Martin Calrsson – Treasurer, Board Member and Co-Founder at the Danish Bitcoin Foundation
First of all I would like to thank Mobey Forum and its members for a great conference in Oslo (Feb 2014) and for the many lengthy and thought provoking conversations there.
There have been a lot of questions and misunderstandings about Bitcoin, so I have put together a short Q&A about what Bitcoin is, and what its benefits and shortcomings are.
What is Bitcoin?
Bitcoin is a decentralized payment system where users can send value to each other fast, nearly free and traceable. The core concept of Bitcoin is when a person transfers money, he tells everybody else at the same time. Therefore, he cannot transfer the same Bitcoin more than once.
This gives the following benefits
- Reconciliation takes a few seconds.
- Transaction fees are minimal.
- You can always prove a transaction has been made.
For more information, please see https://Bitcoin.org/en/Bitcoin-for-businesses
The technology or the currency
A lot of press has been dedicated to the currency. And of course there is a lot of news value in that a new currency is emerging, and the extreme ups and downs in its value. But this is not what is so extraordinary about Bitcoin. Bitcoin is the first time in human history where value can be transferred globally within seconds and without a third party intermediary.
Is stability paramount, if the currency is liquid?
Or to put it in other words. Bitcoin’s weakness is its exchange rate volatility. A common objection about the use of Bitcoin is that “you cannot use a currency that jumps 5 % each day”. Of course we would all hope for some more stability, though I would argue that since Bitcoin is so easy to sell for legal tender, stability is not paramount. Anybody can set up a store today accepting Bitcoin and get legal tender as output, for example by using a payment processor like bitpay.
The built in capabilities
Besides all Bitcoin’s present shortcomings, it is obvious that Bitcoin has some advantages over the current financial system; free bank accounts, instant reconciliation, near free transactions etc. One could argue, that any of these advantages can be built in to the present day financial system, given enough development.
A key difference between Bitcoin and the present day financial system is that Bitcoin comes with all these capabilities already built in. The widely popular (and very useful) MobilePay system in Denmark makes it possible for the recipient to see immediately, that a person has received a payment. To make MobilePay work seamlessly, the developer would have to do a lot of workaround and actually show the recipient that he has received money, at least a day before the recipient has the money to his disposal.
All the above benefits are a part of the protocol. No workaround is needed. That means that when you own Bitcoin, you have instant reconciliation, cheap remittance, the capability to use it anywhere as long as you have access to the Internet. But it can also work offline. Personally I know of at least one programmer that is making a system where only the merchant needs to be online from time to time.
Download my presentation slides from: http://Bitcoin-expert.net/
For news on Bitcoin: http://Bitcoin-expert.net/category/Bitcoin-analysis/
And connect with me on LinkedIn (even if I didn’t have a chance to meet you): dk.linkedin.com/in/mcarlsson/
