Why Bitcoin (for the third world)

Many people, probably most people see Bitcoin as yet another currency. The big question then becomes "why would I want to use just another currency?" Trying to see it as a very different thing is difficult.

If you are trying to sort this out, a discussion between Andreas Antonopoulos and Stefan Molyneux available on AllThingsBitcoin.org is a good time investment. It is titled Bitcoin vs. The Federal Reserve.

While there is a lot of "The Mt Gox story" in the beginning but a lot of the discussion of the realities of bitcoin. That includes how to buy/sell bitcoin, who real players are and, probably most important, all the reasons bitcoin makes more sense that fiat currencies in the third world.

The last 10-15 minutes offer lots of "How To" information including URLs of a lot of sites to get you connected.

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Sure...

All fiat currency is faith based.. If bitcoin can get the faith is will gain traction. My points were based upon earning that faith.

Second the cellphone analogy, while seemingly obvious on the surface it does not work when you drill down.

Cell phones worked as they needed less hard infrastructure. Instead of Millions of dollars of wire, thousands of poles, hundreds of switching stations and 10's of service trucks to keep the whole thing ticking you just needed one tower and a bunch of Nokia hand sets as less than $50 to make it work.

The bitcoin model is much like what apple accomplished.. How to make society forego a drive to the record store to buy a $15 CD to which they only really wanted one song to buying a single song for $0.99

Virtually currency will rise to prominence eventually, it is just assured that bitcoin will be it.

I looked into mining coins back a month or two ago as I have a few dual chip/dual core Xeon's lying around. Apparently the hashing of new coins is growing at a rate of 10X computing power / yr. Hence you have to spend a couple thousand dollars on current hardware (Specifically AMD/ATI graphic cards set stuffed in a box or a full ASIC FPGA array) to mine coins equal to your hardware investment plus a 10 or 15% return.. Try convincing your wife you want to spend $15K to make $20K on a thing she has never heard of and you can not buy groceries or make up with (yet)

Sure you can buy a coin.. But that is like buying tulips in the 16's

maybe not

And ...

Other than she was CEO of a startup working with bitcoin, is there a point? In particular, it seems to have zero to do with the third world.

acceptance

Yep - There is a point there - Bitcoin has almost no main stream acceptance in the first world. Without first world acceptance it will never gain traction in the 3rd world. Shenanigans such as the closing of Mt Grox and the questionable dealings of Bitcoin celebrities (both in life and death) do nothing to help with Bitcoin traction.

I think many Nica's would except bitcoins if they were paper, green, and had a portrait of on Ben on them.

Overstock story

Business Insider has an interview with the CEO of Overstock. Clearly, he knows why it makes sense to use it.

His statement about no chargebacks is very important for places such as Nicaragua. Many US-based vendors will not accept non-US credit cards or even credit cards with non-US addresses because of their concern for fraud.

Not quite

How can I put this? When an area doesn't have a product or service, and they finally get it, they get what is most current. For instance, cell phones have been adopted by people in Africa and China who didn't have land lines first. And this came as a big surprise, although I don't know why it would, to executives in the phone companies who remarked that China was skipping a whole generation of infrastructure, as though these countries were supposed to trail the first world and adopt the obsolete technology before adopting the new stuff.

Now that cell phones are common in Africa, the services are appearing, so they can do things like open a bank account from their cellphone. Can we do that yet? Now why not make the next logical step and transfer money from your bank account to your wallet - and your cellphone is the wallet. And they already do cell phone to cell phone payments.

Bitcoin is not a bad idea or our own governments wouldn't be experimenting with the same thing, like Canada's MintChip. But whether it's Bitcoin, MintChip or another crypto currency, when it comes to theft, it's more secure on your phone than money is in your wallet. It's also cheaper for a country than producing the physical paper money and coins. I think it will take off in the developing world.

Bitcoin was invented 5 years ago and at least the name is mainstream now, and the ATMs - I haven't checked out the one near me yet - are doing a booming business with all age groups. A tech advocate, like fyl, has followed it for awhile. I see it as about to go mainstream and I notice more and more places are adopting it. It makes sense for people who shop on-line and it's cheap for money transfers. Many people are just cautious and want the government endorsement OR they're the type who like it because central bankers don't control it.

What did Douglas Adams have to say?

Actually, there is a lot of mainstream interest right now. Here are some of the pieces:

  • Banksters are scared. They see the threat to their monopolies and are trying to figure out how to get into the game. A lot of involvement but the industry moves slowly.
  • Silicon valley has noticed. In the last few months tens of millions of venture capital dollars have been invested in bitcoin startups.
  • There have been little guy retailers but bigger players are now jumping in. Tiger Direct and Overstock.com are already there. I would be very surprised if Amazon was not in the game before the end of this year.
  • There are now multiple companies offering merchant services for retailers. They work pretty much like merchant services for credit/debit cards except cost a lot less.
  • The ATM market is just happening. Initially you saw ATMs that took cash and dispensed bitcoin but there are now 2-way machines. At least one is made by a current regular ATM manufacturer.

I have been seriously watching because I have a startup business idea related to cryptocurrencies. What has happened in the last six months tells me I got into the game too late. At this point bitcoin innovation is going crazy with lots of money.

While most Nicas still appreciate those green pieces of paper, a lot of them come out of offices of Western Union and the like. To get them you need to go to an office during office hours, stand in line and present an ID. As most Nicaraguans seem to have a smart phone with them 24/7, having the Ben equivalents appear there works. While banks could do the conversion, I think it is more likely that smart business owners will start accepting bitcoin and offering change in cordobas.

Now, about that Douglas Adams thing:

“I've come up with a set of rules that describe our reactions to technologies:

  1. Anything that is in the world when you’re born is normal and ordinary and is just a natural part of the way the world works.
  2. Anything that's invented between when you’re fifteen and thirty-five is new and exciting and revolutionary and you can probably get a career in it.
  3. Anything invented after you're thirty-five is against the natural order of things.”

― Douglas Adams, The Salmon of Doubt