Railroads, Cars, and the Price of Bitcoin

I recently had a fun email exchange with a good friend regarding the recent drop in price of Bitcoin. The friend sent this New York Times’ piece by Sydney Ember. I’ve pasted my response below:

Agreed, I suspect there’s not much rationale behind using Bitcoin as a currency unless you’re in a very unstable economy where even with the recent downswing, Bitcoin has shown to be a safer store of value than the local currency.

That said, the article is missing the point and focusing its attention orthogonally to the core innovation within Bitcoin: the ledger. A decent analogue is a railroad track or network with an initial and faulty or problematic car. The article focuses on the faults with the initial car, while discounting the potential in creating entirely new cars and leveraging the core innovation: the track and transportation ability.

Example: Counterparty, an open source collaboration I’m advising is working to create the necessary infrastructure to streamline the deployment of new ‘cars’. Recently, Overstock.com’s CEO Patrick Byrne made public his intent to use this next layer of infrastructure to issue Overstock shares - essentially disintermediating traditional exchanges. Of course there are nontrivial regulatory hurdles in the process, but this is a good example of where we can imagine this technology going 3-7 years down the line.

Extending further, a Managing Director from a large financial institution (5+ billion market cap) is flying in on Thursday to chat with me about adopting Bitcoin and associated protocols for internal and external asset management and transportation rails. Admittedly these are early conversations and learnings, but mainly want to point to these examples of potentially real value creation and greenfield opportunities enabled by the blockchain yet orthogonal to fluctuations (up or down) in the price of Bitcoin.

(In case you’re totally geeking out, here’s a [link](github.com/SymbolicSystems150) to a seminar I taught at Stanford last quarter on Cryptocurrencies)

 
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