so.
There are, it turns out, two factions within the Bitcoin (BTC) community: the "true believers" (as they are called) and the "speculators" (as the true believers call them). The speculators quietly slipped out of the room this afternoon to change their underwear as BTC's price in US dollars nosedived right before everyone's eyes. To make matters worse (or, quite possibly, the initial REASON for the panic), access to the major exchanges including Mt. Gox and BitFloor appeared to be under some form of heavy load or denial of service attack making customer access difficult—that would spook anyone.
The amount I have in BTC is insignificant, but it's these "insignificant" individual actions that when added up into the millions move markets and change our behavior. Google, for example, is not a company that makes most of its money from a handful of large institutional clients. Instead, it's the hundreds of millions of us searching—and occasionally clicking on a relevant ad or two—that feed the wise beast.
I don't know what motivated the speculators this week, aside from a combination of greed, boredom, and the tempting lure of easy returns. But after immersing myself in the BTC forums and community, I have a better understanding of what motivates the true believers:
1) Bitcoin is a vision of the future. It's a future where adults have control of their own money, and can send it anywhere in the world, even in the middle of the night... even on a weekend.
2) The true believers' dream is not that they are deep into the next Groupon-style money train before it pops, but rather that they are a part of a system that will enact massive global change—and incidentally make all early adopters astronomically rich. As someone on Twitter summarized it to me, "The beauty for true believers is that if bitcoin becomes THE major net currency, 1 BTC is a life changing amount."
Given the restricted number of BTC that will ever be in circulation, and the predicted loss of a certain number of coins over time (due to wallet file failures, forgetting encrypted private key passwords, etc), even owning one full BTC would command a staggering amount of purchasing power at some distant point in our Ridley Scott future where space mining is routine, we're all paid in universal credits—sorry, BTC—and the individual is more likely to be guided by pure capitalistic impulse rather than governmental decree.
3) Bitcoin is just the platform for what is yet to come. In other words, true believers hold that Bitcoin is not necessarily the killer app, it's merely the operating system. The recent media interest in BTC is sure to attract new app developers, tip widget designers, online casino companies, and even porn sites. The only thing between mass acceptance of BTC and what we have now is, well, being able to actually spend the stuff somewhere.
4) The end of credit card companies and politically connected fee-fed banks. To send a family member $10,000 in another country via PayPal would cost my recipient $200 to $399 in total fees. The same transaction over Bitcoin would cost 0.0005 BTC ($0.075 at current market price), and if my family member were to forget her Bitcoin public-facing address in the future, she could just create a new one with a single click.
So that's where the true believers are coming from. I think out of all these factors, if I were to begin using Bitcoin on a daily basis, I would want to see much better app development. It's the Wild West at the moment—lose your private key or find your wallet file corrupted, and you're out whatever money is in your account. I believe more consumer-friendly apps and services could be the welcome mat for the rest of us, giving a layer of comfort between ordinary user and Bitcoin's sharp, geeky edges.
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