Many articles mention, that the limited Bitcoin money supply is a major advantage of this digital currency. The reasoning usually goes like this. Since Bitcoins can only be created through mining and there is an upper limit of 21 million, Bitcoin is supposed to be inflation proof. This article for instance says, Bitcoin “theoretically eliminates inflation”. If this was true, Bitcoins would not lose purchasing power. The Bitcoins I own today would buy me the same amount of goods and services tomorrow. Or a larger amount in the case of deflation.
Exchanges are the link between the old world of banking and the new world of crypto-currencies; they play a vital role in supporting the growing Bitcoin economy. If Bitcoin hopes to continue rapidly gaining new users it needs this bridge between the old and new systems to be up and functioning. While Bitcoin is in no way dependant on a link to the traditional banking system, its smooth transition into mainstream use certainly is.
Unfortunately these bridges which make up the exchange market are concentrated and often broken. This leads to concerns over reliability and security, which can cause market panic and extreme volatility. As Bitcoin enters the mainstream a wave of new businesses, services and software developers have recently dedicated their efforts to solving this problem. Their task will not be easy, and the while the exchange rate has seen some recent stability, there is a long way to go before obtaining bitcoins can be called user friendly and reliable.
One of the biggest problems currently facing the Bitcoin economy is the exchange market. The market suffers from continued concentration and price volatility. In order to maintain their links to the traditional banking world, these businesses have the unenviable task of attempting to shove Bitcoin into the world of bank accounts and anti-money laundering policies. New exchanges are joining the Bitcoin economy but regulatory compliance is no small barrier to entry. The few existing online exchange services continue to be significant points of failure for the Bitcoin economy.
A network of small, peer-to-peer transactions would likely bypass many of these issues and would be a fitting solution for the brilliantly decentralized Bitcoin network. But is such a thing possible? The guys behind MetaLair, a UK based start-up, think so and are working hard to develop the software and find the investors to make it a reality.
After the success of services such as M-Pesa, Kenya’s mobile-phone based money transfer service, it is clear that there is a large under banked population in the non-western world. A population that is quick to adopt low cost mobile based solutions.
A new mobile payment system, Dinero MPS, aims to offer a wide variety of mobile payment services starting with the unserved markets in Africa, South America and Asia. Founded by financial cryptographer Ian Grigg and entrepreneur Ken Griffith, Dinero’s Ricardian-Contract based system is set to launch later this year with the release of an Android phone app.
Dinero’s co-founder Ken Griffith shared with DGC insight on the businesses’ plans and motivations.
Commercial banking is a money making endeavour; literally. Sure there’s a complex set of rules, but the short story is commercial banks create money. A button is pressed and congratulations, your loan has been approved and $50k of brand new digital Dollars are now sitting in your bank account.
As you might imagine, creating new money is a very handy little trick for banks. In fact, the commercial banking business model is dependent on the variable nature of national fiat currencies which makes this possible. But this trick only works on fiat currencies, replace the US Dollar with Bitcoins, and the banking system as we know it today ceases to exist.
Part II examines the Voucher-Safe economy, trust, security and software.
This final part looks at Voucher-Safe’s interaction with Bitcoin, Issuers and OnionPay.
Out very soon, the new version of Ripple has has undergone a dramatic renovation.
Ripple was created by Ryan Fugger in 2006 as a trust network where people can grant each other credit, and anyone can ‘be their own bank’. The project has since been acquired by a team of developers including Mt. Gox creator Jed McCaleb. Ryan’s trust network is still there, but it is now one feature of a much expanded system.
The new features of the soon to be open source software include the possibility for a decentralized currency exchange, a p2p transaction network, “Gateways” for bringing other currencies into the system, and Ripples (XRP), a new digital currency.
How’s this for a startup venture – Digital Gold Currency: a universally used currency that can be trusted by all, without the risk of debasement or fraud. Sounds pretty good, right?
Well over the past year, that’s exactly what I’ve worked on, and I’ve certainly discovered a few things along the way.
The business’ founders, Chris Odom (Fellow Traveler) and Johann Gevers aim to make this ‘financial system 2.0’ possible by developing commercial versions of the Open Transactions digital finance library. This software will allow digital finance entrepreneurs to startup micropayment services, financial markets, community currencies, escrow services, and many others all without depending on the traditional banking or legal system.
Johann, Monetas’ CEO, recently shared with me his thoughts on finance, his belief in decentralized systems and his plans for Monetas.