Tuesday, April 23, 2013

Matthew Boesler — Here's Why Venture Capitalists Want To Make Bitcoin The 'Next Big Thing'

In a note to clients, Colas highlights the merits of Bitcoin for venture capitalists, comparing it to tech success stories like Amazon and Netflix:
Those thousands of tech-savvy folks who run the bitcoin system have created a new and very low cost method for transferring money around the world. For the potential 25 bitcoin reward of solving one of those 10 minute puzzles, they keep track of all the transactions created by users around the world.
The current system for money transfers – banks, brokers and other financial institutions – want a lot more for their efforts than a few thousand dollars six times an hour. Bitcoin is to money what Amazon is to retail or Netflix is to video content – a much more efficient way to meet the needs of millions of people around the world.
Colas goes on to say that there are two major issues to overcome. The first is security, which undermines confidence, and the second is anonymity, which attracts government interest. He doesn't see either as insurmountable, although they have to faced and dealt with for Bitcoin to be economically viable as an investment.

Business Insider
Here's Why Venture Capitalists Want To Make Bitcoin The 'Next Big Thing'
Matthew Boesler


Dan Kervick said...

Great. Just what the world needs. Another unregulated financial innovation that venture capitalists can use to unleash their oh so special brand of destabilizing chaos and radically individualistic predation on the world.

Anonymous said...

I believe that Bitcoin will eventually fail as it is difficult to make investments in common infrastructure. However, until a serious digital currency alternative arrives, bitcoin and other digital currencies will continue to appreciate.

If one is really interested in these digital currencies I recommend looking at Litecoins. In my experience they are technically superior to Bitcoins. They have better security and provide greater transaction processing feedback.

Unfortunately, like bitcoins the total number of litecoins issued is capped.

One should remember that although bitcoin is capped, this could potentially change. This would become a political situation in that the majority of miners( bitcoin transaction processors) would need agree on a new set of rules. This should be considered plausible.

To gauge the political potential of bitcoin one should observe the control of the miners. Basically the power lies with them and observing how they are controlled will indicate if Bitcoin will morph into something greater than a gold-subsitute.

I believe that any call that dismisses the value of bitcoin is premature.

Some seem to ignore some strong benefits of bitcoin too. For example, wikileaks which is under a banking blockade has been able to receive funding via bitcoin. Check for yourself: Wikileaks account balance the receiving bitcoin address can be confirmed here: Wikileaks bitcoin address.

It's a double-edged sword.

I believe that with time the free and decentralized nature of the internet will become strongly related to digital currencies. For the time being I think that bitcoin will increase the free-nature of the internet as bitcoin relies on the freeness of the internet and will thus fund endeavors that support this. This is particularly important as there is mass surveillance of all internet traffic.

I'm betting that bitcoins will make it to 500, but 1000 wouldn't surprise me, within 10 years. Expect to hear about litecoins.

Dan Kervick said...

Shaun, I tweeted a message earlier tonight which read, "NOTICE: I will not give money to any charity that accepts payment in bitcoin. I encourage others to adopt a similar personal policy."

I followed it up with, "If a charity supports a rogue, speculative alt-currency for black marketeers and tax cheats, it is part of the problem not the solution."

Anonymous said...

So charities are the problem? I believe that wikileaks has good reason to use an un-regulated currency given the state-supported illegal banking-blockade placed upon wikileaks.

Anonymous said...

Dan, I agree that it is unethical that v.c(s) use charities to improve the value of bitcoins. This is consistent with the predatory nature of such groups. However I'm not sure that challenging charities is the best way of dealing with the issue.

Dan Kervick said...

Shaun, I think charities should be discouraged from getting mixed up with bitcoin and similar fly-by-night schemes. They really might not know what they are enabling. When I read that venture capitalists are suggesting that bitcoin investors encourage charities to accept bitcoins so they can create a kind of shield of philanthropic legitimacy to keep government from regulating bitcoin, and ruining their plans to profit from bitcoin speculation, I thought it would be good to intervene in my small way with a countervailing message.

Bitcoin is to my mind just another of those financial "innovations" that laissez faire America and its relentless armies of hucksters. money-launderers, tax cheats and flim-flammers are always coming up with to avoid the snares of financial regulation and governance. But that's the kind of activity that blew the economy up on 2007 and 2008, and so I think this is a good one to nip in the bud right now. We have had three decades of movement in the direction of under-regulation of financial activity.

James said...

The need for charities is the sign of a government not fulfilling its duties, and they're usually filled with people feathering their own nests, so it won't be any surprise if they jump into bed with these charlatans.

The Rombach Report said...

"Bitcoin is to my mind just another of those financial "innovations" that laissez faire America and its relentless armies of hucksters. money-launderers, tax cheats and flim-flammers are always coming up with to avoid the snares of financial regulation and governance."

Ironic, don't you think, that demand for alternative "currency" Bitcoin is at least in part driven by taxes on fiat US Dollars?

Matt Franko said...

"Charity" is a snare in any case (a form of self-justification imo) ... I wouldnt be surprised if many "Charities" jumped on the bitcoin bandwagon...