Bitcoin’s killer app just hasn’t arrived yet, suggested Dylan Love in an article for Business Insider recently. Bitcoin is still in its infancy, and although it has a lot of potential, it still needs time to develop the great functionality that will really take the world by storm. Dylan suggests, as many other have done, that Bitcoin is right now where the internet was 25 years ago, barely functional, but really, really interesting.
The fact of the matter is that Bitcoin does not have one killer app. It has a number of killer apps that are going to play a role in its development. Right now, due to its meteoric rise in value, Bitcoin’s killer app is as a combined investment and savings strategy. The Chinese have discovered Bitcoin in a big way and are piling in with their savings. It is kind of interesting to see the constant stream of Bitcoin headed toward China on this site. As the momentum behind Bitcoin grows, the only really sensible strategy is to buy and hold.
This is great news for broad Bitcoin adoption, but it is not great news for the Bitcoin economy. In order for Bitcoin to survive and thrive, it can’t just be gold, it also has to be cash, and when we get run-ups like this, liquidity vanishes. People are not going to be willing to buy their cupcakes, chocolates, rock climbing lessons, or much of anything else with Bitcoin as long as the trend is up.
But there is also a counter pressure. When people see their net worth increase, they are also going to want to get to take advantage of it. What’s the use of having a lot of cash if you can’t buy that a nice gift for a loved one or a new guilty pleasure for yourself? So, after a big rally, when prices have smoothed out for a while, we’re likely to see a return of Bitcoin to circulation. People are getting into Bitcoin because they want to, among other things, improve the quality of their lives. People will not only be buying pizzas, but trips, cars, houses.
For a while, we are going to see a pattern of people holding Bitcoin through upturns and spending when the market is calmer. This rhythm is what is going to work Bitcoin into every country and every household.
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In the meantime, people will start to see the benefits that Bitcoin can bring immediately:
- An ability to receive, send, and store money electronically without the need of banks and their fees and hassles.
- An ability to send money anywhere, to anyone, in any amount, for a very small amount of money. In a time of greater governmental controls, this is a crucial feature.
- Transactions are non-reversible (good for store owners), and non-freezable (good for everyone). As long as you hold the private keys, the money might as well be buried on a desert island with only you holding the map. The Dread Pirate Roberts has proven that although the government can keep him from accessing his funds, neither can they get to them. Until he or someone else comes up with the keys to his bitcoin addresses, no one can touch that money.
- An ability to save money and see it grow just by virtue saving it – Bitcoin is designed to appreciate in value over time. That means that when people start to get paid in Bitcoin, even if they never get a raise, they will always get a raise.
And, as Bitcoin begins to be broadly adopted, we will start to see other killers apps begin to be developed on top of the Bitcoin protocol. Many possibilities have already been suggested:
- Information can be certified and time stamped by sending it along with a miniscule payment into the block chain. That information would sit there, inerasable. From that point, it could be checked by anyone at anytime. What used to cost $30 to be done by a CPA, can now be done for pennies.
- In business, we’ll be able to have payments automatically complete when the conditions of the deal are met. Set up a program and fund an address. The program checks that the right conditions are met and releases the funds. If the conditions are not met within a certain period of time, then the funds are returned to the sender.
- Inheritances could be automated this way. A program could check to see if news stories announcing the death of an individual hit the papers. If they do, then the program could send the funds to the predetermined recipient. No more worries about executors or squabbling over a will.
- This could also apply to betting. Set the conditions of the bet and the program will see who wins and award the money. No more worrying about who holds the money.
- This could also be done with people. Transactions could be made in which two of three people have to agree what will happen to money in a deal. If the seller feels cheated, he can talk with the mediator of the deal. The mediator would have no ability to touch the money, only to approve that the money move forward to the seller or back to the buyer.
- Smart devices could also be made to recognize their owner by a bitcoin profile. When a sale is made, the device (phone, car, etc.) could detect payment and then become operational for the new owner.
- The above idea could also work for arranging collateral for loans. When I make a loan, I could program the collateral to recognize when repayment does or does not happen. If the loan defaults, then the collateral (phone, car, house, etc) would recognize me as the new owner.
Of course this list is incomplete and there will likely be things that can be done with Bitcoin that haven’t even been thought of yet. But it does suggest that Bitcoin tremendous opportunity beyond the speculation craze that is going on right now and is likely to keep the Bitcoin community in its grip for the next couple of years. When we come out of that craze, though, there are going to be hundreds of uses for Bitcoin.
That is why I think that Bitcoin is its own killer app.