‘Bitcoin is combination of desperation and innovation’

As Bitcoin does not discriminate between ethical and unethical transactions, it has the potential to grow into a trillion-dollar transaction network, believes journalist and online show host David Seaman.

The digital currency’s value has fluctuated violently over the last two days, declining by a factor of four. On April 10, one Bitcoin was worth approximately $266 before plummeting to $65 on Friday. These dramatic variations have characterized the currency since the beginning of the year, when it was valued at just $20.

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What drives people to put their faith in a product of a mathematical algorithm rather than good old-fashioned hard cash?David Seaman: I think it’s a combination of desperation after seeing what happened in Cyprus and seeing that a lot of central banks around the world can just continue to print money and devalue people’s saving. It’s a combination of desperation and innovation. This is something that was only launched in early 2009, most of the public doesn’t even know about it. It’s a phenomenally interesting technology, the idea that you can trade digital currency as you would cash.

RT:Basically, everyone’s going to be onboard here, aren’t they?

DS: Well there’s a lot of debate because today the price went down significantly due to the fact that the exchanges where you buy and sell bitcoins they were not able to keep up with the recent rise in demand over the past week. They just aren’t able to scale quickly enough. And when an exchange goes down that obviously causes some temporary panic.

But I think the benefits in terms of just how much people will save from transactions fees going away gives it some clear advantages. You know, to send $10,000 over PayPal to family member in another country would cost me around $299. The same transaction over Bitcoin would cost me less than a nickel at current market prices.

RT:Many analysts say the Bitcoin initiative is a bubble waiting to burst. Do you agree?

DS: Thinking of it as a bubble or asking ‘is it going to crash?’ or ‘has it crashed?’ these are questions that kind of make it sound like a stock. And it is not a stock, what it really is a new technology coming online.

You know, when e-mail first came online and people started using email instead of going to the post office you didn’t really have people saying ‘is this a bubble that gonna burst?’ It was just an obviously better technology.

RT:Despite the good theory behind it is Bitcoin a legitimate alternative to the global currencies?

DS: I think that’s the question people are asking. They are asking: “Is Bitcoin worth everything or is worth nothing?”  It surged above the $2 billion market cap, and so the question is why not $50 billion? Why not $100 billion? If it is actually easier to use than PayPal or bank transfer why won’t it take off? There are a lot of questions, there is also a possibility of government regulation.

The Economist magazine just came with an opinion piece and they said that the regulator should leave Bitcoin alone, and other emerging digital currencies. Which is a huge deal for the Economist which is super influential to come out and say that regulators should leave this alone, let it grow.

Think about it as if the post office would come in when email was in its first couple of years and if they said “we are going to regulate it and make sure that it stays safe for people to use” it would not had taken off or innovated in a way that it has.

And same with this, certainly there is a lot of uncertainty, nobody knows if those things are going to be the new beanie-babies or if it is the next multi-billion, potentially trillion dollar transaction network.

RT:Bitcoin's anonymity allows people to possibly act illegally. Could it be shut down on this basis?

DS: I think some governments might make that arguments, many more impressive governments are out there. It’s not ultimately a valid argument, because the US dollar, the same $20 bill that I use at the supermarket today to buy sushi could have been in the hands of a cocaine dealer last week or in the hands of a human-trafficker two weeks before that. You know, one of the things about currency is that it does not discriminate between ethical or unethical transactions.