Saturday, April 13, 2013

What's next for Bitcoins?

Their price zoomed up from about $15 at the start of 2013 to over $250 in April.

I think that in a year, Bitcoins will be viewed as an innovation on the path to a digital payment system. However, other systems will surpass it.

Like Napster was an early way to get digital music but it was quickly exceeded by competing services, Bitcoin showed the possibility of digital payments that didn't require interchange costs.

Early digital currencies have tried out various exchanges or small economies. Outside of tightly controlled virtual economies like those used in games or limited to single websites like Facebook, digital currencies have failed.

Even earlier were social currencies based on tightly linked money changers.
(http://en.wikipedia.org/wiki/Hawala)

Bitcoins are the first decentralized electronic currency that achieved popularity.  Bitcoin used cryptology techniques to expand its money base but not for secrecy of users or transactions.  Basically Bitcoin is a distributed accounting system that supports signed transactions. Payment networks are an old idea but Bitcoins used the idea of peer-to-peer networks.  Its "block chain" (http://blockchain.info/) data is exchanged so that servers see the transactions.

A next-gen digital currency system to watch is Ripple.




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