2014 was only three years ago, yet how things have changed in that time for bitcoin, the world’s foremost cryptocurrency. In the winter of that year, bitcoin looked set to take over the world, riding on a unicorn of feckless optimism into a rose-tinted golden future. More and more businesses were accepting the virtual currency as a payment option, and it looked like the dream of a decentralized anonymous money exchange was due to be realized. Cinema bookings site Movie Tickets announced bitcoin was to be accepted as a hassle-free way to pay for tickets, and other high-profile sellers followed suit soon after, anticipating that bitcoin was about to become mainstream.
The middleman, in the guise of banks and clearing institutions, would be swept away, and the whole business of exchanging goods and services for money might soon be streamlined to a peak of international efficiency. The ins and outs of Bitcoin news were followed assiduously by proponents of the disruptive technology, convinced their idea of a digital utopia was just around the corner. The novel concept of a currency that can cross borders while staying safe and secure captured the public imagination, and was soon taken up by casino sites such as Vegas Casino, who looked to add bitcoin to the list of their payment options. Seeing which way the wind was blowing, other industries quickly followed suit as bitcoin gained commercial trust.
Then the real world intruded as is its wont, and the bitcoin revolution hit a wall with a wet thumping sound that was Mount Gox being raided in February 2014 to the tune of 850,000 bitcoins (valued at the time as over $450 million). The pricing of bitcoin hit crazy territory – up, down, up-down like a yo-yo – hardly a sign of a stable currency alternative you might think, and business appetite for offering bitcoin as a payment option began to dry up. Ironically, it is bitcoin’s well-deserved reputation for anonymous encryption that saw the cryptocurrency take such a reputational hit – “untraceable” is a concept with more than just notional appeal to citizens eager to preserve their right to privacy on the net. It also attracts the attention of designers of ransomware and a whole range of unsavoury folk up to no good, keen to hide their transactional activities from the relevant authorities.
However, there are indications that business confidence is now returning, albeit slowly. Fundamentally, the bitcoin principle is sound: the cryptocurrency is, by definition, decentralized and anonymous. So long as a trader keeps his or her encryption hashkey safe somewhere, then theoretically they shouldn’t come to any harm. The blockchain technology underpinning bitcoin is simultaneously tamper-proof and open source – the Mozilla of digital money – and much like any other scientific advance, can be harnessed as a force for good or for ill. The challenge of regulatory authorities will be to promote the former and clamp down upon the latter. As the world adapts to the digital age, all the signs are that this adjustment is very much underway.
In June this year, the International Monetary Fund circulated a staff note urging banks to consider investing in cryptocurrencies, a clear indication that the corporate world is taking them seriously. At around the same time, IBM struck a deal with the Digital Chain Trade Consortium, a group of seven continental banks, to build a digital trade platform that will run on IBM’s cloud. Signatories to this deal include such heavyweights as HSBC, Unicredit and Deutsche Bank.
If there is a tide in the affairs of bitcoin, we can presume that it’s on the turn. With banks throwing their weight behind digital trading, the retail sector can dip in a toe without feeling exposed, and bitcoin can slink back into the cinema and resume it’s aisle seat as if it never left the building. Get your popcorn at the ready.