h1

Bitcoin: Currency of the Future

29/05/2012

Bitcoin – the peer to peer digital currency that’s a perfect fit for Online Communities.

Intro Video: http://www.youtube.com/watch?v=Um63OQz3bjo

Benefits of bitcoin:

—–Bitcoin is global.

Bitcoins can be transferred to and from anywhere with internet like email.  There are peer to peer nodes that support the bitcoin system all across the world.  When someone sends bitcoins, they are visible to the reciever instantly, and can be spent within about 15 minutes.

—–Bitcoin doesn’t discriminate.

There are no requirements like gender, age, credit history, or minimum balance.  All you need is an internet connection.  Technical users can download the client from bitcoin.org and create a bitcoin address.  Others can sign up for a free online wallet.  A 10 year old girl in Singapore can send and recieve 0.001 bitcoins just as easily as a 45 year old man in the UK can transfer 1,000 bitcoins.  You can literally get a bitcoin address and start recieving bitcoins from other people in the next 5 minutes.

—–Get rid of more than just the penny.

Bitcoins are divisible to 8 places (or more in the future).  The smallest unit is 0.00000001 bitcoin.  This can be expanded so for all practical purposes, they are infinitely divisible.  Carrying metal around be it penny, nickel, dime, quarter, or even gold or silver is a hassel.  With a mobile phone and internet access, bitcoin can be used to digitally pay for something at a brick and mortar store or restaurant.  The infrastructure is continuously growing around bitcoin with gift/debit cards coming onto the market and mobile applications being developed.

—–Microtransactions for Commerce

With Paypal and credit cards, any transaction below 25 cents is impossible.  The Apple iTunes store doesn’t allow artists to sell songs for less than $0.69.  Applications can’t be sold for less than $0.99. The Google Play store has similar prices on music, apps, books, and movies.  Even gumroad won’t let you sell for less than $1.  These mostly stem from the problem of credit card and bank fees.  Bitcoin’s low fees open up a whole universe of possibilities in microtransactions that weren’t possible before.  Content creators can charge less for a song, and still make more money by cutting out a middle man (banks).  When prices are lower, sales increase.  What would happen if an artist sold a song for $0.20 or even $0.10?  These microtransactions could be the middle ground we need between the old media distribution model and full blown piracy.

—–Microtransactions for Charity and Crowdfunding.

Microtransactions can allow a large number of people to give a tiny amount to fund a project they think is worthwhile.  With Paypal, any transaction less than 33 cents goes straight to paypal’s pockets with none doing to the cause you wanted to donate to.  The Uncultured Project (UP) is one example of a cause that could benefit greatly from microtransactions.  Shawn Amed has recently been working in Bangladesh to build the John Green School so that more children can have a better place to study than fields.  Lately he has been having trouble raising money and the future of the school is uncertain.  He has said that $10,000 would help solve some of the problems he has run into.

Currently, Paypal is the best method to send a donation for most organizations and their supporters.  This is the method Shawn currently useds for UP.   What would raising money look like with bitcoin microtransactions?  Shawn has ~250,000 twitter followers.  Assuming 1/4th of those are genuine, how much would each one have to donate to raise $10,000?  Some would give more, some would give less, but on average, just 16 cents.  These followers are already interested in what Shawn is doing because they follow him.  They are priviliged enough to have an internet connection.  I don’t think it’s too much of a stretch to say that they have a 16 cents laying around and would donate that 16 cents if it were easy to do.

Crowdfunding for future projects is becoming popular on fundraising sites like kickstarter.  Here too bitcoin can provide a benefit and lower the minimum donation amount.  More people will be able to support a greater number of projects by being able to split their money across more campaigns.  Raising funds for an anticipated product is another solution to piracy.

Kiva.org has looked into using bitcoins but they are still in a legally grey area.  Bitcoin suffers from the chicken and egg problem.  People don’t want to have bitcoins if they can’t spend them anywhere, and merchants don’t want to go through the trouble of accepting them if no one wants to spend them.  I think using bitcoins for the above advantages are as common sense as phasing out the penny.  For crowdfunding to work using bitcoins, everyone has to have at least a little bit of bitcoins.  There’s no minimum balance, and no monthly fee, so there’s not much harm in keeping a small amount.  Ideally everyone might have $5-$10 worth of bitcoin that they can use to spend on stuff on the internet.

Resources:

https://en.bitcoin.it/wiki/FAQ

http://www.thebitcointrader.com/2011/12/kiva-bitcoin-project-on-hold-due-to.html

https://twitter.com/#!/uncultured

~Sean S.

Advertisements

2 comments

  1. also a predictable supply of bitcoins will be minted to a maximum of 21 million over the next 120 years or so if the system continues to function. there are currently 9 million in existence and the rate of production cuts in half every four years.


  2. Nice article, thanks.
    But it’s not true that you can’t buy anything with bitcoins, for example you can buy all the amazon,apmex,apple,ebay and others using:
    https://www.spendbitcoins.com/



Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: