Bitcoin has value and will bring change, boosters say

April 30, 2014

The world according to Bitcoin reads like a sci-fi fantasy.

Virtual banks where people can buy virtual currency to store in their virtual wallets. Real-world ATMs where they can punch in their “private key” to extract Bitcoins, the smallest of which is called Satoshi in honor of the cryptocurrency’s mysterious creator. Countries using Bitcoin as their national specie.

It would all seem unreal if hundreds of millions of dollars’ worth of Bitcoins weren’t already being traded. People like Gavin Andresen, Bitcoin’s chief scientist and evangelist, are being paid in Bitcoins and entrepreneurs are getting funded by savvy investors to build companies to service a Bitcoin-financed world.

Whether there were Bitcoin doubters in the audience at the Money Goes Virtual: The Bitcoin Bourse panel at Global Conference, the message from the stage was clear: Virtual currency is not just a reality, it’s a game-changer.

“In places like Africa, Bitcoin could become the primary banking system. It could even end up becoming the primary currency in some of these countries,” said Brock Pierce, a Bitcoin pioneer and co-founder of GoCoin, ExpressCoin, and Robocoin Asia. He argued that the only way Bitcoin could fail would be if a significantly better form of virtual currency came along. “The idea can’t be uninvented,” he said.

Pierce said Bitcoin’s highly secure virtual currency system – which he claims is driven by a network of data miners more powerful than all the world’s supercomputers combined – has created a platform for a host of disruptive technologies.

That includes the development of a “giant decentralized version of Dropbox” that would allow people to share their excess computing space in exchange for Bitcoins. Or a place where people could collect virtual currency from neighbors interested in tapping into their unused bandwidth.

For small-government advocates, virtual currencies create a space to do business without Big Brother calling the shots, explained Charlie Lee, a software engineer at Coinbase Inc., His operation received a $25-million infusion from Silicon Valley venture capitalist Marc Andreessen to build a one-stop shop for the Bitcoin economy.

“If you are using the U.S. dollar, there are a lot of restrictions on how you can spend your money,” said Lee, the creator of Litecoin, a Bitcoin alternative. “For example, the government says you can’t donate money to WikiLeaks…. The government prevents you from playing poker.” In the Bitcoin world, he explained, those restrictions fall away.

The prospect of a global economy where huge virtual sums could trade hands without government oversight is worrisome to many regulators, causing countries like China to ban virtual currencies. Those fears intensified this year, when Mount Gox, one of the leading Bitcoin traders, said it had lost a cache of Bitcoins worth nearly $500 million.

Megan Burton, founder of CoinX, a virtual currency exchange, said regulators were still working out how to tweak their laws to protect consumers and prevent abuse of the system. But government officials in Canada, the U.S., and the United Kingdom were beginning to recognize that the “brilliance” of a virtual currency outweighed its risks, she added.

“The currency system as we know it today emerged from the mid-1800s,” Burton said. “It wasn’t built for the digital commerce world.”