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Bitcoin Wonder and Awe (updated)

April 3, 2013

If you’ve been paying attention, New Market Entrepreneurs can’t help but to be in awe of the phenomenon called Bitcoin.  This chart alone should get your attention:

Bitcoin Market Cap on 4/3/2013 7:05 EDT

Bitcoin Market Cap on 4/3/2013 7:05 ED

Don’t know about Bitcoin?  This is your entrepreneurial inner-voice:  CHECK IT OUT!

Whether a coincidental alignment of 1) early stage financial panic in Europe  and 2) right place/right time availability of a decentralized crypto-currency or the start of something big as a hedge or even an alternative to nearly every government on the planet pumping cash into their economies and debasing the future value of their currencies, we are not sure.   What we are sure about is that, like Mobile, like The-Internet-of-Things, like Wearable Computing, like 3D Printing and other emerging engines of New Market Entrepreneurial opportunism, you can now add bitcoin.   Bitcoin is not something you can master in 10 minutes.  It will take an hour or more to truly ‘get it’.  But here is an elevator pitch from the person who invented it:

[Bitcoin is] completely decentralized, with no central server or trusted parties, because everything is based on crypto proof instead of trust. The root problem with conventional currency is all the trust that’s required to make it work. The central bank must be trusted not to debase the currency, but the history of fiat currencies is full of breaches of that trust. Banks must be trusted to hold our money and transfer it electronically, but they lend it out in waves of credit bubbles with barely a fraction in reserve. We have to trust them with our privacy, trust them not to let identity thieves drain our accounts… With e-currency based on cryptographic proof, without the need to trust a third-party middleman, money can be secure and transactions effortless.

While the chart above is an attention grabber, it’s not the real source of wonder and awe.  As in all markets, manipulated or pure, crowd psychology will cause booms and busts.  Everybody expects wild swings in both directions as this nascent currency makes its way into the mainstream.

Here are some of the fundamental reasons why bitcoin is earning wonder and awe from New Market Entrepreneurs.  It has to do with the ability to transact frictionlessly, anonymously, in whatever denomination you wish (1,000,000 to .000,000,001) and in complete confidence that the value of your currency is protected from governmental hanky-panky.  We are already hearing a growing roar of buzz associated with startup opportunities associated with bringing 1-click-access to bitcoin to the masses.   This is something to at least watch.  If your New Market Entrepreneurship efforts involve web-based transactions, might want to better understand if bitcoin can become a business driver for your revenue model.

Here are some places to start:

  •  You can find good recent introductory coverage from mainstream media here and here
  • Here is a good deep-dive explanation.
  • Here is a +/- 30min radio interview with a NYC-based entrepreneur who founded a thriving bitcoin hub/exchange.  The interviewer asks most, if not all of the questions you probably have.
  • Here is a website dedicated to bitcoin that is ofttimes referenced by bitcoin enthusiasts.  And this Quora post rocks.
  • Last, but not least, last week the US Feds announced their plans to regulate cyber-currencies.  While not mentioning bitcoin by name, it’s clear bitcoin is now in their cross-hairs.

So have at it.  We have a feeling you will feel the sense of wonder and awe too…   either way, let us know what you think!

Update 5/6/13.  Overnight, this blopost was published by a VC who very clearly describes the nature of the bitcoin opportunity (from an infrastructure-buildout perspective) as a bet that this nascent currency moves closer to the mainstream.  By his calculation, 2 to 2.5X growth from where we are now will do it.  It’s worth a look.

All of these market-sizing analyses require a 2 to 2.5 order of magnitude increase over current levels. Those same metrics have shown a 1 to 1.5x order of magnitude increase in the last year, so it doesn’t stretch the imagination to think that it might be possible.

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