Hardly a month goes by without another story about Bitcoin in the mainstream media. Despite volatility and mixed reaction from economists, all the signs are there that both retailers and investors are beginning to take the digital currency seriously. Just last year, for example, a story broke about an individual from the UK who was scouring landfill sites for the hard drive he trashed, after discovering the 7,500 bitcoins it held were worth $7.5m.
Subsequently, the currency crashed when the Bank of China prohibited Chinese financial institutions from adopting it, however, it is slowly but surely fighting back from a valuation of around $220.
Will Bitcoin go mainstream?
Just recently, the president of PayPal, David Marcus, said the digital currency would eventually become a competitor to online payments service. PayPal is even considering processing Bitcoin transactions.
As for online retailers, accepting payment in bitcoins means that firms can minimize their costs relating to processing online credit card transactions. A growing number of Bitcoin ATMs, where individuals can convert their own currency to digital currency, are appearing in the US and Canada.
There’s little doubt Bitcoin has come a long way since its creation by a technologist under the pseudonym of Satoshi Nakamoto just four years ago. An open source database called a blockchain maintains a list of all bitcoins currently in use and computers unlock a cryptographic puzzle releasing one new bitcoin every ten minutes. There are currently around $7bn worth of bitcoins in circulation, although this valuation can vary greatly from day to day.
Growing confidence amid setbacks
Alan Donohoe believes the currency is only just finding its feet. He is the founder of the Official Irish Bitcoin Association, which was created last year:
“The simple reason why Bitcoin is becoming more and more viable is because the volatility is decreasing. However, liquidity will need to increase, which it certainly is.”
He says banks are starting to sit up and take notice of Bitcoin, but legislation will be needed before it can be fully accepted by the financial community:
“We are in the process of finalising some documents which will be sent to relevant departments in government to start the process of integration into the currency system of Ireland. Any law the Irish government introduces regarding Bitcoin will make or break it.”
“2014 will be a year of immense growth in this area.”
Dave Fleming has his own Bitcoin consultancy, Eircoin, which he set up as a hobby, but has been seeing a distinct increase in inquiries:
“Lots of people think of it as a born-on-the-Internet currency, but it’s more than that. It’s a revolutionary idea and currency is just one manifestation of that that. People treat it like a currency, but it’s a distributed ledger. People also talk about it as a way of facilitating anonymous transactions, but all transactions are traceable.”
Online financial transactions are still increasing
What is sure is that online retail is growing fast and software companies are racing to build applications for conducting transactions online. If Bitcoin does take off, whoever creates the platform that becomes the standard will do well. Bitcoin’s big advantage will be that it enables people to use the currency without a bank account and, potentially, will mean lower charges for online transactions than at present.
Meanwhile, the currency has faced another week of ups and down as the largest Bitcoin exchange, Mt. Gox, halted withdrawals following a software bug and the price of the crytocurrency fell to its lowest level in two months. For some, such as Cameron Winklevoss, one of the twins who sued Mark Zuckerberg over ownership of the Facebook idea, that will be seen as a buying opportunity. He believes that a single bitcoin could be worth $40,000 in five years.