Interesting positive article on bitcoin:
Source - http://www.brw.com.au/p/tech-gadgets/bubble_bitcoin_could_succeed_where_7DW6j1z2gZo7ZegicC7xPO
Why Bitcoin could succeed where Facebook Credits failed – even after the bubble bursts
Published 10 December 2013 11:23, Updated 10 December 2013 12:06
The massive increase in Bitcoin valuation this year is potentially a bubble but it will survive longer term because it fills a market need, experts say.
Recent analysis by Bank of America Merrill Lynch argues Bitcoin has “clear potential for growth” and could ultimately become a major means of payment for e-commerce and a serious competitor to traditional money transfer providers.
The price of Bitcoins is currently volatile. It recently soared as high as $US1200 ($1317) before dropping down to $US600 late last week, but on Tuesday morning Bitcoin had recovered to $US900.
Bank of America Merrill Lynch says fair value would be $US1300 per Bitcoin, or $US15 billion in total, if it became a major payment method for e-commerce with a storehouse reputation similar to silver.
The investment bank responds to the “bubble” question by suggesting the 100-fold increase in Bitcoin prices this year “is at risk of running ahead of its fundamentals”.
Bitcoin was a hot topic at a panel discussion on the “innovation of money”, involving Pozible co-founder Rick Chen, PayPal head of retail services Jonathan Kelly, and Joe Cincotta of digital agency Pixolüt, organised by consultancy How To Impact in Sydney last week.
Moving money across borders is a pain
Pozible’s Chen says he enabled Bitcoin as a payment method for crowdfunding projects because it meets a real need for a global currency.
“We’re the first major crowdfunding platform in the world to enable Bitcoin and the reason is that we’re dying for an international currency to facilitate transactions,” Chen says. “Moving money across borders is such a pain in the arse. It’s very much an old traditional sector … and nobody is thinking about innovation.”
Chen says it is “ridiculous” that only one bank in Australia can process different currencies and settle currency conversion. He argues that concerns over Bitcoin being used to purchase drugs and guns and other illegal goods are overblown considering people had the same worries about the internet and e-commerce in the early days.
PayPal’s Kelly agrees that there is a place for a global digital currency.
“People are sitting on Bitcoin because it’s an investment ... but at some point it’s like the Dutch tulip bubble and it’s going to burst and come crashing down,” Kelly says. “That’s when we’ll see whether it has legs.”
Both Chen and Kelly suggest that Bitcoin itself might recover from such a crash, or that the concept might survive in an alternative form – similar to the transformation of the internet economy after the dotcom crash in 2001.
“I think the form is what is important to be recognised and the innovation and direction is great,” Chen says. “There might be a future one that comes up.”
Kelly says that PayPal would consider enabling Bitcoin as a currency source if consumers wanted it, but it would not “pick winners and losers”.
Why Bitcoin is different to Facebook Credits
Facebook spent a few years trying to establish Facebook Credits as the virtual currency in use on the social networking site, mainly for buying in-app purchases within games such as Zynga’s FarmVille.
In September this year, Facebook ended the program and converted all existing Credits back to national currencies.
However, Pixolüt’s Cincotta says the failure of Facebook Credits has no bearing on the viability of Bitcoin.
“The difference between Bitcoin and Facebook Credits is that Bitcoin is truly a currency in its own right, meaning it could be traded and it has an inherent value – as opposed to Facebook Credits, which was essentially just referencing the US dollar,” Cincotta says.
“Facebook Credits was a virtual currency not a real currency, with varying values in different geographies. Virtual currencies are about rewarding people through gamification.”
Cincotta points out that once money went into a platform like Facebook to buy Facebook Credits, it did not come out again. Bitcoin, on the other hand, could be spent across multiple sites.
The reason why Facebook Credits failed was that game developers had to set the same price for virtual goods across all territories, rather than following the iTunes model of charging more in countries like Australia.
“Managing that currency fluctuation became a problem not so much for Facebook as for the game developers,” Cincotta says. “Facebook had a bunch of game developers accepting FBC but if you’ve got a game player in a country where the cost of living is dramatically lower, then they’re not going to be spending a US dollar on buying a virtual sheep. They’re going to spend a fraction of that, so they’re essentially alienating different geographies where the cost of living is lower.”
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