I first met Jeremy Allaire when he was chief technology officer at Macromedia back in 2001. Fast forward 13 years, and I saw him give the opening keynote speech for the Inside Bitcoins Conference and Expo at the Javits Conventions Center in New York. His opening remark was that Bitcoin is an historical innovation. As noted here before, Bitcoin has all the trappings of the web in 1994. Jeremy referred to Bitcoin as being in the pre-Netscape era of digital currency. While some say that BTC is a fad, Jeremy said it just needs time and a “build-out” just like the web did. He said it may take decades. As we all know, sometimes painfully, video is really taking hold on the web, but yet 90% of video is still conventional broadcast, and it has taken 20 years for the web to get where it is today.
Bitcoin at its infancy should not discourage us. There are more than 2,000 companies involved — building out the infrastructure and services that will be needed to make BTC mainstream. Jeremy estimated that BTC will reach that point in 10 years. Today, 90% of BTC activity consists of investing and trading. The evolution to a global payment and transactions platform will require an architecture that can handle a large number of transactions. There must be a link between those transactions and the identity of the participants in transactions, a capability to handle refunds, derivatives, futures, options, integration with foreign exchange platforms, and electronic communications trading networks.
Jeremy had a quite bullish outlook for the evolution of BTC, with which I agree. Consumer services companies will emerge as muti-billion-dollar companies that focus on making transactions easier (Jeremy’s stealth company in Boston, Circle.com, may be one of them). Major payment processors will join BTC — PayPal , Stripe, Square, and others. ATM networks will provide the vital bridge between paper currency and BTC. Jeremy said that 75% of transactions today are still paper based, so there must be a seamless bridge between BTC and existing ATMs. Banking interoperability and deep integration, which will be demanded by consumers, will be essential to BTC adoption.
There is a lot to do, just like there was in 1994. Identity and security present a huge opportunity, and there were a number of startups at the conference providing such services. However, for BTC to go mainstream, industry-led standards efforts will be required. A number of such efforts were essential to the adoption of the web, such as Apache, Linux, IETF, ISO, W3C, and others. Governments will need to establish and enforce BTC legality. (Some countries may initially ban BTC, just like China and some Middle Eastern countries did with the web in the early days. ) Governance rules and oversight will evolve to provide consumer protection, ways to address theft, verifiable identities, oversight of monetary policy, and the necessary legal framework — all country by country.
BTC gets put into circulation through the efforts of mining operations. Mining is the process of adding transaction records to the block chain (Bitcoin’s public ledger of all past transactions). Jeremy said that mining will evolve from hobby to institutionalization. Consumer hobbyists will continue to be able to participate. (I hope so, because I am a miner myself. Rather than buy the specialized hardware to perform mining operations, I am using cloudhashing.com, which I learned about at the conference. As BTC is mined, I reinvest the proceeds in more capacity. I started with 100 gigahash/second as part of a pool at cloudhashing.com.)
After Jeremy’s enlightening and visionary keynote, the conference continued with a panel of experts. There are a number of seasoned vets involved in BTC, but walking around the conference floor, talking with vendors, and listening to speeches, one can see bright, young, creative, incredibly technical skills working on the evolution of BTC. This will be exciting to watch. I was optimistic before the conference, but am now even more so.