In case you missed it, someone bought a Porsche Cayman S for 300 Bitcoin yesterday.
But the real star of the story was Bitpay.com. After all, since they were the ones cashing out the buyer’s Bitcoins, they were taking on all the risk.
As Bitcoin’s value has skyrocketed in recent weeks — now $127; about $50 just a month ago — lots of people have been highlighting the “crypto-currency’s” dangers.
Felix Salmon, for instance, believes Bitcoin is not a currency at all, but rather behaves more like a commodity, subject to the same touchy price changes as corn or cotton.
Bitcoin’s recent flash crashes — the result of both technical and malicious failtures — have only added to the scepticism.
Thursday morning, we talked with Bitpay.com’s founder, Tony Gallippi to get his take.
Speaking to us by phone from his Orlando office (which was outfitted using Bitcoin-bought supplies, naturally), Gallippi essentially agrees with Salmon, calling Bitcoin an “asset class.”
As long as its value keeps rising, he said, it will come to be viewed like stocks or real estate.
[If it gets up to] $500 and $1,000, it’s now usable for people who want to trade in and out of real estate, gold positions, stocks. Someone moving to New Zealand wondering how to get $5 million in gold…with Bitcoin, they can cash it back out.
There’s volatility now, the market has it undervalued, so people [who are] trying to do larger transactions, the market can’t handle it. But if there are $10 billion-worth of Bitcoin in the market, it’s not really going to move on market volatility.
He does not dismiss the technical concerns, but said there’s good reason to believe they will diminish in the coming months. The trust system underlies Bitcoin has so far proven resilient:
The way Bitcoin is designed, there are financial incentives for people to cooperate to use it [rather] than attack it. So we recently saw a situation, it wasn’t an attack, there was a technical bug in the software, the value of Bitcoin started to decline, people were scrambling to fix problem, it was their money at stake…I was pretty impressed with the way they handled it. I think [threats are] starting to diminish now that it’s been tested multiple times through different kinds of challenges.
Nor does he fear increased regulation. The government continues to recognise Bitpay as a payment processor, treating them the same way as they would a hotel handling poker chips, he said.
He also compared Bitpay to a better version of Visa or American Express. Those firms are currently blocked all over the developing world. Bitcoin faces no such restrictions.
If Bitcoin can do international ecommerce, what’s its value? I think it depends on how quickly people start adopting it.
That growing exposure may be one reason why Bitpay just passed underground or “darknet” website Silk Road as the world’s leading Bitcoin processor.
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