That's the point; it only has value as long as people accept it has value. Without it another payment system will be used, its disappearance would have little or no impact on society or trade. This may well be because it hasn't been around for very long but it is not a new phenomenon; it is a variation on what's there already.
As a payment system, yes, it can be seen as a variation on what's there, like many at first viewed the internet as a variation on a fax machine, but bitcoin is also revolutionary in many ways, as I'll discuss more below.
I don't see what it's USP is. If it gets traction and becomes engrained then it will acquire real value but at the moment I don't see its worth other than its speculative value.
How much traction is enough traction? Bitcoin is still small on a global scale, but has it reached critical mass yet? I'm not sure, probably not, but here are some numbers: There are about 13,848,000 of the eventual 21m in existence, trading at $240 giving a market cap of over $3 billion. Transaction numbers are steadily increasing, there are about
100,000 Bitcoin transactions per day lately. Last year Microsoft started accepting Bitcoin becoming the largest company to do so. $350m in venture capital funding to Bitcoin related companies last year, and another $100 already this year, when there had only been about $100m in total prior to 2014, so what are these companies going to do....
I guess I haven't really explored a lot of the possible benefits of Bitcoin in previous posts so lets do that. I'll try to explain why Bitcoin is more like the Internet of money than money for the Internet.
Credit cards
Credit cards are fundamentally flawed as an online payment mechanism and they were never designed for it. They involve giving your private payment info to the merchant and hoping they don't take too much or store and leak your details. This is like walking into a shop and handing the cashier your wallet and hoping they only take the right amount and don't scan your drivers licence. With Bitcoin the transaction to the merchant is signed with your private key *locally* and then communicated - your private key never leaves your device. There is no private information given to the merchant, there can be no subsequent payments taken from you.
The cost of credit card fraud is usually hidden from consumers, but baked into the prices of everything we buy as the merchant is on the hook for significant fees from the CC companies to cover this fraud, not to mention possibly on the hook for the full amount for purchases deemed to have been made with fraudulent cards. If everything you bought was 2% cheaper (or maybe more for some merchants) with Bitcoin because merchants didn't have to worry about CC fees or charge-backs would it encourage you? Bitcoin can be better than CCs in this case, but I accept that there may be other solutions too, either way, I think CCs are on the way out, and we'll be making most payments with our phones or some dedicated hardware wallet device within 10 years.
For example, I found [broken link removed] as an example, you can go to that site and make a bet with Bitcoin without creating an account or providing any details whatsoever. It's the online equivalent of walking into a bookies in person. This is impossible with credit cards or even something like paypal.
Programmable Money
Bitcoin is the first natively programmable money, so this is an entirely new concept for us. You can make transactions that are timelocked so something like a trust fund could be natively implemented in the money itself, no 3rd party or fees needed. Bitcoin addresses can also have multiple private keys. You can make an account that needs m of n keys, e.g. 3 of 5 keys or 6 of 10 keys. Again this is native to protocol itself, and has many uses for things such as joint accounts, corporate accounts and provides a way of securing Bitcoin like nothing else on earth can be secured. Imagine making a 3 of 5 key account. One key on your phone, one key at your parents house, one key in a safe deposit box at a bank locally, one in a safe deposit box in Switzerland etc. Any 3 of the keys are needed to spend the coins. You can't secure cash or gold like this.
You can make trust-less escrow transactions where the escrow party can only either return the funds to the original account or complete the payment but cannot steal the money themselves. Additionally, since Bitcoin is programmable and not tied to personal identity it can be used by automated software applications, this has long been a missing part of the puzzle for autonomous agent-based software systems.
Smart Property
Bitcoins can be used to represent more than tokens in the Bitcoin payment system. Imagine you own a company and have a Bitcoin which you divide into 10,000 sub-units and sell. Each of these units could represent a share in the company. Dividends could be paid directly to the owners of the units without even having to know who they are. The units could also be transacted peer-to-peer by the share-holders without any stock market being needed. Imagine if these units represented property rights e.g. car or home ownership. A global public ledger can be used for more than just money. Imagine how this could replace human-based property-conveyance, stock-markets, escrow services.
People are working on all the things I've mentioned above, but it's still really early days. Even though Bitcoin is about 6 years old now, it's really only in the last year these more advanced use-cases have started emerging. In 1995 we had no idea youtube or twitter or facebook would be built on the Internet, we still don't know what the final successful applications built on Bitcoin might be.
fpalb I agree that the integrity of money as a claim on society is dependent on central banks managing its supply in line with the economy's capacity to honour those claims. Nonetheless, it is a most marvellous and sophisticated concept and has played no small part in the massive growth in Western economies over the last century or so. I can't see how 21m BTC can ever match up to the flexibility of fiat currency in being able to adapt to an economy's needs.
Just as a note on the 21m cap. Bitcoins are already sub-divisible to 8 decimal places. The smallest unit called a Satoshi is 100,000,000th of a Bitcoin. Even more decimal places could be added if needed by a change to the software. Digital money does not suffer the same limitations of physical money in terms of divisibility. There's not going to be a problem of there not being enough for everyone.
As for how our western economies are doing, I'm no expert, but I don't take it for granted that the system we currently have is as good as it gets. The rich are getting richer in proportion to everyone else, and when the QE money tap is turned on those closest to the faucet seem to benefit the most. How come QE isn't divided fairly among the citizens bank accounts?
As someone that was fiscally responsible and has never taken a loan I resent having to pay for bank bailouts and having my savings devalued by QE because the banks are 'too big' to fail. I'm not convinced that 'voting in the other guys', 'better regulation' or any incremental changes to the system are likely to be a good enough solution. I would much prefer that we invent ways to make the banks obsolete, working around them with technology that is not as prone to human corruption. As I said before, I'm ready to try something else, I look forward to the day I can close all my bank accounts.
If nothing else I hope Bitcoin will at least force the existing system to up their game due to competition. It's 2015 and it can still take *days* to send money between digital bank accounts. Fees for financial operations that should be completely automated are ridiculous, it should cost pennies to make a stock trade not 30euro.
Money as a claim on the economy has very real value albeit dependent on management of the price level. The attributes you have cited for BTC have the most flimsy of value. Would I value super slick and safe transmission? A bit but not nearly enough to justify the face value of the BTC. I'm afraid that despite your evangelical efforts I will remain a disbeliever.
It's still early days, I'm a big Bitcoin enthusiast but even I wouldn't risk pouring my life savings in. There is both great opportunity and great risk. At the moment I am mostly enjoying the educational journey