Cash is not the enemy of bitcoin

CoinDesk
May 10, 2013 at 18:49 UTC
Updated Jul 4, 2013 at 11:15 UTC

This week in the newsroom, the question came up as to why couldn’t Facebook launch a distributed, secure network and run currency and exchanges over it. It already has the user base. What’s to stop them?

This is almost certainly going through the minds of leaders at other large technology companies. Apple users are petitioning the company to allow digital wallet apps on the iPhone. Yet so far, the company has said no.

Why? Perhaps there is a chance that it will launch its own currency. Other big retailers already have. Earlier this week, we outlined the reasons that large retailers are aggressively targeting such moves. Basically, they want your cash.

And what is the one thing that bitcoin, litecoin and all the other digital coins don’t yet have? Trust from the masses. Acceptance. A way to pay.

If the currency market suddenly explodes with tokens from, well, anyone who wants to launch a new currency, we might end up seeing a Betamax and VHS war rerun: a battle not among the open-source technologies (such as bitcoin and litecoin) themselves, but between- open and closed-source currencies. Corporate vs. community.

One has the masses. The other has geeks. Does that remind you of any technology battles that have been fought before? Windows vs. Linux. iOS vs. Android.

It’s not for CoinDesk to say whether that’s a battle between good and evil. But the bitcoin community should be thinking about corporate currency more than cash. Cash could actually be a friend to bitcoin in comparison.

Whether bitcoin is successful or not is almost irrelevant when you look at currency this way. Something that looks a lot like bitcoin will almost certainly find wide acceptance. But it will have its downsides.

For example, the lack of institutions such as banks — which, as poor as they are with customer trust, are likely to be the hub of economies for some time.

A bank for bitcoin — or a similar currency — would have to do a lot of work on branding and PR to be accepted as “safe” and “trustworthy”. As does the currency itself. It’s not that there’s anything wrong with the technology. But it has yet to win the battle of perception [enter corporate PR stage right].

Traditional banks get away with this because a lot of those perceptions are inherited. They are old. They are based in big stone ‘safe’ buildings. But perhaps our perceptions are changing too. A lot of people have moved from iOS to Android because it’s a brilliant system. Technology is causing us to constantly challenge our perceptions of what is acceptable.

Acceptance is the battle for open-source currency. For corporate currencies, it’s more likely to be getting the balance right with transparency, ethics and usability.

Corporate currencies can offer benefits quickly — such as cheaper goods in exchange for tokens. But how much will the companies behind them tell you about what they’re doing with the money they “store” for you?

That piece smells a lot like fractional reserve lending. And as everyone has seen – that system works while currency is moving around. It works while people trade and there is cash flow. But when people start asking for their money back (say, from  a company that was looking likely to go bust), walls start to tumble.

Then again … what, really, is digital currency? A lot of regular money is digital now. Is that open source? Is it closed source? Isn’t that what this is all pegged to?

Witnessing digital currency’s fits and starts toward maturity is unquestionably one of the most interesting developments we have seen since the internet began. But it won’t be a smooth ride.

Opportunity, you say? Perhaps. But there are some big battles to be fought first. And only the first few contenders have even turned up yet.

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.