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The value of bitcoin surged past $1,000 this week, the first time it has reached such heights since late 2013. But don’t let that big number fool you: this strange and controversial technology is no closer to becoming a mainstream currency. Even Olaf Carlson-Wee, the first employee at Coinbase, the country’s most important bitcoin company, will tell you that bitcoin will never be a substitute for the dollar.
“It was a big mistake that any of this was ever compared to currency,” Carlson-Wee says.
This seemingly pessimistic sentiment is what you hear more and more often, not only from people on the fringes on the bitcoin community but those at the heart of it. Bitcoin is not something the average person will ever use to buy and sell stuff, they say, particularly in the US and other Western countries. The world just doesn’t need a dedicated digital currency. It’s already pretty darn easy to pay for stuff with dollars, thanks to debit cards and the internet and any number of smartphone services. And even if the need was there, too many legal, regulatory, and cultural hurdles stand in bitcoin’s path to mainstream adoption. Right now, bitcoin is useful mainly as digital gold—as an investment. Precious metal-style speculation is why bitcoin’s value is on the rise: The price is going up because people think the price will keep going up—particularly people in China, which now dominates the bitcoin landscape.
Bitcoin is also a useful way of moving money across international borders, and that will likely be its main application over the next several years. But for Carlson-Wee, bitcoin is most valuable as something else entirely—not as a new currency, not as a new gold, not as a new Western Union, not even as a new stock, but as something that enables financial phenomena that have never existed before, what Carlson-Wee calls “programmatic finance.” Through the idea of a blockchain, Carlson-Wee believes, it will power businesses that essentially own and run themselves—a role more important than any one currency.
He believes this so strongly, in fact, that he left Coinbase this past summer to start Polychain Capital, a new kind of hedge fund designed to back this need breed of business. Backed by $10 million in venture capital from the likes of Andreessen Horowitz and Union Square Ventures, Polychain only invests in bitcoin and other digital “tokens” that live on a blockchain, the distributed online ledger that makes bitcoin possible. That may sound like Polychain merely invests in online currencies, but the idea is more ambitious than that. Thanks to Ethereum and other alternatives to the bitcoin network, such tokens are increasingly prevalent online, and they’re intended to function as digital versions of anything that holds value—not just money. Ethereum, for example, runs “smart contracts”—software programs that can potentially drive entire businesses.
“For the first time, we’re seeing software automate business itself—the business entity,” says Carlson-Wee, who bought his first bitcoin in 2011, when it was $2 a coin, and penned his undergraduate
Read More At: https://www.wired.com/2017/01/bitcoin-will-never-currency-something-way-weirder/