Can Bitcoin Replace Traditional Monetary Transactions?
Circle founder Jeremy Allaire is banking on it.
In the next 20 years or so, Jeremy Allaire envisions a world where there will be no paper or plastic involved when people go out and spend money.
â€śIf you go down the list of innovations, 20 years ago if you said every inch of the world would be searchable to you at no cost, you would have been called a lunatic,â€ť he said.
But thatâ€™s not the case. And he is hoping the same can be said for digital currency, like Bitcoin. â€ś[Itâ€™s] changing the consumers experience of using money,â€ť he said. â€śI think we will look back in 10, maybe 20 years, and we wonâ€™t believe that [how we do things now] actually existed.â€ť
Bitcoin, an open-source form of online currency, comprised of complex algorithms, first surfaced after the financial collapse in 2008. Since then, Bitcoin, and 150 other versions of digital currency that â€śforkedâ€ť off from it, have emerged.
Allaire expects that popularity to continue to blossom, so much so that he launched a company last month called Circle, whose purpose is to build payment acceptance tools for merchants that want to accept this form of money from clients and customers.
Bitcoins can be passed from person-to-person into what are called â€śBitcoin wallets,â€ť using secure, encrypted transactions that are essentially monitored by a third party. They can then be used to make orders online, and in some cases, in stores.
During a talk at Boston University on Monday, called â€śBitcoin Now: Exploring the New Frontier of Digital Currency,â€ť Allaire discussed the basics of the digital-currency world, including how simple transactions are made using the system.
During his discussion, Allaire, founder of BrightCove, spoke little of his own new company, and more broadly about the impacts that Bitcoin specifically could have on the economyâ€”both online, and during face-to-face retail purchases. Allaire claims Bitcoins and digital currency “represent a once-in-a-lifetime opportunity to shape the future of the Internet and global commerce.”
Unlike a paper dollar, Bitcoinsâ€”there are currently 11 million in circulation and have a capacity of 21 millionâ€”are divisible to eight digits creating what Allaire called a â€śvery, very flexible systemâ€ť with zero transaction costs or fees. He said because they can be broken down when buying goods, vendors could also accept micro-payments, opening up a field of opportunities for companies selling â€śdigital goodsâ€ť like news articles or video games. â€śItâ€™s scalable to make a lot of economic activity,â€ť he said.
Allaire is aware that just simply, and slowly, going from conventional banking practices to a world of digital currency is not a seamless transition.There are barriers and roadblocks as far as regulations and security go that involve immense oversight, and could take yearsâ€”even decadesâ€” to figure out.
â€śDigital currency attempts to disrupt the financial industry, and itâ€™s potentially threatening to the existing financial services industry, but it doesnâ€™t have to be that way,â€ť he said.
Although Circle is under the watch of the Financial Crimes Enforcement Network, a bureau of the U.S. Department of Treasury, as a money transmitter, there are other obvious dangers involved, according to Allaire, since digital currency as a whole isnâ€™t regulated by other federal government entities at this time. There is also the worry about price fluctuations when buying the currency.
Thatâ€™s why he employed the help of John Beccia as the companyâ€™s general counsel and chief compliance officer. â€śMy job is to keep Jeremy out of jail,â€ť he said, citing the challenges digital currencies are up against in terms of federal agencies. â€śWhen you donâ€™t have regulatory certainty, you have to dip your toes in the water, and then take a leap and do the best you can.â€ť
But Allaire is willing to take that risk.
â€śFor the first time, it is viable to think about using [mobile] devices for payments and other financial interactions,â€ť he said.
Source URL: http://www.bostonmagazine.com/news/blog/2013/11/04/bitcoin-jeremy-allaire-circle-boston-university/