Why Bitcoin Matters
How the financial system should work in the Internet era
Keith Bedford | Reuters
MARC ANDREESSEN | DealBook NYTimes
A mysterious new technology emerges, seemingly out of nowhere, but actually the result of two decades of intense research and development by nearly anonymous researchers.
Political idealists project visions of liberation and revolution onto it;
Establishment elites heap contempt and scorn on it.
Technologists – nerds – are transfixed by it. They see within it enormous potential and spend their nights and weekends tinkering with it.
Eventually mainstream products, companies and industries emerge to commercialize it; its effects become profound;
Later, many people wonder why its powerful promise wasn’t more obvious from the start.
What technology am I talking about?
Personal computers in 1975,
the Internet in 1993, and
Bitcoin in 2014.
The gulf between what the press and many regular people believe Bitcoin is, and what a growing critical mass of technologists believe Bitcoin is, remains enormous.
In this post, I will explain why Bitcoin has so many Silicon Valley programmers and entrepreneurs all lathered up, and what I think Bitcoin’s future potential is.
First, Bitcoin at its most fundamental level is a breakthrough in computer science – one that builds on 20 years of research into cryptographic currency, and 40 years of research in cryptography
Bitcoin is the first practical solution to a longstanding problem in computer science
Bitcoin gives us, for the first time, a way for one Internet user to transfer a unique piece of digital property to another Internet user
The consequences of this breakthrough are hard to overstate.
What kinds of digital property might be transferred in this way?
digital signatures,
digital contracts,
digital keys (to physical locks, or to online lockers),
digital ownership of physical assets such as cars and houses,
digital stocks and bonds …
and digital money.
All these are exchanged through a distributed network of trust that does not require or rely upon a central intermediary like a bank or broker.
All over Silicon Valley and around the world, many thousands of programmers are using Bitcoin as a building block for a kaleidoscope of new product and service ideas that were not possible before.
International remittance. Every day, hundreds of millions of low-income people go to work in hard jobs in foreign countries to make money to send back to their families in their home countries – over $400 billion in total annually. In fact, it is hard to think of any one thing that would have a faster and more positive effect on so many people in the world’s poorest countries.
A global payment system anyone can use from anywhere at any time, can be a powerful catalyst to extend the benefits of the modern economic system to virtually everyone on the planet.
Micropayments, or ultrasmall payments. Think about content monetization, for example. All of a sudden, with Bitcoin, there is an economically viable way to charge arbitrarily small amounts of money per article, or per section, or per hour, or per video play, or per archive access, or per news alert.
Fight spam. Future email systems and social networks could refuse to accept incoming messages unless they were accompanied with tiny amounts of Bitcoin – tiny enough to not matter to the sender, but large enough to deter spammers.
Public payments. Think about the implications for protest movements. Today protesters want to get on TV so people learn about their cause. Tomorrow they’ll want to get on TV because that’s how they’ll raise money, by literally holding up signs that let people anywhere in the world who sympathize with them send them money on the spot.
Ben S. Bernanke: Bitcoin “may hold long-term promise, particularly if they promote a faster, more secure and more efficient payment system.”
Milton Friedman said: “One thing that’s missing but will soon be developed is a reliable e-cash, a method whereby on the Internet you can transfer funds from A to B without A knowing B or B knowing A – the way I can take a $20 bill and hand it over to you, and you may get that without knowing who I am.”
Bitcoin offers a sweeping vista of opportunity to reimagine how the financial system can and should work in the Internet era, and a catalyst to reshape that system in ways that are more powerful for individuals and businesses alike.
Marc Andreessen’s venture capital firm, Andreessen Horowitz, has invested just under $50 million in Bitcoin-related start-ups. The firm is actively searching for more Bitcoin-based investment opportunities. He does not personally own more than a de minimis amount of Bitcoin.