Bitcoin, Blockchain, and ICOs What You Need to Know
0Bitcoin, Blockchain, and ICOs What You Need to Know.
One of the offshoots of CES this year was a CoinAgenda event. It was attended by over 1,000 folks paying about $1,000 each to hear and learn about Bitcoin and blockchain startups, and judge a variety of ICOs (Initial Coin Offerings). Bitcoin bubble or not, blockchain-based technology is here to stay. Maybe some other cryptocurrencies are as well. It’s still early days, but not too soon to try to understand what Bitcoin, blockchain, and ICOs are, and how they relate to each other.
Bitcoin (BTC if you want to trade it) is famous, has made a lot of people rich (certainly on paper), and gets a lot of public attention. After the recent crash, I suspect it has also made some people poor. It’s a way that I can send some value off to you without the fees inherent in systems like PayPal, or the need to trust a central arbiter (like PayPal or a bank). It’s sort of anonymous, too, but if you want to cash out, you’ll eventually need to have a bank account, which isn’t anonymous.
However, along the way Bitcoin’s aspirations have been mugged by three factors. First, the blockchain on which it runs is slow, so it’s kind of lame for most purchases. Second, transaction fees have skyrocketed as a result, so it isn’t all that cheap to transfer Bitcoin if you need it sooner rather than later. And third, it has become something of a commodity and is traded like one — which means it fluctuates more than most merchants will tolerate. So it is probably best to think of Bitcoin as something quite different from a currency. Either way, it is important to realize that the underlying blockchain technology will be here to stay, whether or not Bitcoin fizzles.
At the same time Bitcoin has become popular and profitable for investors, it has become increasingly useless as a currency. Transactions are taking longer than ever (imagine waiting an hour for your coffee shop to process your payment and pour your cup) and are more expensive than ever (imagine paying $20 to speed things up and get your coffee sooner). Bitcoin is slowly moving to address these issues, but its very success has created a larger problem. The better Bitcoin is as an investment, the more deflationary it is. And the worst thing for an economy is a deflating currency. If you expect your money to be worth more tomorrow, you have no incentive to spend it today. Definitely not a recipe for creating a thriving economy. This isn’t the vision most people had for Bitcoin when we first described it as “dollar bills with wings” four years ago — although even then, we explained why it was acting more like a commodity than a currency.