Let me begin by making a confession that I was originally a Bitcoin skeptic. I was also a Bitcoin virgin. I am still not fully convinced. I do not think that a non-government currency can solve all of the world’s pressing problems like poverty, hunger or illiteracy.
Yet, what I have seen and experienced has made me change my mind - somewhat.
Bitcoin and other cryptocurrencies have an important role to play in the future and that future is here and now.
This year we have seen a tremendous increase in the value of Bitcoin. In mid-January, the value of Bitcoin was close to $350 and it is now above $900. It is, however, not the value alone that is interesting but also the potential that the cryptocurrency holds that is of interest in the uncertain times that we live in.
2016 a revealing year
2016 has been a revealing year. It has shown us in no uncertain terms that whatever we took for granted can be gone in an instant. Brexit, Trump or indeed the Indian demonetization have all been driving forces for the increase in Bitcoin’s price but they are also the symptoms of the general economic malaise that are so prevalent in this day and age.
We don’t know what the future will bring, however, there is certainly no doubt that if the present trend continues that there is plenty of upsides left for Bitcoin.
Bitcoin is more than just its worth
Blockchain, the technology behind Bitcoin, has been a great disruptor in many ways and we can expect that banks will definitely make a move to adopt this technology.
According to a report by IBM titled “Leading the pack in Blockchain banking: Trailblazers set the pace,” they classify 15 percent of the 200 banks in 16 countries as trailblazers who are expected to have Blockchains in commercial production. The report says:
“Trailblazers see a significant wall of disruption heading their way in core business areas. They expect five out of nine core business areas to experience significant disruption and are investing in each.”
We have already covered the potential of smart contracts to a great degree in 2016, but it is in 2017 that we expect the smart contract to become a reality.
Capgemini considered how long it would be before smart contracts make a headway in their report called “Smart Contracts in Financial Services: Getting from Hype to Reality,” where they conclude:
“Considering the scale of this digital upheaval, it will be at least three years before smart contracts enter the mainstream. Yet, industry practitioners who are leading Blockchain and permissioned ledger initiatives at financial institutions are upbeat about smart contract adoption. Smart contracts that do not require distributed ledgers could be viable by the end of 2017. We anticipate mainstream adoption to begin in the early years of the next decade.”
Why Bitcoin is more relevant than ever before
Not only will Blockchain be an important factor in 2017 but also cryptocurrencies themselves will hold more attraction.
Events occurring in India, Venezuela, Nigeria and even western countries indicate that people are losing faith in the ‘mainstream’ financial system. In fact, it is the continuation of this madness in 2017 that will lead to cryptocurrencies assuming an increasing significance.
Take India for example, where the next assault on people’s wealth from the government might be on gold or property.
The government has been increasingly vocal about bringing in a law that will make it difficult for Indians to have any financial anonymity with respect to property holdings. Then there are proposals to demonetize high denomination bills in the US, Europe and Australia. The pain is all set to continue in 2017 and people will increasingly want to turn to a currency on which the governments can’t put their grubby paws.
The missing fungibility is what we need in 2017
Bitcoin has survived and is increasingly a store of value and has taken the shape of digital gold. Why am I still not fully convinced? It is the lack of mainstream adoption.
Many people will say that it is not supposed to be mainstream or that Bitcoin is just an experiment. Well, maybe. However, it is only when more people use and discover Bitcoin for themselves that the currency will become truly useful.
Maybe this year the best gift we can give back to Bitcoin is to just use it to pay for things. It is only when Bitcoin becomes completely ubiquitous that its true potential will be realized.
After all, fungibility is what makes a currency a true currency. Will the appreciating price of Bitcoin come in the way of making its mark as a currency? I am afraid that it might.