Bitcoin: Going from Deceptive to Disruptive

191 24 Loading

bitcoin-abundanceBitcoin is moving from its Deceptive phase to a very Disruptive phase. This post is going to explain why, and what you may want to do.

I’ve been tracking Bitcoin since its inception, and my confidence has grown to the point where I’m now trading in a portion of my gold holdings for bitcoin, buying it and accepting bitcoin for the Abundance 360 CEO Summit.

What exactly is bitcoin?

For starters, bitcoin is a digital currency. As of right now, one bitcoin is equivalent to about $600 USD. Bitcoin is divisible down to 8 decimal places, or 0.00000001 BTC. You can buy things with bitcoin, sell things for bitcoin, and exchange bitcoin for other currencies (and vice versa). You can also “mine” it, but we’ll get into that later (here).

At its core, bitcoin is a smart currency, designed by very forward-thinking engineers. It eliminates the need for banks, gets rid of credit card fees, currency exchange fees, money transfer fees, and reduces the need for lawyers in transitions… all good things.

Most importantly, it is an “exponential currency” that will change the way we think about money. Much the same way email changed the way we thought of mail. (Can you remember life before email?)

If you’ve followed my work, or participated in my Abundance 360 Summit, you understand that I teach and track exponential technologies using my “6 D’s” approach, looking for “user interface moments.”

Bitcoin is following the 6Ds and is on a path to go from deceptive to disruptive over the next 1 – 3 years. Allow me to explain.

Why Bitcoin is following the 6 D’s

1. DIGITIZED: Bitcoin is digitized money — it is a global, purely digital currency. Every bitcoin is traded, earned, sold, exchanged and bought in cyberspace. For this reason, it is living on Moore’s law and hopping on the exponential curve.

2. DECEPTIVE: Bitcoin software was released to the public in 2009 and for the first few years has been growing in its deceptive phase. Few heard about it, few used it and accepted it. In addition, the currency has been hard to use; therefore, it hasn’t had its “User Interface Moment” (the key transition from deceptive to disruptive). More soon.

3. DISRUPTIVE: As described below by my friend Barry Silbert (founder of Second Market), Bitcoin is about to enter its disruptive phase where its rate of acceptance and use will explode, as will its value. See below.

4. DEMATERIALIZING: Bitcoin is eliminating or dematerializing the use of physical money (bills and coins), even credit cards. But more than that, it is also dematerializing (read: eliminating) the need for central banks, lawyers and currency exchanges.

5. DEMONETIZING: Bitcoin eliminates middlemen (banks, lawyers, exchanges) and demonetizes the cost of transactions. Lower fees. It makes it cheaper to use, spread and share money.

6. DEMOCRATIZING: Bitcoin makes access to capital available to everyone, where there are no banks, no ATMs and no credit card suppliers. Ultimately, as we move (over the next 6 years) to a world of 7 billion digitally connected humans, Bitcoin makes currency available to anyone with a connection to the internet.

Bitcoin’s Evolution – Why it will be Disruptive Soon

Barry Silbert (founder of Second Market) recently spoke as my guest at Singularity University’s Exponential Finance conference about Bitcoin. He provided an excellent overview of its near-term trajectory, summarized below. His input has also put me on the lookout for the “User Interface Moment” – that moment in time when an entrepreneur designs a piece of interface software (think Marc Andreessen and Mosaic) that makes it so easy to use bitcoin.

I’ll be reporting on those user interfaces, investing in those startups and helping to promote them.

Okay, now back to Barry Silbert’s insights. Barry outlined five phases for this digital currency that help explain where it’s been and where it’s going.

Phase 1: The period 2009 to 2011 was the early ‘experimentation phase’ for bitcoin (i.e. deceptive). Here the software is released to public and most technologists and hackers started playing with the code. During this phase, there was no apparent value to currency yet; mining bitcoin was easy and could be done by a single person on a MacBook or PC.

Phase 2: 2011 marked the beginning of the ‘early adopter’ phase (still deceptive). There was a lot of early hype and press around Silk Road (where you could buy drugs). The value went from less than $1 to over $30, then crashed. This spurs the first generation of bitcoin companies to build basic infrastructure: wallets, merchant processors, mining operations, exchanges, etc. – i.e. the early user interfaces.

Phase 3: 2012 thru mid-2014 marked the beginning of the ‘Venture Capital Phase.’ Folks like Marc Andreessen, Google Ventures, Benchmark and others have begun investing in Generation 2 Bitcoin companies. We are right in the middle of Phase 3 right now. Thousands of bitcoin companies are getting funding. Many of these are trying to create the “User-Interface Moment.”

Phase 4: Fall 2014 thru 2015 will likely see the start of the Wall Street Phase. Here we will begin to see institutional money acknowledging digital currencies as an asset class, and they will begin trading it, investing it and creating products around it. This marks the start of the disruptive phase.

Phase 5: Finally will come the ‘Mass Global Consumer Adoption’ phase — this is where bitcoin becomes a major player in the global economy. When consumers feel it is easy, safe and secure to use bitcoin. It won’t be possible until after the “User Interface Moment” materializes, but I believe, as does Barry, that this is only 1-2 years out.

So now what?

Learn, do, teach… Go experiment! Create a bitcoin wallet and buy some bitcoin. There is no better way to learn than by doing.

First, there are a few bitcoin exchanges where you can “buy” bitcoins with dollars (or other currencies). The most popular exchanges are:

If you want to start accepting bitcoin in your business, a popular platform to do this is:

For those of you in my Abundance 360 Community, we will be discussing bitcoin in more detail. We will talk about how they work, how you start investing, how you mine, how you get involved, how to create a wallet, and how to begin acquiring bitcoin.

If you aren’t a member yet, join us here: http://www.a360.com

Every weekend I send out a “Tech Blog” like this one. If you want to sign up, go to www.AbundanceHub.com and sign up for this and my Abundance blogs. Please forward this to your best clients, colleagues and friends — especially if they don’t trust bitcoin yet.

[Credit: golden bitcoin courtesy of Shutterstock]

Discussion — 24 Responses

  • ticorico July 3, 2014 on 11:51 am

    you can start mining right away at mbigas-com

    i tried it and it was simple to get it going

    • Rustbucket ticorico July 3, 2014 on 6:44 pm

      There is no point in anyone mining Bitcoins on an ordinary computer, unless you’re just doing it as an experiment. Mining has moved on to ASIC based machines.

      On an ordinary CPU the cost of power used would exceed the value of any possible Bitcoins you could mine.

  • simon July 3, 2014 on 4:54 pm

    With the greatest respect, at one point the article argues Bitcoin does not need banks or foriegn exchanges and then the article goes on to state that it’s adoption relies on the involvement of these organisations.

    The problem is that no-one really needs Bitcoin. We already have digital currency,. It has little intrinsic value. I just can’t think of a problem that it solves that is big enough for it to be adopted globally.

    My other point is this: when currency began, we did not have lawyers, banks, or other institutions. They became necessary with the wide scale adoption of currency as a facility of exchange. If someone can invent a solution for Bitcoin to own that is big enough for it to spur global adoption, then it, too, will need to be managed in the way other currencies are managed. Which comes back to my point; it just ain’t that different from what we have already got in terms of its utility with ordinary people.

    • Steve Morris simon July 4, 2014 on 1:44 am

      My understanding is that the problem Bitcoin solves is government manipulation of currencies. It is decentralized, so no government is trying to control the money supply and impose artificial constraints on the market.

      • simon Steve Morris July 4, 2014 on 3:06 am

        I appreciate that Steve, I really do. However, that is not a billion person problem. Or, rather, it is not a problem over which one billion people are prepared to change deep habits. On another point, there are people as we speak trying to centralise and control Bitcoin, Peter Diamandis alludes to it in the post. He states that when the right interface is created then Bitcoin will explode. This suggests that whoever comes up with the right interface will ultimately control the currency by default of being the conduit. In engineering the design of the conduit influences the characteristics of the flow.
        I respect Peter, but the more I think about this article, I see the similarities between it and those sales page websites you see for penny stocks, raspberry ketones(?) and nutritional supplements. It makes sense with a quick read, but, with some thought, the argument drifts away and it reads as duplicitous. This could possibly signal an ultimate end-point for Bitcoin in the repository of things that have no real value and need hard sell by shifty characters , like, erm; penny stocks, raspberry whatever, nutritional supplements…

        • palmytomo simon July 5, 2014 on 5:02 pm

          Simon,
          1. The billion person problem you mention is in the developing countries – who can offer simple services and products via internet without having to go through a bank (restrictions and charges) even undercutting China or Hungary (who may in fact sub-contract them).
          2. Don’t worry about overcontrol by the ‘right interface’ because it will be in constant competition with others, just like Internet Explorer and Chrome. Diamandis is referring to the ‘style of interface’ that makes Bitcoin easy to traffic.
          Bruce Thomson in New Zealand.

