As we look to the future, we expect Bitcoin to continue to make strides to become an accepted currency worldwide. According to Coinbase
, one of the largest Bitcoin exchanges, around 20 percent of activity on its network was payment related rather than speculative investment in January 2016. While that percentage may seem small, it is growing as Bitcoin becomes more accepted as a currency.
One thing the public expects from a currency is being able to easily spend it. Bitcoin made strides in that area when Coinbase
introduced the country’s first bitcoin debit card. The company reported that more than 7,500 people signed up for the card within two months of its launch. In addition to making it easier for users to spend their Bitcoin, it will also help push more businesses to accept Bitcoin. By accepting Bitcoin outright, they can benefit from lower service fees than from the Bitcoin debit card.
In April 2016, another important step toward the legitimacy of Bitcoin occurred when Bitstamp
, a Bitcoin exchange, was granted a payment institution license in Luxembourg. This license allows Bitstamp to operate in all European Union countries under the EU’s “passport” program. According to the exchange’s cofounder and chief executive Nejc Kodrič, “‘we believe that this is stability-inducing — that people will see this as a sign of Bitcoin going mainstream’”. The recognition of Bitcoin as a true currency by European governments will only encourage more people to utilize it. This will increase demand and therefore the currency’s value.
In addition to being used as a currency, Bitcoin’s blockchain technology is being utilized in other ways. A group of tech and finance giants—IBM, Intel, Cisco, the London Stock Exchange Group, JP Morgan, Wells Fargo, and others teamed up to create Hyperledger, an open source project inspired by Bitcoin that the companies hope will one day provide a more secure and reliable way of trading stocks and other assets” . For example, IBM says that disputes over tax rates or incorrect shipments take an average of 40 days to resolve today. With Hyperledger, the hope is this process can be streamlined. Such large,reputable companies utilizing Bitcoin’s blockchain technology will help to increase the currency’s acceptance.
Due to these factors, we anticipate Bitcoin moving into a period of greater stability and adoption as a currency. This will continue to result in growth, but not at the breakneck speed of earlier years. However, it will not have the volatility of its infancy either.
On the contrary, the future of the currency ether depends upon Ethereum’s technology being used. Ethereum
made great strides in having its technology accepted as the blockchain standard when Microsoft Azure started offering it as a service in November 2015. Microsoft indicated it chose Ethereum over Bitcoin because “[w]hile a platform like Bitcoin has many great uses specifically as a Cryptocurrency, Ethereum provides the flexibility and extensibility many of our customers were looking for. By offering Ethereum as part of Azure, Microsoft is making the technology available to far more users than would otherwise use it. This will help to spur further innovations.
One industry that is already developing many uses for Ethereum is the Internet of Things (IoT). For example, the Ethereum computer could unlock doors when someone rents an office or apartment space. As more and more devices are connected to the Internet, the ability for them to interact with one another by using Ethereum’s smart contracts becomes ever more valuable. In fact, IBM believes that blockchain technology is key to the success of IoT. In a time when over a billion devices could be connected to the internet, “the blockchain is the framework facilitating transaction processing and coordination among interacting devices. Each manages its own roles and behavior, resulting in an ‘Internet of Decentralized, Autonomous Things’ – and thus the democratization of the digital world.Ethereum
has a better technological foundation than Bitcoin does to take advantage of these needs. Ethereum has many uses in the financial services industry as well. Nearly every bank currently uses SWIFT messaging to securely process transactions, but Ethereum smart contracts could cause this network to become archaic. Distributed ledgers could settle accounts more quickly and save banks, and therefore consumers, up to $20 billion a year. This would also help to protect banks from the unethical actions of employees and the subsequent bad press.
There are risks with Ethereum’s smart contracts as well. While smart contracts do not require consumers to trust each other, they do require them to trust the code. If code is law, so are bugs in the code—and correcting them may itself mean a breach of contract. While smart contracts are set up to be unchanging and trustworthy, they still ultimately are created by humans who are capable of error.
However, if Ethereum’s smart contracts are utilized to the extent that we believe they will be, its currency Ether will be used more frequently as well and its value will subsequently increase. While the future of Ether is more uncertain than the future of Bitcoin, the potential gains are also much greater.
- Number of Bitcoin Transactions Per Day:
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