Bitcoin is becoming more of a fixture in mainstream media every day. However, I feel that everyone sees Bitcoin as something different. Zealous Libertarians see it as a big middle finger to the government and the banking system, hackers see it as a new source of power to support their various causes, and some entrepreneurs see it as a golden opportunity to make outsized profits. While some are claiming that it will bring big banking to its knees, Elon Musk is claiming that Bitcoin is simply an “API for micropayments.”
So what is Bitcoin? To put it in a sterile phrase, Bitcoin is a disruptive technology. BusinessDictionary defines disruptive technology as “new ways of doing things that disrupt or overturn the traditional business methods and practices. For example, the steam engine in the age of sail, and the internet in the age of post office mail.” Disruptive technology is inevitable and cyclical. In the computer age, we have gone from floppy disks to CDs to DVDs to Flash Drives to Cloud Storage. Each of these has largely replaced its predecessors while giving consumers more utility.
Bitcoin follows a similar pattern, but let’s keep in mind what it is replacing. I don’t think that anyone can make a solid case for Bitcoin replacing fiat currency altogether (yet, at least). Anecdotal evidence shows that there are almost no goods sold for BTC which are denominated stably without consideration of the BTC/USD rate. Rather, I think that Bitcoin is replacing current payment systems. It makes international transactions easier and cheaper than the current alternatives, such as credit cards and PayPal. Those technologies, in turn, replaced arcane methods of payment like checks in the mail.
While it is difficult to say whether Bitcoin will remain the digital currency of choice 10 years from now, it is pretty elementary to say that digital payments are going to be the way of the future (until something better comes along, of course).