May 23, 2013
Bitcoin backers have big dreams—dreams of reinventing the financial system based around a currency not issued by governments and not subject to the whims of central banks. But the cryptocurrency’s volatility over the last few months has raised questions about whether most people would want to depend upon it to pay for goods and services.
Despite the wealth of bitcoin-related startups entering the market, even bitcoin’s most avid supporters admit that its volatility might not subside anytime soon. But that might not matter. After all, bitcoin isn’t really a tool for normal consumers; while it may be used by companies to exchange money and avoid transaction costs, there’s little reason for small-time consumers ever to use bitcoins directly.
The beauty of bitcoin is its independence from the traditional financial system—the fact that transactions once made are irreversible and can be untraceable. That’s also a huge drawback for most normal, law-abiding people in stable economies. “Bitcoin is basically based on mistrust rather than trust,” said Reuters columnist Felix Salmon, at a Quartz conference on bitcoin on May 22 (pictured above). “If you look at the way people use currency in the real world, then they like the ability of banks to hold their money for them.”
That’s because banks offer clients a variety of protections—they allow clients to contest transactions, monitor for fraud, and will assume some losses if a client’s identity is stolen or account is hacked. Governments monitor banking activity and guarantee deposits. And in stable economies, the vast majority of people trust that their government will make good on its debts and that the cash in their wallets today will be worth about as much as it will tomorrow.
Read more at Quartz.
May 23, 2013