I’ve avoided the bitcoin hype for long enough. I’ve watched a bit on the periphery, but recently been doing a bit more research. Then I bumped into the new Andreessen Horowitz podcast, and got a crash course on it!
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1. Goldman Sacks has taken notice
Want proof that Bitcoin isn’t just for geeks? Goldman has released a report and they have real interest.
Specifically Goldman identified the potential for 210 billion dollars in savings in payments that Bitcoin could bring. That’s billion with a “B” and serious opportunity for disruption!
2. Solves online trust problem
There are many who feel Bitcoin doesn’t have potential as a currency. But even those folks feel it’s underlying technology could solve a big problem with online payments, the general ledger problem.
When you want to send digital things, whether a signature, contract, keys or currency, you need a way to establish trust between people. Bitcoin solves this with it’s technical sounding “block chain” which serves as a sort of internet notary public. Anyone can check on this common general ledger the status of a transaction, without fear of compromise, double entries or theft.
For more in-depth discussion, check out Bitcoin & the Byzantine Generals problem. It explains the general ledger aka the block chain in a lot more detail.
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3. Better digital wallets
Although currently bitcoin wallets are banned on the iphone AppStore, the potential there is huge. Currently there still isn’t a good digital wallet solution, and bitcoin sits nicely in that space.
Bitcoin is more a platform, and a set of protocols, a new digital infrastructure that solves a lot of big problems online. As new apps are built on top of it, they abstract away the technical complexity, providing day-to-day
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4. Store of value for Greek & Cyprus
Citizens of distressed countries can face the fear of their savings eroding away. That can happen rather quickly as we’ve seen in Greece & Cyprus. Savings in Bitcoin presents an alternate currency within which one could place some of their savings. Since it’s not controlled by any government or power, it provides a hedge against such fears.
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5. Say goodbye to inflation
Fiat currency, as it’s known, is the currency we live with today. It’s the post gold standard currency, where the federal reserve controls the money supply. Quantitative easing, aka printing money, is the lever the fed uses to keep a small steady inflation on the money supply.
With the gold standard before it, and potentially through something like Bitcoin, you eliminate the government meddling, and inflation along with it. Some argue this would reduce or even eliminate the so-called moral hazard in the present system. With the gold standard, large & systemic firms cannot be bailed out, so they have a huge insensitive to behave prudently, or fail.