Bitcoin Develops New Uses Beyond Money
Bitcoin has been deemed property, not currency, by the IRS. This will be important to the government in terms of taxes as it changes hands, but the real change will be how it changes hands. Several investors, including BitAngels and Andreessen Horowitz, are backing entrepreneurs who see many development opportunities for Bitcoin to reach beyond its function as money to find new uses for it. Instead of relying on banks, who make money just for holding the keys to others’ money, these new functions can be handled by Bitcoin. Several start-ups in particular are looking to use the verification capabilities of the company.
BitAngels is a collection of investors who fund start-ups related to Bitcoin. David Johnston, co-founder, has said that they are looking into over 30 different projects. These investment opportunities follow the theme that what was once considered a digital currency is, in Johnston’s words, not “a payment system, [instead] it’s the Internet of Money.”
This week, the central bank of China has closed the trading accounts of over 10 Bitcoin exchanges, which caused Bitcoin’s value to drop by approximately 10 percent. However, last year investors held a rally that bumped the value from $12 up to $1,200. The value has leveled out now and in the past month has ranged from $500 to $620. With groups like BitAngels, the value of the currency should be more stable and new uses for it may be discovered. The block chain, which is the public record of all transactions using Bitcoin is key to these forward movements as far as how these commodities can be used, and it is what makes this system so unique. The public database not only keeps track of every transaction, it can be used for identification and verification. Marc Andreessen, multimillionaire investor and a partner at Andreessen Horowitz, thinks that the ledger and the functions of Bitcoin is what will help it move forward and access other industries. His company is looking to fund these start-ups as well.
As Bitcoin develops new uses beyond the limited capabilities of money, virtual currency entrepreneurs have begun gathering at conventions. One of these is CoinSummit, where Andreessen explained plans to draw other industries in with the “core innovation” of the block chain. “We want a whole sequence of companies: digital title, digital media assets, digital stocks and bonds, digital crowd funding, digital insurance. If you have online trust like the block chain provides, you can reinvent field after field after field.”
BitShares X, one of the first Internet of money services to pave new ground with Bitcoin, is a decentralized bank plus exchange. Users will be able to save, trade, borrow, and lend with no middle man. Computers handle all transactions and because verification is public, there will be no concern of theft and fraud. Dan Larimer, CEO of the developing company Invictus, said that unlike Mt. Gox, “no one can steal the balance from your account.” This is ensured through the exchange not defaulting on their transactions, making it a much safer investment. Chris Dixon, a partner at Andreessen Horowitz, said that how Bitcoin assists the system is “very brilliantly designed.” It is moving towards eliminating fees such as the costs of accounting, banking services, and verification steps.
Banking systems are not all that Bitcoin can revolutionize. Actual property could be given verified digital tokens and those would be simultaneously exchanged along with the payment. The purchase of particularly costly items, such as cars or houses, can also be changed. Dealerships and real estate brokers are currently the middle men who, for a commission, run those transactions in order to minimize the risk between buyer and seller. Michael Terpin, co-founder at BitAngels, projects that the block chain can take over “at least 10 percent” of transactions done online.
The Bitcoin Tangible Trust is another project that is moving modern technology forward. It allows buying and trading gold using Bitcoin technology for verifying transactions. RippleSingapore is a similar service for not only gold, but also silver and platinum. Invictus is expanding this technology and using it for buying shares in soundtracks, but this could also be used for other digital media. In addition to defending against piracy, Larimer explained that, “It’s a way for fans to buy into a song when it’s new, and if it becomes popular, you can make money.”
Johnston from BitAngels said that the groups funding the technology will be mostly related to Internet of Money this year and have invested over 60 percent of their funds in Mastercoin.“Right now, Bitcoin is in the lead,” said Brock Pierce, an investor of Mastercoin, “And usually, the technology that gets the most adopters wins.” It is an accurate point, and likely this will determine how well all of the new developments that use these technologies do in the future to help expand Bitcoin beyond just being money.
By Whitney Hudson