Bitcoin opportunities

I’m sat here at the Bitcoin London conference organised by my friends Shakil Khan and Pamir Gelenbe mulling over opportunities in Bitcoin. Here are my thoughts, many of which are inspired by, or re-hashes of, what I’ve heard on stage.

  1. Bitcoin’s momentum continues to grow.
  2. Regulation is getting clearer, but is still a big issue.
  3. Governments are starting to recognise that virtual/crypto currencies will co-exist alongside fiat currencies.
  4. Bitcoin’s predictability, reliability, extensibility, and low costs might make it fundamentally superior to fiat currencies, and hence it might prevail, at least for some use cases – of which international remittance is the most obvious.
  5. Usability remains a big issue (although I did use the Bitcoin ATM pictured above from Lamasu which swallowed my £20 note and gave me 0.3406 Bitcoins in a few seconds).
  6. A big part of the usability problem is interfacing with the mainstream financial services industry. I’m told that banks in the UK are much less welcoming of Bitcoin than their international brethren.
  7. Bitcoin transactions are irreversible meaning that fraud is hard, and maybe impossible, to unwind. This is one of the reasons the traditional financial services industry finds it difficult to work with Bitcoin.
  8. The cost of regulation is making Bitcoin exchanges capital intensive businesses, most other Bitcoin companies are capital efficient.
  9. US regulations make it difficult to build Bitcoin startups there – Tradehill, a US Bitcoin startup has eight people in their legal team. Their development team is smaller.
  10. Bitcoin is inherently deflationary, which encourages saving. That’s a good thing.
  11. There are now possibly 10k online merchants that accept Bitcoin.
  12. A lot of people want to view the world as Bitcoin vs the system. That’s understandable given the number of accounts that have been blocked and exchanges that have been shut down, but it’s smarter to think about how Bitcoin can engage with the system rather than fight it.

In summary, the chances of Bitcoin becoming a significant force continue to increase and the obstacles in the way and the paths around those obstacles are becoming clearer. That tells me there is opportunity here. I don’t think we are at the point yet where startups should raise huge rounds to run hard, but we are the point where it makes sense to make small investments in companies that will be careful with the cash until the market really opens up.