I've been following Bitcoin and all other so-called crypto-currency developments since, well, November last year (2013) after it skyrocketed to $800. Before that I'd had my head in the sand. I'd heard of it, but had made some huge assumptions that made me ignore it. i) just another start-up ii) just another start-up.
But it's not a startup is it. Nope.
The real reason I've been inspired to write a little article on the famed crypto coin is that one of the things I've found so very interesting is the number of smart people that have been mouthing off about how awful, disastrous, #fail Bitcoin is. When it's so obviously (to me) none of those things.
I'm going to analyse this at my level :) Nice and simple.
What does it mean when a smart person writes a load of rubbish about something and thereby demonstrating a plain failure to understand it? Well to me it means they just don't get it (obviously). Although somehow that failure to grasp is significant enough that they also seem to think that the topic is so unimportant that their comments won't matter much. I.e. whether they are right or wrong, nobody will care. An interesting phenomenon if you ask me. Remember this is Warren Buffett and some Nobel Prize winners. To me it simply says that these are not the kind of people that understand Bitcoin. That kind of excites me. If people like this don't get it and I do, then I've got plenty of time to profit from it. Well that's not necessarily true. But you do get to be part of the badass club of folks that *got* it :-)
My explanation as to why folks like Buffettt don't get get Bitcoin, is that this thing is producing such a major paradigm shift that they simply can't factor it into their reality. It doesn't fit into everything they know. So here's the conundrum for them. This thing (Bitcoin) is fundamentally a financial thing, but it seems to defy every other financial thing they know and understand. So for them it's a closed case: must be a bunch of crap. That's why they don't give it their careful attention and try to take their understanding to the next level. What they fail to notice (and what I and many others do notice) is the sheer colossal impact this thing (Bitcoin) is having on the interwebz (I'll just call it that for blanket purposes). I mean online exchanges shifting huge amounts of money. Hundreds of new cryptocoins, new ones arriving every week. The whole mining community with expensive mining hardware. Lengthy tutorials about mining. The mining software itself. If you're out there taking notice and doing a bit of digging it's in plain sight. This huge raging community of effort, focussed on this new (not so new now) thing called Bitcoin (and is mass of derivatives).
Take it from me (whoever the hell I am) that that kind of concentrated effort is extremely rare on the interwebz. As a bit of a geek who's been locked in to interwebz developments these past 15 years or so, I've actually never seen anything like it. To me this realisation, coupled with someone like Buffett's lack of understanding does more than just strongly suggest to me that digital currencies will change finance and economics in an extremely significant way. It makes it a simple and undeniable fact. Like I already live in that cryptocurrency future and everyone's forgotten the world before crypto (and everyone says they knew it was the future all along.. haha, yeah, sure).
I am fanatical about bitcoin and digital currencies not because I have such a clear view of what will happen with them or a profound understanding about the technology behind it (although I have a decent clue) but it's because of all these smart guys writing such utter nonsense about it. That's speaks volumes and volumes. I've never seen so much nonsense before about a new technology.
Despite there being a Bitcoin wiki packed with information and despite the highly unusual phenomena of a colossal amount of effort being poured into Bitcoin and also similarities with other successful technologies (which I will come back to in a moment) people keep writing these articles that interpret the things that are happening in the crypto currency scene in really naive and ridiculous ways. And not just any old people as I have mentioned. Warren Buffett, folks from CNN and Newsweek and of course the Nobel prize winners.
Now I want to come back to the parallels with successful technologies that I mentioned above. The ones I'm talking about are: Google Search; BitTorrent; Twitter.
With Google Search it's kinda personal.
My first Google search was near the end of 2000 somewhere. The UK magazine PC Pro had just given Google the best new search engine award. But Google was no household name in 2000. In fact nobody I knew used Google search or had heard of it.. and I'd just started working in IT. I'd been using Altervista for about 3 years by then and had performed a ridiculous number of searches in endless late night geeky binges exploring this new phenomena the internet. I'll never forget the buzz I got seeing the results page of my first Google search. I was shocked. I'd never been presented with such incredibly relevant search results. I knew instantly it would be mega successful and of course I switched my browser start page to Google search and left it like that for the next ten years or so.
