July 26th, 2014
Via Equity Kicker, a look at bitcoin:
Coindesk just published their quarterly ‘State of Bitcoin‘ presentation. This slide stood out for me:
Looking at the massive year on year increases in most of these metrics I’m reminded of some wise words from Jeff Bezos. In around 2002 I was stuck in my hotel room in Egypt due to food poisoning and the only English TV available was an American business channel. I forget which it was. In fact the only thing I can remember from 48 hours of television is an interview with Jeff Bezos. When asked why he founded Amazon he said that he was working on Wall Street in the early 1990s when someone showed him how fast the internet was growing he knew that something very important was happening. Otherwise you just don’t get growth like that.
You can see from the chart below that the number of internet hosts grew 10x from 1989 to 1993 – that’s roughly 2x a year. Bezos founded Amazon in 1994, so this was the data he was looking at. You can see from the table above that Bitcoin adoption is growing faster than that – 3x to 685x depending on which measure you choose. As with the internet back then major use cases are still unclear, but as with the internet they will come.
As one comment noted:
Bitcoin is at that point where it’s clear that it fundamentally enables a new type of interaction that has been sought after for some time. Remember that true digital-cash has been theorized for decades; it’s just that no one figured out to sufficiently solve distributed global consensus to make it all work…until the bitcoin whitepaper solved it. Now the core infrastructure is being built around that, and we suspect that myriad applications will eventually emerge. Bitcoin is secure, decentralized/open, and programmable; that’s never happened before with money and value-transfer.
But even if the fancy >=Bitcoin2.0 consumer apps never emerge because it turns out bitcoin is only great at being money, bitcoin can be extremely successful in its role as “Gold2.0″. While it’s less hip to discuss in tech circles, bitcoin’s role as an inflation-hedge in people’s portfolios increasingly makes sense alongside or in-place-of gold, as bitcoin obviously has direct economic transactional utility (which gold lost 100+ years ago). Many are searching for a real uncorrelated asset class. Gold kinda fits the bill, but to this next generation of tech-savvy internet-dwellers, it looks more and more inelegant. Physicality is a bug, not a feature. Bitcoin doesn’t have that bug.
The other point is that this crazy value explosion needs to happen in order for the other stuff to bootstrap. Bitcoin is actually a store of value *first*, before it becomes a day-to-day unit of account (stuff priced in btc). The naysayers scream “volatility”, but the fact remains that bitcoin is *still* undervalued by a couple orders of magnitude if it does manage to cross the chasm, which is what the speculators have realized. Thus, for those with high risk tolerance, bitcoin has begun to function as a store of value already, and with that monetization and liquidity, the transactional economy can grow, followed by whatever else is dreamed up upon humanity’s first open platform for trustlessly transferring digital value.
This entry was posted on Saturday, July 26th, 2014 at 12:49 am and is filed under Blog. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
