Bitcoin has been smoked this year.
The digital currency is down 34%. It’s valued around ~$US200. That is significantly down from its peak, which was near $US1,000.
If bitcoin were simply a digital currency that exploded and collapsed, that would be that. We could all move on, and act like nothing happened.
But, bitcoin is more than another fad according to venture capitalists who are pouring millions of dollars into it.
A year ago, when bitcon’s value was flying to the moon, Marc Andreessen wrote an op-ed for The New York Times on why bitcoin matters. In it, he compared bitcoin to the internet and personal computers. He believes bitcoin has the potential to be that transformative.
Another influential VC, Fred Wilson, is a big believer in bitcoin. He also believes it has a chance to be a transformative technology. He has invested in companies working on bitcoin.
But now that the price is cratering, are Wilson and Andreessen going to see their investments go poof? No, at least, not in their opinions.
On Twitter, Wilson said the price collapse could actually be a good thing. He said the “price decline will certainly have impact.” But, he added, the “best thing to come of it may be to get people to stop focusing on & talking about price.”
Another investor in bitcoin, Barry Silbert, said he’s seen “no impact” from the price of bitcoin falling.
So, what has these people so excited about bitcoin, even though the price is falling?
I spoke with Scott Rosenberg about it on the podcast I do with Farhad Manjoo of The New York Times. Rosenberg is veteran technology writer who co-founded Salon. He wrote a big piece on bitcoin, and its potential for Backchannel, a new technology site.
The reason people are excited about bitcoin has less to do with bitcoin and more to do with the technology that supports it. That technology is called “blockchain.” Essentially, blockchain creates a new type of internet. Bitcoin is just the first application on top of the blockchain.
To look at the failure of bitcoin, and say that it was just a fad, according to Rosenberg, is to look at early web products that were bad and say, “Well, looks like the internet isn’t going to work!”
The internet came together when Netscape was built. It took years before Google search existed. It took years for Facebook, and all sorts of other great applications to be built. In theory, blockchain will do the same.
There are, of course, many problems with this idea, which we dig into on our podcast:
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