With BitTorrent it's all about the parallels of peer-to-peer. Peer-to-peer means nobody getting in the way. Means I do what I want how I want. I rode the early BitTorrent wave, saw Suprnova's reign and fall and all the multitude of sites that sprung up in its wake. I worked my way through the BitTorrent clients: the original BT client, Azureus and finally utorrent (i almost mentioned pirate bay but meh) All people did was share illegal copyrighted material.. maybe now there's more legal stuff floating about, but BitTorrent was always almost exclusively about illegal downloading, whatever anyone says. But despite the fact that all this stuff was illegal it was virtually unstoppable, supposedly accounting for 35% of all internet traffic in 2004 (wikipedia). The copyright organizations waged war on downloaders for like a decade. and failed miserably. The models have changed. We now have iTunes, App Store, Spotify, Netflix. It's a lot lot easier to consume media legally. But the old paradigms for selling media had been broken for good. The masses found a solution and essentially won. Even though it was illegal. Illegal!
Twitter is about a lot of people taking a long long long time to grasp an alien concept. Ask yourself if you now *get* Twitter. When did the penny drop? I read a lot of crap dissing Twitter when it started to hit the public consciousness somewhere back in 2008/2009. The classic one was that people used to say it was just a bunch of people saying what they had for lunch. Or that it would be trumped by more "feature rich" services that added images and messages longer than 140 chars etc. Ok, apart from Facebook ;) they trumped the other microblogging wannabes. Now it's a public company worth tons of money. It's overvalued on the stock market, sure ;-) but it's being used actively by a hell of a lot of people.
So the relevance of these three technologies in terms of Bitcoin?
The similarity with Google Search is that I got the same buzz when the penny dropped for me about Bitcoin. I was very late to take notice of Bitcoin. Partly I think due to me and my wife having our first child :)) but a lot was down to my making assumptions (ass, you, me, etc) that it was just another startup hoping to make it big. When it hit $800 last Nov/Dec, a colleague asked me what I thought about it and it's the huge rise in price. I was completely out of touch with it still. I was just like "whatever, just some startup, blah-di-blah.." but he was like "wait, it's not a startup, it's not owned by anyone" I was like "....huh?...." then I was like "Oh shit!!!" The penny dropped.
It was there that same buzz I got with my first Google search. A kick in the balls that you have just witnessed a game changing thing. I bought my first Bitcoin that same afternoon on Bitonic.nl (gotta love that Dutch web site. Man I love Holland).
BitTorrent was peer to peer and everyone loved and used it to solve a problem with a broken industry. And nobody could stop it... even though it was illegal. Bitcoin is the damn same. only sending a made-up digital currency isn’t breaking any copyright law. It’s not illegal. So it’s a leap ahead of Bittorrent already.
By the way, the whole legal/illegal thing is another discussion. Will it be regulated, how and what will the impact be. But let’s just take Bitcoin being made actually “illegal” as a doomsday scenario for the coin. Just try to imagine how one (any government) would go about making Bitcoin illegal. It gets really messy. And if you want to take it a step further into the hypothetical, remember the BitTorrent analogy. Ask yourself, even if it were made “illegal” (somehow), would it really die.. really?
The analogy with Twitter is simply something that nobody understood. Like. At all. Then eventually became huge. So many people couldn't see its potential.
however there are many other things that fill this analogy. The same went for the iPhone. Even with the success of the iPod, I remember very clearly that there was widespread scepticism about the yet-to-be-launched iPhone 1 (2g) all over the tech blogs and forums the opinion was in fact in my memory more negative than positive. 60/40 I'd say. To me it was simple. Apple had “rinsed out” the iPod (as one used to say in London) and the smartphone world was desperate for a proper smartphone. I knew it would kill it. The rest is history.
So, in a similar vein, I see Bitcoin’s potential. It will prevail. It will change a paradigm, one that guys like Buffett have run their lives by.
This analysis is about looking at Bitcoin from a kind of Gladwell point of view. (maybe some have read Blink or The Tipping Point, awesome books). So will Bitcoin win? You don’t need to be a world class economist to see that Bitcoin will prevail. To see that it belongs at the heart of the future of finance. You just need to observe a few things. Look at the internet over the last 15 years, then look around you at what the Bitcoin community are doing. And think about what I’ve written here. Then you’ll have your answer.