Will Bitcoin Ever Have Mass Appeal?

Who's Heard Of Bitcoin?

Most people have no idea what bitcoin is. Will bitcoin ever be widely adopted?

No, it will not. This has nothing to do with bitcoin's association with the internet's murkier nether world, nor the oddness of some of bitcoin's champions. The reasons are more prosaic.

Four Reasons Why Bitcoin Won't Take Off

Risk of Loss. If I forget my wallet's password I've lost all my money. Who in their right mind is going to put their money into that sort of repository? The computer savvy, the enthusiasts, the very well organised maybe.

It's unnecessary. What can I do with bitcoin that I can't do with PayPal, my credit card or my bank account? Nothing. At least nothing that I, a normal average person, need or want to do.

Mathematics. Most people can't cope with more than two decimal places. If something costs $2.35 that's fine, but if something costs 0.00391 that confuses the hell out of people. And it's all too easy to overpay 10-fold with those sorts of numbers.

Complicated. So I've got to install an app or get an online wallet, sign up with a trading platform to get some bitcoins, electronically transfer some real money to this platform, do some involved deal to get the bitcoins, deal with some 34-digit numbers when I want to send some money to someone... Sod it, where's my credit card?

Volatility. You want me to put money into something that could halve in value tomorrow? Please tell me you're joking!

Well, that's quite enough reasons why your average man or woman in the street will not be using bitcoin. And no, if you're reading this you're not average. You're intelligent and techno-savvy. And probably one or more of these: geek, gambler, entrepreneur, evangelist, anti (anti-fiat, anti-bank, anti-state, anti-who knows what).

Could Bitcoin Ever Be Popular?

So, will anything ever persuade my Aunt Dolly to use bitcoin?

If my Aunt Dolly's credit card gets ripped off she knows her bank will sort it out and cover the loss. When she knows her bank, or someone equally trustworthy, would sort out a bitcoin rip off then she might consider it. (And if you're scoffing at the idea of a trustworthy bank you're definitely not average.)

My Aunt Dolly can, and does, transfer money via her credit card into her PayPal account. She then simply and easily pays for goods or transfers money. When she can equally easily transfer money into an account which, at the press of a button, converts it into bitcoin, and when she can then press a "pay this invoice" button to pay a bitcoin-denominated bill, and when she can say "send $50 worth of bitcoin to Jessica" (Jessica being her niece) then she might, just might, be interested in using such a facility - if the cost of using it is less than PayPal. Even more so if Jessica (who lives in France) receives the bitcoins using the same system and sees she has received 37 euros worth of bitcoins. Neither Dolly nor Jessica is necessarily aware of how many bitcoins have been transferred, nor has either had to use a 34 digit bitcoin address in this process. Jessica may then transfer the 37 euros to her credit card if she so chooses.

The implications of the above simplicity are manifold: if they are insuperable, bitcoin will never gain mass appeal. But if such a system ever was introduced, guess what? It implies costs. Someone making good any losses; someone enabling instant fiat-bitcoin conversion; someone taking a profit - the profit coming from charges levied on users. Which implies charges not dissimilar to those levied by PayPal or banks. So what's the point? Even if the volatility issue goes away.

OK, so bitcoin might survive as a niche crypto-gold-like investment. It might survive as a niche money transfer mechanism. It might survive as niche money, much as several UK towns have their own (very niche) currencies. But niche, niche, niche.

So What Will Bitcoin Be Worth?

You might think that Bitcoin is a dead duck: the excitement over, the promise unfulfilled, break out from the geek ghetto never to be. Bitcoin's value will wither gracefully. But not so fast.

Towards the end of 2014, the Winklevoss brothers plan a NASDAQ listing for a bitcoin ETF, and SecondMarket intend to make its Bitcoin Investment Trust available to all and sundry. These two events raise a terrible spectre: Ordinary investors will be able to invest in bitcoin via their IRAs and 401(k)s (that's pension savings pots for non-U.S. readers).

Currently there's no easy way for middlemen to make a fast buck by getting folks to put their cash into bitcoin. ETFs change all that. Given the relatively small market caps, it wouldn't take much to get the price moving and then the door is wide open for every broker in town to persuade Joe Public not to miss out on a great investment opportunity.

It's even rumoured that PayPal might allow bitcoin as a currency. An easy way for Aunt Dolly to buy bitcoin. If that - and the ETFs - happen, hang onto your hats, bitcoin is going sky high.

So maybe 2017 or 2018 will see bitcoin have its South Seas moment. Many will believe bitcoin really is worth $10,000, $100,000 - the sky is the limit. Tulip Mania 1637, South Sea Bubble 1720, Wall Street 1929, Dot-com Bubble 2000: people bought into something with little or no intrinsic value before the inevitable crash. Surely it can't happen again?

If it does happen, wait a year or so and then when your taxi driver tells you he has just made a surefire investment in bitcoin, sell.