In an Interview on CNBC in May 2014, Marc Andreessen said: “I compare [Bitcoin] to the Internet. The Internet was a new way to transmit data. Bitcoin's a new way to transmit money.”
When the RocketSpace Corporate Services team announced that we would take a deeper look at the future of cryptocurrencies in our special report on Bitcoin, a lot of people asked us “Why should we care?”
We think there are many reasons you should care, even if your business is in consumer products, education, or something else entirely. We believe cryptocurrencies will be one of the most profoundly impactful technologies of the decade. They will touch companies across industries in the same way that the internet has.
But before we dive right into the topic, let’s get started with the basics.
What Is Bitcoin?
According to Timothy B. Lee at Vox, Bitcoin is the world’s first truly global, open, and decentralized payment network. Like Visa or MasterCard, it is a technology that allows people or businesses to exchange money with one another.
Like most large payment networks, Bitcoin is global. The network has its own unit of value, called the bitcoin, and requires that any payments be performed in bitcoins. Anyone anywhere in the world can buy bitcoins, no matter their home currency. But unlike the Visas and MasterCards of the world, Bitcoin is also completely open, meaning that any developer can build products on top of it.
Moreover, the Bitcoin network is fully decentralized. Visa itself verifies any transactions on the Visa network. Bitcoin, however, has no such central entity to verify transactions. Instead, Bitcoin activity is confirmed by a crowdsourced computer network that uses thousands of independently owned nodes spread across the world.
But Why Is That Important?
Computer scientists have been trying to build a reliable electronic currency for decades, but have been challenged by the “double-spending” problem (users can spend the same money two or more times because of faulty verification). Bitcoin is the answer to this problem. This is a huge technological achievement!
And How Will Bitcoin Impact the Real World?
Bitcoin is a way to verify transactions with a safe peer-to-peer network; no central intermediary required. This means that transactions on the Bitcoin network carry little to no fees.
Since Bitcoin is an open network, it's gaining momentum in the developer community and people are increasingly starting to build and innovate on the technology. That’s where Andreessen draws the comparison between Bitcoin and the internet. The internet was clunky and only understandable to highly technical users at first but once it was opened, the tech community rapidly built interfaces for non-technical users.
Areas for Immediate Disruption
- Reducing costs for payments and money transfers: these are usually two to three per cent, but could go down to a fraction of that price.
- Remittances: individuals trying to send money internationally face fees up to eight per cent and three day waiting periods.
- Micropayments: With little to no fees, online publishers could charge tiny amounts of money for single articles rather than pushing users for subscriptions or displaying ads. Another type of micropayment is social tipping, where users can tip one another for content creation or valuable contributions to the community.
- Payments and banking in developing countries: traditional banks haven’t entered those markets yet as prices and wages are so low that transactions are not profitable.
- Managing digital ownership of real-world assets: cars, houses, etc.
Wide-reaching Potential for Disruption
Besides these disruptions to the payment and money transfer industries, Bitcoin will also affect the broader financial industry as consumers come to expect banks and brokers to not only play nice with cryptocurrencies, but to compete with their offerings.
We see implications as well for publishers, e-commerce, crowdfunding and viral marketing, brick-and-mortar retail, and asset ownership as many businesses will be able to expand into developing world markets that were previously unavailable due to payments issues.
Overall, Bitcoin will probably impact back office operations profoundly in most industries. Just imagine - your next salary might be paid in bitcoin!
These are just some of the many places where we see opportunities for disruption. To learn more, get in touch with the RocketSpace Corporare Services team to order our report on cryptocurrencies.
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