If value is a good measure of success, then 2013 was a wildly successful year for Bitcoin, which saw its price increase roughly 6,000% from beginning to end. Yet the currency remains a target for many economists and reporters who find it difficult to think of it as a simultaneously viable investment commodity and a viable medium of exchange without any regulation, which further ignores a third aspect of Bitcoin as a payment protocol. To summarize the argument, picture two people who each owned 5,000 bitcoins in January 2013. One of them bought a Tesla automobile for the equivalent of $70,000. The other held on to his/her bitcoins and can now retire comfortably with the equivalent of $4,000,000. Such is the risk associated with storing and exchanging a volatile commodity.
Despite this argument, Bitcoin continues to grow and to gain acceptance. More and more companies, from Overstock.com to Virgin Galactic, are treating it as a viable form of payment. While many of these companies are still mitigating their exposure by converting bitcoin back into local currency, they are also participating in the first steps toward making Bitcoin a legitimate currency. As even more large companies exchange Bitcoin, the exchanges become more stable, and its value becomes more tangible. While this means the investment side of Bitcoin becomes less enticing, it is the best way for it to move forward as a currency – which is why it’s encouraging to see it have a presence at this year’s CES.
Bitcoin is an inherently digital currency, with its roots in cryptography and distributed networks, so it makes sense that acceptance by the consumer electronics industry is crucial for its success. Technologically-minded people will be the first to adopt Bitcoin and the transactions they make will drive the exchanges over the next several years. The presence of BitPay, a bitcoin payment processor, at CES shows an eagerness to expand its reach into larger corporations and to increase the volume of legitimate transactions conducted within the exchanges.
2014 has the potential to be another successful year for Bitcoin, but not by the standards of 2013. Another 6,000% increase in price would represent disaster for Bitcoin as a legitimate currency, indicating that there had been no progress toward creating a stable exchange. Companies would back off, as concerns over excessive volatility became exacerbated. Instead, Bitcoin supporters should use exchange volume as the measure of success in 2014, as that will be the better indicator that Bitcoin has reached the mainstream. And major corporations like those at CES are the ones who have the power to make that happen.