The TCP/IP protocol was formalized in 1983 and became the backbone of the internet. During the 1980’s, the applications were limited to simple transfers of information packets across government and educational institutions. Although the technology had promise, widespread adoption remained elusive.
It wasn’t until the invention of the Mosaic browser in 1993 that we started seeing wide adoption of the internet. Mosaic allowed a user friendly way for individuals to interact with the “World Wide Web”.
Mosaic was the critical tipping point that enabled mass scale adoption and use of TCP/IP enabled information transfers. Whether it was news (economist, wired), marketplace (pizza hut in Santa Cruz), information discovery (search engine) the Mosaic interface enabled it.
Similarly with the Bitcoin protocol, the application right now is limited to simple transfers of value i.e. individual X sends individual Y Bitcoin in exchange for a good and/or service.
In 1983, If everyone had believed the only significant use for the internet was to send simple messages across heavily endowed institutions, we’d be living in a very different world and I wouldn’t have had a chance to write this blog post.
The interesting use cases of value transfer which Bitcoin can service include smart contracts, supply chains and even healthcare. This does not include some of the other novel use cases around micro payments and future side chains that enable IoT coordination by allowing machines to write on an always accessible and globally readable database.
So, how do we get there? The true value of the Internet and Bitcoin is driven by powerful network effects, so it’s important to consider the unique growth challenges. Below, I attempt to identify those key factors in hopes of starting a discussion on Bitcoin technology adoption.
From a funding perspective, total VC funding in Bitcoin related technologies for 2014 was ~$350M. We’re only halfway through 2015 and we have already seen $350M of venture funding pouring into Bitcoin startups. To put that into perspective, IoT saw ~$340M in venture funding in 2014.
Given that the primary use case (at least for now) deals with traditional value transfers and the Silk Road debacle is still a relatively recent occurrence, it’s important to consider the regulatory framework of Bitcoin.
We are seeing a wave of acceptance from institutions world wide. There are numerous examples I could mention, that could warrant an entire new blog post, but I’ll limit to a few key ones. The Chancellor of the Exchequer of the UK has indicated the country’s desire to become a hub for Bitcoin. NYFDC just released a framework for the regulation for Bitcoin. In one of the most implicit validations of Bitcoin, the US Government will be auctioning off ~$18M worth of Bitcoins that were seized from Silk Road. The US Government would never have sold $18M worth of cocaine that resulted from a criminal investigation.
Needless to say, without builders building things nothing will materialize. There is a lot of significant interest in the developer community:
Despite the drops in the price of Bitcoin, the number of Bitcoin GitHub repositories continues to grow indicating significant interest in the developer community.
For the TCP/IP protocol, it was the release of the “HTML” language that allowed developers to create websites on a large scale. Bitcoin is already written in languages which developers are familiar with, but will new languages/frameworks emerge that will allow for more efficient development of software for applications that use decentralized value transfers? The HTML of Bitcoin?
At the moment it seems like it’s only dramatic events that brings Bitcoin into the main stream. Whether it’s the Silk Road debacle or the recent Greek crisis, financial crisis seem to give Bitcoin good publicity.
As more applications are built on the Bitcoin and the narrative focuses on the story rather than the technology itself we could see Bitcoin entering daily lives of individuals.
For the internet, the story wasn’t “the TCP/IP protocol allows information to be accessed within seconds of delivery”, but rather “You can now access your daily news instantly”, that showed the true power of the internet.
As smart entrepreneurs figure out applications for Bitcoin and block chain related technologies the amount of users buying into the technology will scale. The number of internet users didn’t scale to 2.94 billion over night. It was years of infrastructure development and emergence of applications that slowly got almost half of the world’s population online.
There are a lot of positive head winds for Bitcoin and block chain related technologies. The sector is still relevantly young, is achieving widespread institutional acceptance and is filled with entrepreneurs building amazing products that could change our lives in ways we can’t even imagine yet.
So It almost does feel like it’s 1993 again, when all the infrastructure and regulatory environment was in place for the internet to thrive. Perhaps no one technology could ever have an impact on the scale of the Internet, but if there is one, Bitcoin could be a good contender.