        • NotGoxed simon July 24, 2014 on 10:41 am

          I suggest you learn more about bitcoin before making such silly comments.

      • Halneufmille Steve Morris July 4, 2014 on 3:33 am

        “My understanding is that the problem Bitcoin solves is government manipulation of currencies. It is decentralized, so no government is trying to control the money supply and impose artificial constraints on the market.”

        This often stated reason for bitcoin is the stupidest thing I’ve ever heard. The reason why Greece and Spain have been in so much trouble since 2009 is because they lost control over their national currency. In the US an important factor that helped avoid a second great depression was the FED’s massive monetary expansion.

        Now you might just be a libertarian and not care about the health of the economy, just about the safety of your own wealth. In that case, your best bet is a stable value fund, and one of the worst is bitcoin as its value has been anything but stable in recent years.

        Or you might just be looking to evade taxes or do off the book transactions around not-so-legal activities. In that case, bitcoin is right for you.

        – An economist

        • NotGoxed Halneufmille July 24, 2014 on 10:43 am

          “an economist” ? I guess that makes you an expert on bitcoin. Once again… learn more about it before you type and look like a fool.

    • palmytomo simon July 4, 2014 on 4:38 am

      - Good comments, but I understand that a major advantage of Bitcoin is that it doesn’t require anyone’s ‘approval’ before you can get it and use it. There’s no ‘big daddy’ banker or lawyer or currency exchange profiteer affecting transactions between people.
      – Millions of third world people will simply ‘be useful and get directly paid’ regardless of who approves or not. Their contribution to global society will be a major reason why Bitcoin thrives.
      – I expect there will be always be some confusion and abuses (just like the arrival of the telephone – for good or criminal use – but the main effect is the ‘lateral’ sharing of wealth instead of traditional ‘authoritarian’ supply of wealth.
      Bruce Thomson in New Zealand.

  • palmytomo July 4, 2014 on 4:30 am

    - I’ve just invested today about $5000 in Bitcoin, triggered by this article.
    – Also really good to look at http://tinyurl.com/q2cy3zk where you get to learn (easily) the concept of ‘block chain’ that underlies Bitcoin. Block chain basically means ‘extremely secure personal identification’ that goes FAR beyond the excellent Bitcoin, onwards into voting instantly and at no cost via internet, government services ‘same.
    – Block chain seems to be a revolution worth learning about because the benefits to early adopters can be great (e.g. the first users of calculators and PCs and the internet.)
    – If interested, see videoconference on YouTube at https://www.youtube.com/watch?v=vhCIHYIxBrI
    Bruce Thomson in New Zealand.

  • IgneousIcarus July 4, 2014 on 8:34 am

    Bitcoin is a joke. It is deflationary by design which makes it terrible as an actual currency but great as a pyramid scheme. A currency in deflation increases in value over time giving those who hold it an incentive not to spend. Given the economies are driven by spending the large scale adoption of Bitcoin would only harm any economy that tried it. Of course it would massively increase the value of the coin people currently hold which is probably why we see pos articles like this.

    Since bitcoin has been created it has acted and been treated much like a stock with wild price fluctuations due to its unstable nature and the fact that those who trade in it realize this. Of course this makes it even more unsuitable for a currency as one of the most important features for one is stability. All in all, please stop making articles about Bitcoin. Your job is to inform not to scam your readers.

    • palmytomo IgneousIcarus July 5, 2014 on 5:07 pm

      - Unlike money generated by Govt-influenced treasuries, Bitcoin production seems to be a market-forces thing that will respond to need for currency – any shortage (or skyrocket of prices) will presumably motivate thousands of people to immeditately start mining, and more Bitcoin arriving to meet demand.
      – I’d guess the present fluctuations are the ‘teething problems’ of Bicoin, and that as it rapidly spreads, there will be a huge smoothing of fluctuations because of the sheer variety and size of the Bitcoin traffic and market.
      Bruce Thomson in New Zealand.

