Patience, please — ‘legal’ Bitcoin is actually only one year old! That is, even though the Bitcoin source code was posted to the Internet in 2009, it was only clearly legal for American institutions to get involved with it after the IRS tax guidance was published in March 2014 (as late as December 2013, the New York Times had published articles predicting and/or calling for a ban). But just a few short months later, former and current officials now publicly laugh at such a thought and have openly embraced Bitcoin.
So the clock has just begun on Bitcoin’s acceptance more broadly. Crash or no crash, we should expect a significant increase in the level of institutional adoption this year. Specifically, a large number of companies will put together groups focused on what Bitcoin means to them — and as early as next year we’ll start to hear people ask “What’s your Bitcoin strategy?” in much the same way people asked “What’s your social media strategy?”
Bitcoin is as different from the wire transfer system as the modern Internet is from phone lines. You wouldn’t expect the phone lines of 1988 to easily accommodate hundreds of millions of tweets and likes per day, nor multi-gigabyte file transfers or P2P apps. Moreover, the primary use of Bitcoin may not be doing “better wire transfers” anymore than the primary use of the Internet was VOIP.
Instead we should expect totally new kinds of applications, because Bitcoin is good for transactions that are very small, very large, very fast, very international, and/or very automated — unlike the legacy payment rails. It probably starts with low stakes, digital goods that the dollar can’t colonize right now due to the requirements of credit card companies … basically business models that are just too low stakes, or too weird, or too international.
Let’s define an intrinsic value app as an application of Bitcoin that does not include any explicit price dependency or reference to price. These are apps that typically use Satoshis to write data to the Blockchain, and work equally well whether the price is $1 or $1,000.
For example, one can use the Blockchain as an identity provider, or as a distributed database where you can log proofs of existence. Given their robustness to price volatility, I expect these kinds of apps to be among the first popular Bitcoin tools.
– Balaji S. Srinivasan