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Seyi Fabode Headshot

The Promise of Bitcoin and The Fallacy of 'Coin'

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One cool Chicago evening in the fall of 2010 I was grabbing drinks with four friends. The El was right above us and would intermittently interrupt our conversation. One of the chaps, slightly drunk, suggested we pool resources to buy servers and 'mine' some Bitcoins. In my sober state (I don't drink alcohol) all I saw was a drunken friend coming up with a crazy idea and so I ignored him. I'm now starting to think that was one of my biggest financial mistakes ever because, say what you will, Bitcoin will become a legitimate currency in the next few years (if not sooner).

Bitcoin, a peer-to-peer digital currency with a limit to quantity available and no 'central' authority, is currently limited in its acceptance for transactions. That will change one day soon; such is the history of currencies until parties accept on its value and legality. We are fast approaching that day when Bitcoin will be a bonafide means of value exchange, especially in light of a U.S. Senate committee hearing that was held this past week to discuss virtual currencies.

To better understand why Bitcoin is the future (and why 'Coin', see below, might fail) we need to better understand money. Money, in whatever form it has come, has been a means of carrying out a transaction where a means of exchange was necessary. First we bartered (you give me a fish I give you potatoes of equal 'value'), then we exchanged things for cattle (two cows for a plot of land, four cows for two plots of land), then cowrie shells, then gold and subsequently other forms resembling our current understanding (paper). The value was as determined between the parties involved or by a central authority.

The basis of Bitcoin's viability as a currency stems from the fact that it meets all the criteria required for it to be a means of exchange and even more so in an increasingly digital world; a world where we pay for everything with cards/phones/online, 'money' (owned or borrowed) no longer needs to be physically existent for it's value to be agreed upon (and this has been the case since the first credit card was allegedly issued by Diners Club in 1950).

I can imagine Americans felt a certain reluctance to stop spending 'buck' (elk or deer skin) when paper money came along. And so will the reluctance to accept Bitcoin reduce with understanding. As it gains widespread understanding, Bitcoin's value will start to be accepted by all. With acceptance will come widespread usage.

On the flip side 'Coin', a buzzed about startup promising to combine all your credit cards into one, is based on a false premise. My friends were excited when they heard about Coin and promptly signed up. One gushed that it was the most innovative thing he'd ever seen, using a superlative where one was not necessary. 'Coin' does not by itself provide any exchange value and it solves a problem where one does not exist for the majority of people (if you have no money in your Coin then it has no value, the real problem is most people have little money). I only see a future for 'Coin' if it becomes the de-facto card for Bitcoin transactions.

Coin solves a first world problem (I have too many credit cards) while Bitcoin allows people do what we've always done (exchange something of perceived value for another thing of perceived value). I wish I had listened to my drunk friend in the fall of 2010.