Last week Microsoft announced that it is now accepting bitcoin for app purchases on Windows phones and Xbox. Many bitcoin enthusiasts were hopeful that this would positively affect the price of bitcoin and also facilitate the wider usage of bitcoin among gamers and general public at large. However, the news of Microsoft accepting Bitcoin went unaffected just like the previous news of Dell accepting bitcoin or DISH accepting bitcoin or Expedia accepting bitcoins for booking hotels and etc etc In fact, the price of bitcoin is hovering at $330-$350 which is one of the lowest in 2014.
What affects the price of Bitcoin?
What is mentioned above are some of the good examples of what does not affect the price of Bitcoin. That means, retailers simply accepting bitcoin alongside cash and credit card payments do not make people suddenly want to use bitcoin in their daily lives. Things that would make people want to use Bitcoin would be, for example:
- Cheaper and more convenient international remittance services (..than Western Union or traditional Bank Wire Transfers) – e.g; Imagine construction workers in Dubai sending money back to India without even visiting a bank branch and at a fraction of a cost.
- Making it easier for freelancers to get paid, particularly from people or companies who reside in different countries
- Making mobile banking and micro-payments available to feature phone users via the traditional SMS technology (61% of world’s population is still not connected to internet). Telcos could play a big role in this area.
- Being able to auto-reload your smart cards when the credit on it approaches certain minimum threshold (this could easily be done by smart contracts on blockchain)
- Decentralization of platforms via blockchain technology;
- decentralized cloud storage services – this would mean emergence of truly cloud services that would make “100% uptime” a possibility
- decentralized publishing services – this would mean certain countries not being able to ban as easily as they ban Twitter at the moment
- decentralized finance and banking services – this would mean possibility of banking systems working 24/7, instead of 9-to-5, thus improving efficiency
- decentralized voting services – making elections transparent and every single vote accountable and traceable (without disclosing the personal details of the voters of course)
- etc etc
As you can see from the examples listed above, there is a stark difference between the news that we have been hearing for the past 12 months. So far, what we have been seeing in the news is that retailers are accepting Bitcoins. They are treating Bitcoin purely as an additional payment option to Credit Cards. For the average Joe, this doesn’t give any compelling reason for him to start paying with Bitcoin instead of his Credit Card.
Therefore, for the price of Bitcoin to rise and for the usage of Bitcoin to increase among the general public, there should be a shift in the usage and acceptance of Bitcoin technology at the back-end platforms of governments, businesses and services mentioned above. These are demand generating platforms if I may say so. Usage of Bitcoin by these platforms will automatically increase the demand for the Bitcoin usage among the general public.
Perception of Bitcoin Must Change
So far, perception of Bitcoin among majority of people, businesses, governments and central banks has been that it’s an alternative currency, a digital currency that is. However, this perception is highly inaccurate. Bitcoin is not a mere digital currency, it’s much more than that. And Bitcoin shouldn’t be seen as a replacement to the US Dollar or the Russian Ruble, it doesn’t have to replace Visa or MasterCard, it doesn’t even have to compete with Western Union’s remittance services or Banks’ Wire Transer services.
In fact, these very governments who issue their respective fiat monies, credit card and debit card companies, businesses and banks that offer financial services should be leveraging on this modern technology (i.e Bitcoin and Blockchain). They should be treating Blockchain as a complimenting protocol that could greatly enhance their services rather than treating it as a competing protocol that is hostile to their core products and services. It should be seen by them similar to the HTTP Protocol (underlying technology for the Internet) which has brought many new opportunities to them with the advent of internet banking and e-commerce.
For example, traditional banks and international remittance service providers like Western Union could leverage on Blockchain and upgrade their existing systems and make them inter-operable with Blockchain technology. This would allow them to slash fees for their international remittance services and make wire transfers almost real-time.
Similarly, debit card and credit card providers could leverage on Blockchain and reduce their processing fees. People would still be using Visa and MasterCard as normal, but the Blockchain would be transparent to them at the back-end. Bitcoin doesn’t have to replace these cards in theory.
“Blockchain is the Engine. And Bitcoin is the Oil”
If we were to relate to the Internet example above, then Blockchain would be the HTTP Protocol (or the Web) and Bitcoin would be a particular website on the net.
Many people wrongly assume that Bitcoin is not secure, thanks to MtGox and other similar Bitcoin services that went down and contributed to this misunderstanding. It’s like blaming HTTP Protocol if one of the websites on the net is hacked, which obviously doesn’t make sense. Because one is a protocol and another is an application that is built on top of that protocol. Making websites secure is solely the responsibility of the website owner and not the HTTP Protocol.
This has been a long rambling. Would like to hear your thoughts as well, please comment below.