But even with the indisputable fact that Bitcoin dramatically reduces transaction cost, it will fail to gain more than 5% traction (and only for e-commerce), until two things happen. Group 'B' will follow Group 'A'...
A: Standards and Practices
Early adopters may value the decentralized, p2p model and the quasi-privacy afforded by virtual currency transactions. But for use in b2b payments, consumer payments, and as an equity for savings & investment, cryptocurrency transactions need to offer at least the OPTION for user identification, transparency, performance guarantees and especially recourse (refunds, rescission, arbitration. After all, why would you pay with a new form of currency, if you cannot prove a receipt (for example, that you already paid a car registration fee--or that you are owed a refund on a cancelled flight.
Regulations won't solve this. But voluntary standards and practices will. Especially, if transactions and transparency-compliance can be tested in real time. That's why CRYPSA (Cryptocurrency Standards Association) has Gavin's attention and that's why banks are working with CRYPSA before announcing support for Bitcoin services, such as an exchange, vendor services, savings, investment and loans. They want to know that trusted processes are in place for security, safety, reserve, recourse, and the potential for proper bookkeeping & audit.
B: Mainstream Adoption: A Series of Events
Bitcoin adoption will pick up steam in a chain of domino events. Each event will hasten the next one...
- A growing fraction of sellers leave their bitcoin in their wallets, realizing that they will need to spend it for their own labor and materials.
- Gradually, wild exchange-rate gyrations diminish—not because fewer people are exchanging money, but because the Bitcoin supply/demand value is driven more by actual commerce than it is by speculation.
- Sellers begin pricing merchandise in Bitcoin rather than legacy units (i.e. national currencies)—because they are less anxious to exchange out of BTC immediately after each sale.
When sellers begin letting a fraction of bitcoin revenues ride—and as they begin pricing goods and services in BTC—a phenomenal tipping point will follow…
- If goods and services are priced in BTC, then everyone involved saves money and engages in transactions more efficiently.
- If goods and services are priced in BTC, then the public will begin to perceive exchange rate volatility as a changing dollar rather than a changing bitcoin.
- If buyers also begin to save their BTC (i.e. they do not worry about immediately moving it back to national currency), it means that Bitcoin is being perceived as a stored value—not just an exchange chit. That may seem to be a subtle footnote, but the ramifications are earth shaking. That earthquake is the world gradually moving away from centralized treasury-issued bank notes and toward a unified and currency that we can all trust.
Summary
Bitcoin won't reach the next plateau because of regulation or intervention. It will become trusted because the same assurances and guarantees that we expect from a credit card or bank-mitigated transaction will become widely available for those who need a safe Bitcoin environment. With tools and a reputable standards organization validating both tools & practices, the experience will almost seem to be controlled by a central authority. But even though Bitcoin resists both central control and authority, it can be made safe for business!
Incidentally, CRYPSA launches in April. It has already gained attention with the backing of banks, state regulators, and several Bitcoin pioneers. Don't let the regulators throw you. The organization is all about making Bitcoin safe for Business -- but only for transactions in which BOTH parties agree to a transparent and secure environment.
), where players can go to exchanges and buy currencies to use in the game and so on. Then the gameowner can exchange it to bitcoin and real money. User repeat the buy when needing more currency...