Bitcoin, the world’s most popular digital currency, is back in the headlines this week after its price doubled in less than a month. After spending most of 2015 hovering around $250, the price skyrocketed up to $500 this week before stabilizing around $375.
Since its meteoric rise and fall in 2013, the pseudonymous currency has mostly stayed out of the news cycle—but a lot has been happening behind the scenes. Bitcoin is different and hard to understand at first glance and early ignorance led many people and institutions to assume the worst. In 2013 the nascent currency was mostly dismissed as a fad or some sort of elaborate scam. That tune has changed dramatically.
Part of the shift, both with media as well as investors, has focused on the non-currency uses of Bitcoin. The blockchain, which is a tamper-proof public ledger that records all Bitcoin transactions, is now being looked at as a way to create a proof of existence for, well, everything. Within each transaction—including when sending fractions of a penny—there is space to include more information and store it on the blockchain; anything from stock ownership to property deeds. One of Bitcoin’s biggest innovations is its creation of a trust-less way to transfer value and information and recent media coverage—such as last week’s cover story of The Economist—have begun to highlight that.
Governments have also taken a much more friendly approach as of late. Last month, in one of its biggest legal victories to date, the European Court of Justice ruled that Bitcoin is exempt from Value Added Tax and should be legally treated as a currency. Bitcoin exchanges have matured as well. Gemini recently opened its doors as a fully regulated exchange in the U.S., following similar moves by Coinbase and ItBit earlier this year. This is a far cry from 2013 when one poorly run exchange—which later imploded—handled the majority of trades. Other parts of the world, such as Indonesia and Brazil, now also have growing exchanges.
And the money is flowing in. Last month Bitcoin based start-ups surpassed more than $1 billion dollars in venture capital funding. Most of that cash has come from places like American Express or Goldman Sachs—some of the same people who once swore it would never catch on.
Daily global transactions have also been rising, indicating increased adoption. In 2013, there were few places where you could actually spend your Bitcoin; today major retailers such as Microsoft or Overstock accept Bitcoin.
This isn’t to say Bitcoin doesn’t have its problems and its detractors. It’s unclear how the network will handle the increased load that would come from mainstream adoption and some people, notably JP Morgan CEO Jamie Dimon, continue to believe it’s just a fad. Still, the future looks bright for the world’s first decentralized currency.
by John Dennehy
John Dennehy grew up in New York but moved out of the country when President Bush was re-elected. For five years he lived in Latin America, returning to the United States in 2010. He writes about travel, politics, media and currency and has been published in places such as The Guardian, Vice, Adbusters, Truth-out and Narrative. His work has been featured by Public Radio International and the New York Times. He blogs at www.jdennehy.com