Digital Currency Deep Dive: So What Makes Bitcoin So Special?

digitalcurrencydive23 Apr 2014 / Pymnts –


Remember the day when a coin was just a bothersome piece of metal that you were happy to toss in the tip jar to benefit the underpaid baristas at your local coffee shop? Well no more. Now a coin might be worth more than many people make in a week. The coin has gone virtual. You can trace its origin not to a copper mine in Peru, but to a kid with in Estonia, perhaps, who created it out of thin air by solving some difficult algorithms on the computer he uses for gaming.

Sure, there have been shenanigans with these virtual coins.  The genius behind the “big daddy” of all of them—bitcoin—remains anonymous with a stash of coins, hackers have stolen hundreds of millions of dollars of coins, the market for one of the leading coins almost got cornered, the largest exchange was liquidated, and key members of the new virtual currency have been arrested for sundry sins. And then there was the guy who hired assassins.  

Serious people, though, have been pouring tens of millions into startups that aim to capitalize on this new virtual phenomenon. A global ecosystem is emerging of virtual coins and various businesses that support them. These range from manufacturers of “mining” equipment for solving the algorithms to create the coins, to vaults for storing coins, to exchanges, to operators of wallets.

And, if that’s not enough to get you to pay attention, to paraphrase the famous advice given to Dustin Hoffman’s character in the Graduate, “I’ve got one word for you: protocol. There’s a great future in the protocol for virtual currency.”  The protocol developed by the still yet-to-be-known inventor of bitcoin, lays the basis for massive innovation in financial services according to some proponents of the new currencies.  The protocol could be more important than the Internet, they say, which was ignited in part by the TCP/IP and HTTP protocols.

Don’t worry if you haven’t the foggiest idea what I just said.  In the next several articles I’m going to provide a primer of sorts on these new digital currencies. In the course of doing that I’ll give you a sense of what’s possible, and what’s not with the virtual coins, and what questions you should be asking if you’re thinking about starting or investing in a coin-related business….. Read more

an economist, business advisor and Founder of Market Platform Dynamics

Follow Twitter

Exchange Rate