Bitcoin is a virtual currency that doesn’t rely on a central authority for bookkeeping but instead is completely open-source, peer-to-peer network for money, something unparalled in the history of human economics. But are the people, their representatives and businesses ready for this new form of currency?
Bitcoin can take off in some places and countries sooner than expected depending on the political climate. If a government destroys and debases its currency, then it is bound to grow in popularity. That’s what happened in Argentina when the government converted local currency denominated bonds into US Dollar denominated bonds at an exchange rate that was fixed by the government. Bitcoin use in the country shot through the roof following this, and it is still accelerating (measured in terms of wallet downloads per month).
Cyprus was another good example – when the government tried to seize people’s money, Bitcoin took off in the country because it is far more fluid on a world scale and can be sent instantaneously to another person anywhere in the world without the need of any government intervention. This also means that realistically, the government cannot control the supply and demand of Bitcoins within its borders.
Of course poor governance is only one side of the equation. Economics dictates the other. Bitcoin takes off in places that thrive on entrepreneurship and where the policies are favorable. Business owners will find the use of Bitcoin to be incredibly more efficient than the existing payment system that the world has that is based on credit cards, because merchants need to pay the credit card companies anywhere from 2-4%. If all transactions were purely in Bitcoin, without any conversion to fiat at all, then the transaction fees for the business is zero. Literally zero. You can send and receive money for free through the Bitcoin network. That’s what makes the economics of using Bitcoin so powerful.
Some of the cities that are ahead in this innovation include the familiar names like San Fransisco and New York but also the lesser known entrepreneurial cities like Berlin, which has a huge thriving market for Bitcoins.
When people in a city or country see Bitcoin as a store of value and simultaneously see it as a payment system that eases the current burden on merchants, Bitcoin has the potential to take off. It has happened in the past and it is likely to happen in the future. Of course you always need the entrepreneurial spirit and risk-taking to dethrone a decades old existing incumbency, but the good news is, it is happening all over the world simultaneously.