      • randerwolf palmytomo July 15, 2014 on 12:04 pm

        Beg pardon if I am mistaken, but isn’t it the case with bitcoin mining that only a fixed amount of new bitcoin is “created” every 10 seconds, and the thousands of more people mining it only increases the lottery pool of who “wins” the created bitcoin and not the amount or rate of bitcoin creation? https://en.bitcoin.it/wiki/Controlled_Currency_Supply

    • NotGoxed IgneousIcarus July 24, 2014 on 10:45 am

      lol… I love all of these silly comments. You really don’t get it do you? Educate yourself before looking like a fool.

  • Quantium July 4, 2014 on 9:00 am

    The interesting thing to my mind about Bitcoin is that it can’t suffer inflation. But whether this means that providers of services and goods can’t put up prices remains another thing.

    Whether, for example, a lawyer charges £200 or £250 per hour of this time and in addition collects another 20% for his government in “value” added tax is surely up to him and has nothing to do with whether the transaction was instead in BTC. Basically as with all service businesses, people can charge as much as the market will bear.

    In the instance of manufactured goods, it is easier for customers to compare one with another, but manufacturers can still add whatever margin they chose, and again this is as much as what the market will bear. Of course in this instance there is value added in turning a lump of iron ore into something useful, for example, which again makes it easier to quantify the price charged.

  • BTCquestions July 24, 2014 on 9:18 am

    “It eliminates the need for banks, gets rid of credit card fees, currency exchange fees, money transfer fees, and reduces the need for lawyers in transitions…”

    I’m sick of reading statements like this, particularly the part about eliminating fees. Even right now there are fees involved. I’m paying .0001 BTC for ever KB of transaction data. Sure right now that equates to about .06 USD which is nominal to say the least. Some would say that “fees are donations and completely voluntary”, BUT I recently made the mistake of pushing a transaction without a fee included. My 0 fee transaction took over 24 hours to receive the first confirmation. This showed me that many many minors where not willing to include my 0 fee transaction in the blockchain. As of right now a reward of newly generated Bitcoin is given to minors for completing a block. This reward sufficiently covers the cost of “Mining”. But what happens when Bitcoin reaches its intended apex of 21,000,000 coins? Are we supposed to believe that minors will continue dedicated their computing and bandwith recourses without receiving a reward? Are they going to do this for free when there is no newly generated Bitcoin being given to them? If they are hesitant about including 0 fee transactions even though they are receiving newly generated coin on every block, how can the network survive the advancing computational power required to complete new blocks? By increasing fees!

    Another point!

    Don’t get it twisted, Bitcoin will become centralized, as the power coming from ghash.io recently proved. Luckily they scaled back a little bit. Scaling back was a measure of good faith. But we know “power corrupts and absolute power corrupts absolutely”. As if it isn’t bad enough the hashing power needed requires capabilities only solved by consolidation. What about the size of the ledger? Fewer and fewer clients are keeping and maintaining a full copy of the blockchain. Ultimately the blockchain itself will be so huge that the majority of users will rely on legers stored in a centralized location. And this is already happening……

    • NotGoxed BTCquestions July 24, 2014 on 10:47 am

      LOL.. so you included no fee and you’re surprised it took so long? Really? Reallllly? Try actually learning about it before typing and looking like an idiot.

      • BTCquestions NotGoxed July 24, 2014 on 11:57 am

        I wasn’t surprised it took so long. I said I made the mistake of not including a fee. Maybe I should have said “I accidentally pushed a transaction with no fee” . I said it showed me the willingness of minors to include 0 fee transactions. Maybe I should have said it “Proved to me”. I’m sorry that a small amount of ambiguity overloaded your delicate little mind.

        Idiot?

        LOL.. Really? Reallllly?

        This is coming from someone who chooses to attack the trivial point of an argument rather than address any of the serious questions.

        “Try actually learning about it before typing and looking like an idiot.”

        I manually create transactions on a day to day basis.

        This is the difference between no fee:

        01000000000100e1f505000000001976a914ef19a71fdae812d451e2b05dec5b54f20b001c6488ac00000000

        And .0001 fee:

        010000000001f0b9f505000000001976a914ef19a71fdae812d451e2b05dec5b54f20b001c6488ac00000000

        Can you see the difference? You are talking to someone with several degrees in cryptography, you presumptuous ignorant troll.