Full Disclosure: I do own some bitcoin (<100 BTC at any given time). I also mine some BTC. My motivation here is not to drive the price up, but rather to demostrate that bitcoin is a suitable replacement for “bad” money.
Today things hit a breaking point. Bitcoin prices are hovering somewhere north of $800 at most US exchanges. Hacker news has tracked a 194 thousand bitcoin transaction for most of the day. Richard Branson announced that Virgin Galactic will accept bitcoin. There may still be some detractors for bitcoin, but one thing is certain, it has the attention of the world. We’ve used banks, vaults, and caves to hide our fortunes for thousands of years, isn’t it time for something new?
Bitcoin has all the makings of a superior form of money, a form of money based around communal knowledge rather than little slips of paper or bars of precious metal. The world can crumble around you and as long as you still have your wallet somewhere you can probably spend your bitcoins in another country. The same certainly cannot be said about money deposited at a traditional bank. To this effect bitcoin has vast potential to do good in the third world, or any country suffering from bad money.
Sudan has a monthly inflation rate of almost 40%, Iran is not far behind at 32%. People in Kenya are already using cell phone minutes as money, isn’t bitcoin a better fit? It is in places like this where bitcoin has the most potential to do good. And the good it does here is very simple, it prevents slippage and lowers barriers to commerce.
Bitcoin works as a global hedge, because it truly is a global currency. Someone, somewhere in almost every country must have at least a little bitcoin. This global hedge gives the currency incredible resilience. Anything bad that happens in the world will drive sovereign currency into bitcoin, thus further inflating it’s value. This is like being the house at a roulette table where people can only pick a single number at a time.
Recent volatility is
almost entirely [There are many financial and political factors at play here.] related to external market factors or externalaties, and not underlying changes in valuation. When the exchanges do something unexpected, such as pausing buy or sell orders, the market reacts with a tantrum of misplaced fear and frustration. This is mostly a learning curve that we as end users need to learn to deal with