Bitcoin, the most widely used alternative currency around the world, is entering a new chapter in its development, one that is sure to propel it into mainstream US business and society.
The first of a series of events that have highlighted this transition occurred earlier this week when Mt. Gox, the world’s largest Bitcoin currency exchange, which handles somewhere between 60%-80% of all trading, registered with the Financial Crimes Enforcement Network of the US Treasury Department as a precaution to reduce the possibility of being charged for money-laundering, which in the past closed down many similar ventures, such as Liberty Reserve.
While not eliminating this threat, especially since an large part of Bitcoin trade goes into drug money, it’s an important step, and demonstrates thoughtful analysis after the first seizure of Bitcoin assets during a criminal investigation which reportedly occurred on April 12. Previous currencies, such as Liberty Dollar, held a more aggressive approach more in line with their decentralization-based views.
The second event also occurred last week, when Mt. Gox suspended withdrawal of US dollars for two weeks, citing a need to upgrade their systems in order to be able to process the influx of new businesses who are getting on board. Many small companies have begun accepting the currency, citing the low rates; that all transactions are permanent; its simplicity; and the community that Bitcoin attracts as being reasons for joining.
As a result of these actions, Bitcoin is getting more publicity. A recently released survey of 22,000 consumers in the US showed that just over 25% of consumers have heard of Bitcoin. That’s a big number, considering the position that the federal government traditionally takes toward alternative currencies, and the skeptic approach that the public has usually taken on monetary issues. People being actually interested in how their money works and how to improve the system is an important development.
So, the $64,000 question is, will Bitcoin be the currency of the future?
The first variable in the equation continues to be the federal response to it. One of the currency’s advantages is that it has no central server, as was the case for Liberty Reserve. Of course, closing down something like Mt. Gox would cause disruptions, but since it is a peer-to-peer system, there is no way to shut it down completely. Bitcoin can also operate fine without the internet. Government can’t close it through brute force.
Another factor that is influencing this is of course the number of businesses who are registering with Bitcoin. There will be a time, not too far down the road it seems, where the currency will be so much ingrained in the day-to-day operations of businesses, that there will be a strong economic argument to keep it going. Bitcoin has already gone further than any other alternative currency in the amount of recognition it has received worldwide. Therefore, i predict that there will be no government crackdown on Bitcoin in the near future.
The second variable is to what extent Bitcoin becomes economically viable. Its first few years have been rocky as its been going on a roller coaster ride as times being worth $5 and at others up to $240. Many blame this on the fact that the currency is unbacked by anything except users’ willingness to use it. However, that is the principle behind every currency; even gold only has its value because we attribute value to the metal and its uses.
Another problem has been the consistent hacks that the system in Mt. Gox has experienced, including a recent DDoS attack on April 10 which sent prices tumbling. However as more money is invested int he system, and rival exchanges are created, such as this one in Germany, such attacks will become less often and less harmful.
Bitcoin is designed to be an appreciating currency, and even if it has its usual swing, it is a solid investment. With its opening up to mainstream society, it might as well become the currency of the future.Published in